The Bureau of Internal Revenue (BIR) has extended by another 90 days the imposition of withholding tax on the gross remittances made by electronic marketplace (e-marketplace) operators and digital financial service providers (DFSPs) to sellers and merchants.
The BIR issued on April 15 Revenue Memorandum Circular (RMC) No. 55-2024 extending by 90 days or until July 14, 2024 the imposition of withholding tax by e-marketplace operators and DFSPs to “provide the said taxpayers a sufficient time to comply and adjust to the requirements of RR No. 16-2023 and other government agencies.”
This is the second extension after the agency released RMC 8-2024 on January 15, 2024 that provided for a 90-day transitory period for compliance with Revenue Regulations (RR) 16-2023.
RR 16-2023, which became effective on January 11 this year, was issued last December 21 and imposes withholding tax on the gross remittances made by e-marketplace operators and DFSPs to sellers/merchants for goods and services sold or paid through their digital platforms or facilities.
Essentially, the gross remittances of e-marketplace operators and DFSPs to merchants shall be subject to creditable withholding tax rate of 1% on one-half of such remittances.
Further all existing unregistered sellers/merchants selling goods and services in an e-marketplace or DFSP are required to register with the BIR and submit a copy of the BIR-issued Certificate of Registration.
After the transitory period for registration, e-marketplace operators and DFSPs “shall not allow unregistered businesses to sell goods and services in their platform/facility.”
Exempted from the withholding tax are the following instances:
• Annual total gross remittances to an online seller/merchant for the past taxable year have not exceeded P500,000; or
• Cumulative gross remittances to an online seller/merchant in a taxable year have not yet exceeded P500,000; or
• The seller/merchant is exempt from or subject to a lower income tax rate pursuant to any existing law or treaty.
Under RR 16-2023, gross remittance is defined as the total amount received by an e-marketplace operator or DFSP from a buyer or consumer for goods or services sold or paid through the platform/facility of the e-marketplace operator or DFSP.
Meanwhile, an e-marketplace is defined as a digital service platform to connect online buyers/consumers with online sellers/merchants, facilitate and conclude sales, process the payment, facilitate shipment/logistics, and post-purchase support within such platforms. It includes but is not limited to the following: marketplace for online shopping; food delivery platform; platform for booking resort, hotel, motel, inn, house, condominium unit, bed space, room for rent, and other similar lodging accommodations in the Philippines; and other similar online service or product marketplaces.
The RR describes a digital financial service platform as financial technology capable of offering a wide array of services of financial nature that are made available to the public through the internet, mobile application, or other similar means.
RR 16-2023 also declares that this withholding tax imposition is in addition to the existing withholding tax obligations being imposed on the e-marketplace operators and DFSPs such as withholding taxes on payment to transportation contractors and for commissions.
