BIR Imposes Withholding Tax On Online Sellers

The Bureau of Internal Revenue (BIR) has announced that electronic marketplace operators, the owners, and those in charge of organizing and administering online marketplaces, are now required to impose withholding tax on sellers or merchants who use their platforms.

This withholding tax applies to half of the gross remittances by electronic marketplace operators and digital financial services providers to sellers or merchants for the goods or services sold through their platforms.

BIR Commissioner Romeo Lumagui Jr. stated, “Electronic marketplace operators began 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.”

According to BIR’s Revenue Regulation 16-2023 issued in December last year, online merchants with earnings of more than PHP500,000 annually are subject to a one percent withholding tax.

This withholding tax applies to half of the gross remittances by electronic marketplace operators and digital financial services providers to sellers or merchants for the goods or services sold through their platforms.

The BIR also issued Revenue Memorandum Circular 55-2024, which provided a 90-day extension to allow affected parties to adjust to the imposition of the withholding tax.

The extension was granted to recognize the compliance needed with the relative policies or requirements of other government agencies and to give the affected parties time to adjust.

Commissioner Lumagui clarified, “Withholding tax is not a new tax. It's merely a system of taxation where taxes are collected at source, which will be credited against the total income tax liability of the sellers or merchants.”

He emphasized that through this tax system, the BIR aims to level the playing field between brick-and-mortar stores, which regularly comply with their tax obligations and online marketplaces.

"Whether their business is operated online or through physical stores, sellers and merchants have to pay their taxes," Lumagui stressed.