SMALL-SCALE online sellers are exempted from paying creditable withholding tax on e-marketplace operators and digital financial services providers, the Bureau of Internal Revenue (BIR) announced on Monday.
In a statement, BIR Commissioner Romeo Lumagui Jr. said that small online sellers with transactions of under half a million annually are exempt from the 1.0-percent tax on half of the gross remittances made by e-marketplace operators and digital financial services providers for goods or services sold through their platform.
"Small-scale online sellers are exempted from withholding tax. The BIR is sympathetic to small businesses in its approach to taxing online sellers/merchants," he said.
According to Revenue Regulation (RR) 16-2023 and Revenue Memorandum Circular (RMC) 8-2024, sellers or merchants are exempt if, in the previous taxable year, the annual total gross remittances to an online seller or merchant did not go beyond P500,000.
Alternatively, they are exempt if the cumulative gross remittances to an online seller or merchant within a taxable year have not yet reached P500,000.
Exemption also applies if the seller or merchant is duly exempt from or subject to a lower income tax rate as per any existing law or treaty.
The BIR stated that the gross remittances of P500,000 include the combined amount of remittances received by the seller or merchant for the sale of goods and services from all e-marketplace operators and digital financial services providers.
"For those who are above the threshold of P500,000 annual gross remittance, it is only fair that they will be subjected to withholding tax. We have to be fair to the retail sector and brick and mortar stores who are regularly paying their taxes," Lumagui said.
"If you have a business, you have to register and pay your taxes. It doesn't matter if it's an actual store or an online store. It is your responsibility to pay taxes like everyone else," he added.
RR 16-2023 and RMC 8-2024, issued by the BIR, outline the withholding tax rules for online sellers. It provides details on definitions, taxations and the responsibilities of both online sellers and platforms with the withholding tax system.
"We know that most of our online sellers do not have the intention to evade taxes. They just need guidance in the registration and payment processes," Lumagui said.
"The BIR is here to provide all the guidance and explanation needed to this new sector of society. We are here to educate. We are at your service," he added.
Lumagui has directed the entire BIR to educate and assist online sellers and platforms regarding their tax responsibilities.
In 2024, the BIR said that it would focus on providing excellent taxpayer service and extending education to various taxpayer groups, including online sellers.
In a recent media briefing along with officials from the Department of Finance and the Bureau of Customs, Lumagui mentioned that the agency aims to generate around P3.05 trillion in tax revenues for this year.
"We've lined up, and we've already discussed our plans and programs for 2024. And again, part of it is one major issue that we'd like to address is, again, the taxpayer service because we believe that if we make it easier for the taxpayers to comply and if we educate them properly, then the compliance for tax payments would go up," Lumagui said.
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