BIR delays 1% withholding tax on online sellers

The Bureau of Internal Revenue (BIR) has deferred the imposition of the one percent withholding tax on online platform providers to mid-July instead of mid-April to allow adjustments among taxpayers.

BIR Commissioner Romeo Lumagui issued a memorandum circular extending the 90-day period for the actual imposition of withholding tax on gross remittances made by electronic marketplace operators and digital financial services providers to sellers and merchants.

In January, the BIR provided a transitory period of 90 days to online merchants to comply with the relative policies or requirements of other government agencies.

It also aims to help them adjust and properly comply with the provisions of the BIR regulation prior to the actual imposition of the prescribed creditable withholding tax.

“In order to provide the taxpayers sufficient time to comply and adjust to the requirements, the transitory period is extended to an additional 90 days or until July 14,” Lumagui said.

According to the BIR chief, online sellers and merchants requested for the extension amid the changes needed in several systems following the withholding tax imposition.

The BIR is hoping to start collecting revenues from the measure once the extended period ends in July.

A withholding tax is a kind of tax on the salary earned by an employee. Based on the current framework, employers are required to deduct a certain percentage of their employee’s salary, which in turn is remitted to the BIR.

The BIR will impose a withholding tax of one percent on one-half of the gross remittances of the online platform providers to the sellers of the goods and services.

The withholding tax imposed, however, will not apply if the annual total gross remittances to an online merchant for the past taxable year has not exceeded P500,000.

Also excluded are online sellers with cumulative gross remittances to an online merchant in a taxable year that have not