THE Bureau of Internal Revenue (BIR) announced that they had implemented their plan to subject partner merchants or sellers in online platforms to the withholding tax system.

The government tax collecting agency as of July, floated that possibility of subjecting a credible withholding tax of 1% with a one-half one-half of the gross remittances of online platform providers to their partner sellers or merchants.

Just this November, BIR Commissioner Romeo Lumagui Jr. said that the plan was in the final stages and would take effect in December, following public consultations and talks with online platforms, and other stakeholders.

On December 21, 2023, the BIR formalized the imposition of a 1% withholding tax on the sales made by sellers on online platforms or digital marketplaces, under Revenue Regulations No. 16-2023.

Finance Secretary Benjamin Diokno and Lumagui signed RR No. 16-2023.

With the BIR regulation, it meant that one-half of the gross remittances of e-marketplace operations and digital financial services providers to the sellers or merchants for goods or services paid through their platform shall be subject to a 1% creditable withholding tax.

It will be withheld by a business in payments of goods or services directly remitted to the government on behalf of suppliers or employees.

Meanwhile, the BIR said that the 1% withholding tax shall not be collected “if the annual total gross remittances to an online seller for the past taxable year has not exceeded P500,000” and “if the cumulative gross remittances to an online seller in a taxable year has not yet exceeded P500,000.”

The BIR defined “gross remittances” as the total amount received by an e-marketplace operator or digital financial services provider from a buyer or consumer for the goods and services sold by or paid to the seller or merchant through the platform of the e-marketplace operator.

The said RR No. 16-2023 will take effect after 15 days following its publication in the Official Gazette or in a newspaper of general circulation.