BIR exempts small-scale online merchants from creditable withholding tax
THE Bureau of Internal Revenue Commissioner (BIR) announced last Wednesday that small-scale online sellers are exempted from the creditable withholding tax (CWT) under Revenue Regulation (RR) 16-2023 and Revenue Memorandum Circular (RMC) 8-2024.
This is in relation to the CWT of one percent on one-half of the gross remittances by e-marketplace operators and digital financial services providers to sellers/merchants for the goods or services sold/paid through their platform/facility, a statement by the BIR read.
“The BIR is sympathetic to small businesses in its approach to taxing online sellers/merchants,” Commissioner Romeo D. Lumagui Jr. was quoted in the statement as saying.
According to the BIR, it exempts an online seller/merchant if the annual total gross remittances for the past taxable year has not exceeded P0.5 million. The exemption may also apply if the cumulative gross remittances to an online seller/merchant in a taxable year has not yet exceeded P0.5 million.
If the seller/merchant is duly exempt from or subject to a lower income tax rate pursuant to any existing law or treaty, the exemption also applies.
The BIR explained that gross remittances of P0.5 million “shall consist of the total amount of remittances received by the seller/merchant for 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. 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,” Lumagui said.
RR 16-2023 and RMC 8-2024 are the regulations issued by the BIR that explain the withholding tax of online sellers. It covers the definitions, taxations, and the obligations of online sellers and online platforms as regard this withholding tax system.