Online sellers might need to pay withholding taxes soon, as the BIR announced that they plan to impose taxes by December. This was confirmed by Assistant Commissioner Jethro Sabariaga to reporters during the SGV Tax Symposium last week.
The BIR has been working on how it will tax digital transactions since 2021, though it did not mention if its current proposal will cover streaming platforms like Netflix, YouTube, and Spotify.
Based on BIR’s final draft of its amendments to Revenue Regulation No. 2-98, it will impose “a 1% withholding tax on one-half of the gross remittances by domestic e-marketplace operators to the online merchants for the goods or services sold through their facility“.
However, this 1% withholding tax will not apply if an online seller’s annual total gross remittances do not exceed Php 250,000 for the past taxable year, or if the cumulative gross remittances do not exceed Php 250,000. Those who are duly registered with the BIR and have a Certificate of Tax Exemption are exempted from paying the 1% withholding tax.
The BIR defines an electronic marketplace as a digital platform whose business is “to connect online consumers with online merchants, facilitate and conclude the sales, process the payment of the products, goods or services through the platform, or facilitate the shipment of goods or provide logistics services and post-purchase support within such platforms, and otherwise retains oversight over the consummation of the transaction.”
Under its definition, the 1% withholding tax will cover online shopping platforms, online delivery platforms, platforms for booking accommodations, and other product marketplaces.
The BIR adds that it made this proposal last April, and has consulted with various industries for the latest version of its draft. By taxing the digital economy, the BIR seeks to find new places to impose taxes.
In 2022, the Philippines’ digital economy contributed Php 2.08 trillion or 9.4% of the country’s GDP. Breaking it down, e-commerce had the highest growth at 26.5%, with its share reaching Php 416.12 billion or 20% of the country’s digital economy.
