Withholding tax for online sellers starts on July 15—BIR

Are you an online seller? E-commerce platforms are now required to withhold a small amount of tax from your sales starting July 15, according to the Bureau of Internal Revenue.

The BIR reminded that the temporary exemption from withholding tax under RMC No. 55-2024 expired on July 14, 2024.

Commissioner Romeo Lumagui Jr. said no further extensions will be given.

Under this measure, online marketplaces and payment providers will withhold 1% creditable withholding tax applied to half of the total gross remittances.

Those with annual gross online sales below P500,000 or sellers who are already legally exempt from income tax due to existing laws or treaties are exempted.

Online shopping apps such as Shopee and Lazada, food delivery apps, online hotel booking sites, transport service apps, and other online platforms are covered by this policy.

Lumagui reiterated that 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/merchants,” the commissioner said.

“The BIR aims to level the playing field between brick-and-mortar stores, which are regularly complying 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," he added.

Digital financial services providers are given an extension until October 12, 2024 to adjust their systems and comply with RR No. 16-2023.

Previously, Lumagui said this policy is designed to improve tax collection efficiency and also encourage more small and medium-sized businesses to formally register.

“Kapag kumikita po tayo, generally kailangan mag rehistro dito sa aming ahensya at kailangan magbayad ng buwis,” said Lumagui.