Grace period ends: Online vendors must now pay withholding tax
MANILA, Philippines — Online sellers on digital marketplaces are now required to shoulder withholding tax following new rules of the Bureau of Internal Revenue.
BIR Commissioner Romeo Lumagui Jr. issued a reminder on Tuesday after the agency delayed imposing withholding taxes on online vendors last April.
“Electronic Marketplace Operators will begin imposing Withholding Tax against their sellers/merchants starting July 15, 2024. We have already extended this by 90 days. No further extensions will be given," Lumagui said in a statement.
The BIR released Revenue Memorandum Circular 79-2024 on July 15 to formalize the reminder.
It said the previous extension was made so that online sellers could adjust to the new tax policies.
Under the new Revenue Regulation 16-2023, a 1% withholding tax is imposed on half of the gross remittances of online sellers on online marketplace operators and digital service providers. A toy vendor or apparel store, for example, would bear the withholding tax upon onboarding or resuming services on Shopee or Lazada.
Lumagui explained that withholding taxes are not new, only that taxes will be collected from the source and credited against the total income tax liability of online sellers.
The tax, however, does not apply to online sellers that have an annual total gross remittances not exceeding P500,000.
"The BIR aims to level the playing field between brick-and-mortar stores, which are regularly complying with their tax obligations, and online market places. Whether their business is operated online or through physical stores, sellers and merchants have to pay their taxes," Lumagui added.
In a Facebook post, Lumagui also said that October 12 was the new deadline for digital financial service providers to comply with new requirements outlined in Revenue Regulation 16-2023, which amended tax collection policies for online sellers.
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