BIR releases new Prescribed Timeline and implementation procedures for Online Sellers/Service Providers in the Philippines

26 February 2024
The Bureau of Internal Revenue (BIR) sets the updated rules for imposing Withholding Tax for the Gross Remittances of Electronic Marketplace (e-marketplace) operators and digital financial service providers (DFSP) to online sellers/online service providers & merchants in the Philippines.

The BIR clarified the updated Withholding Tax obligations for the gross remittances made by both online e-marketplace operators and Digital Financial Services Providers (DFSP) through their Revenue Memorandum Circular (RMC) No. 8-2024, issued on January 15, 2024. These guidelines include the actions that will be taken in case remittances exceed PHP 500,000.00 and the requirements that must be fulfilled within the taxable year.

The provisions from this Circular were issued for the guidance of all concerned to prescribe the timeline and implementation procedures of Revenue Regulation (RR) 16-2023 and to address the potential issues and concerns which may arise from its implementation.

Updatedwithholding tax policies and compliance for e-marketplace operators and DFSP sellers

According to the RMC, both E-marketplace operators and DFSPs have ninety (90) days from the issuance of this circular to comply with any relative policies or other requirements from other government agencies and comply with the provisions of RR 16-2023 This grace period is to ensure they are ready before the withholding tax takes effect.

It is also explained that the ₱500,000 threshold remittances pertain to the combined amount received by online sellers/merchants from all e-marketplace operators and DFSPs throughout the year. If any e-marketplace operator or DFSP has determined that the gross remittance in its online platform surpasses this limit at any point, the prescribed withholding tax shall automatically be deducted from the remittances exceeding the said threshold and all subsequent remittances from that platform for the rest of the year.

Obligations of Online Sellers/Merchants in the Philippines 

 The RMC mandates that sellers/merchants must fulfil the applicable requirements stated below:

  1. Sellers/Merchants must register their business with the BIR and provide them with a copy of the BIR Certificate of Registration before being allowed to sell in an e-marketplace. If the seller’s combined annual earnings from e-marketplace or DFSP services are not expected to exceed ₱500,000, they must then submit a Sworn Declaration (SD) received by the BIR (form in Annex "A" of the Circular) to the marketplace or DFSP operator. The BIR-received SD must then be submitted thereafter on or before the 20th day of the first month of each taxable year.If the seller/merchant fails to submit the prescribed Sworn Declaration, as mandated by RR No. 16-2023, said Withholding Tax is automatically deducted by the e-marketplace operator or DFSP, regardless of the actual total income or gross remittance generated by the said seller/merchant.If gross remittances received by sellers/merchants exceed the ₱500,000.00 threshold at any time during the taxable year, they are then mandated to submit the prescribed BIR-received SD to the respective e-marketplace operators or DFSPs.
  2. Sellers who are tax exempt or subject to a lower income tax rate due to specific laws or treaties, must submit a duly issued certificate to the e-marketplace platform as proof of exemption or entitlement to a lower income tax rate. The RMC highlights Section 2 of RR No. 16-2023 which states:“'(c) if the seller/merchant is duly exempt from or subject to a lower income tax rate pursuant to any existing law or treaty. Provided that, the concerned seller/merchant is able to secure the necessary certification, clearance, ruling, or any other document serving as proof of entitlement to the said exemption or lower income tax rate. The said proof of entitlement shall be submitted by the seller/merchant to the e-marketplace operator or digital financial services provider concerned.'”

The BIR also mandates that all sellers/merchants that sell goods and services through an e-marketplace not yet registered to the BIR must complete the registration following the Tax Code. Additionally, after the transitory period outlined in this circular, e-marketplace operators and DFSPs will no longer allow unregistered businesses to sell goods and services on their platforms.

Obligations of e-marketplace operators and DFSPs

The RMC provides for the obligations of e-marketplace operators and DFSP’s under the provisions of BIR RR 16-2023, both are required to observe the following:

  1. Make sure that all sellers/merchants are registered with the BIR before granting access to their e-marketplace or DFSP platform and require them to submit a copy of their valid BIR Certificate (Form No. 2303). 
  2. Mandate sellers/merchants who are tax exempt or subject to a lower income tax rate due to specific laws or treaties to submit the necessary certificates and any other documents as proof of their entitlement to the exemption or lower tax income rate.
  3. Require sellers/merchants to submit a copy of the BIR-received SD. If they fail to submit the requirement, regardless of the actual income or remittances, their Withholding Tax will then be automatically deducted following the provisions of RR 16-2023.Furthermore, those who did not submit the required BIR-received SD within the prescribed period to the e-marketplaces and DFSPs, the withholding tax shall be automatically deducted.
  4. Monitor all buyer/customer payments on their online platform and deduct the Withholding tax stated in the provisions of RR No. 16-2023before subsequently remitting the same to concerned sellers /merchants.
  5. Provide the Certificate of Credible Tax Withheld at Source (BIR Form No. 2307) to sellers/merchants within the period prescribed under the Tax Code and other relevant revenue issuances, or upon request by the sellers/merchants.

Applicability of Withholding Tax Obligations of e-marketplace operators and DFSPs

The RMC clarified that the Withholding Tax obligation of the e-marketplace operator and DFSP in cases where the accumulated gross remittances to a seller/merchant exceed the prescribed ₱500,000.00 threshold shall commence:

  1. Upon receipt by the e-marketplace operator and DFSP of the BIR-received SD indicating that the sellers/merchants have exceeded the ₱500,000.00;
  2. When the seller/merchant failed to submit the required BIR-received SD to the
    e-marketplace operator or DFSP within the prescribed period;
  3. When the e-marketplace operator or DFSP has determined that its total gross remittances to the concerned seller/merchant have exceeded the ₱500,000.00 threshold.

Other updated policies and regulations for online sellers/merchants in the Philippines

It is stated that sellers/merchants are not allowed to receive payments through their personal/individual accounts. – the rule applies to all payments, remittances, and transfers covered by RR No. 16-2023. The BIR then reveals that they will be strictly monitoring the usage of accounts under the registered trade names of all sellers/merchants.

Any e-marketplaces that accept or collect payment for the goods and remit the same to the seller, will be subject to withholding according to RR No. 16-2023 where said Withholding Tax shall be deducted before its remittance of the income payment to the seller.

Note that in the case where the payment is transmitted to the seller/merchant using different facilities, the last one with control of the payment before completely remitting the same to the seller/merchant shall be liable to withhold the taxes following the policies of RR No. 16-2023.

The RMC also clarified what BIR Form and Alphanumeric Tax Code (ATC) should be used and filed by e-marketplace and DFSPs. Stating that the following BIR forms are the ones allowed:

  • BIR Form No. 0619-E for the first two months of the quarter.
  • Revised BIR Form No. 1601-EQ for the last or third month of the quarter which includes the additional ATC for creditable withholding tax imposed by RR No. 16-20223.

Lastly, the BIR highlights the penalties in case of violation of the provisions of RR No. 16-2023 will be subjected to the proper penalties under the Tax Code, relevant laws, rules, and regulations.