BIR plans online sellers tax in time for Christmas

Bureau of Internal Revenue (BIR)

MANILA  -The government is hoping to start collecting a 1-percent withholding tax from operators of online marketplaces before December this year, as it seeks to cash-in on the exponential growth in e-commerce transactions during the pandemic.

Speaking to reporters on the sidelines of a tax symposium hosted by SGV & Co. last week, Bureau of Internal Revenue (BIR) Assistant Commissioner Jethro Sabariaga said the tax agency is now studying the comments from stakeholders on the final draft of a new revenue regulation (RR) covering online sellers.

Once released, the new RR would amend the provisions of Sections 2.57.2 and 2.57.3 of the 25-year-old RR No. 2-98 to impose a creditable withholding tax on income payments made by electronic marketplace operators to online merchants.

“It already took a long time to study the issues from its first exposition. So, the process could be shorter and we might just come up with it before the start of December. It will not be unreasonable to expect it before the start of December,” Sabariaga said.

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For clarity, the BIR said e-marketplaces were digital platforms whose business is to connect online shoppers with online merchants, as well as facilitate and conclude sales. This includes marketplaces for online shopping, food delivery platforms, as well as online facility for booking of resort, hotel, motel, inn, house, condominium unit, bed space, room for rent and other similar lodging accommodations.

Holiday consumption

“The longer that you withhold this release, you’re hobbling a significant portion of today’s economic transactions,” Sabariaga said, adding that the BIR is hoping to take advantage of increased consumption during the Christmas season.

Based on the draft RR released by BIR last week, a 1-percent withholding tax would be slapped on one-half of the gross remittances by local e-marketplace operators to their partner merchants for the goods or services sold through their facility.

This would be on top of existing withholding tax obligations being imposed to e-marketplace operators, including those already being collected from payments to transportation contractors for the delivery of goods and merchandise, and commissions on the goods and services actually sold.

READ: Consumer group asks BIR to reconsider plan to tax online sellers

If the annual total gross remittances to an online merchant for the past taxable year has not exceeded P250,000, the new tax will not be imposed.

At the same time, the fresh withholding tax will not be collected if the cumulative gross remittances to an online merchant in a taxable year has not yet exceeded P250,000.