BIR may start imposing withholding tax on online sellers by Q4

The Bureau of Internal Revenue (BIR) is looking to start imposing a creditable withholding tax on partner-merchants of online platforms as early as the fourth quarter this year.

“We are aiming for (its) full implementation by next year. It may even start by the fourth quarter. Hopefully, the private sector will be on board,” BIR Commissioner Romeo D. Lumagui, Jr. told reporters on Tuesday.

The BIR is amending Revenue Regulations No. 2-98, which currently does not cover income payments by online platform providers.

Under the draft rules, the BIR proposed a creditable withholding tax of 1% on one-half of the gross remittances of online platform providers to their partner sellers or merchants.

It defined an online platform provider as any entity that serves as an intermediary, where sellers and buyers of goods and services transact their business through the use of information technology and other electronic means, and act as the withholding agent of the government.

These would include marketplaces, food delivery, lodging accommodation, travel or transportation, and payment platforms, among others.

Mr. Lumagui said that the agency is working with online platforms to address their concerns on the implementation of the creditable withholding tax.

“There really is a need to level the playing field. It’s also unfair for brick-and-mortar stores. There are so many sales now online,” he added.

Under the draft rules, online platforms that do not require business registration from sellers will only collect withholding tax on single transactions of goods or services worth P10,000 and if the same buyer and seller have engaged in at least six transactions, regardless of amount per transaction, in the previous or current year.

The BIR has been seeking ways to tax the digital sector, as e-commerce surged during the pandemic as people were forced to stay at home.

The Marcos administration included the proposed value-added tax (VAT) on digital services as one of the priority legislation that Congress aims to approve by end-2023.

Last year, the digital economy contributed PHP 2.08 trillion, equivalent to 9.4% of GDP. Of this, e-commerce had the highest growth at 26.5%, with its share to the economy reaching 20% or PHP 416.12 billion.

Revenue goal
Meanwhile, the BIR raised its 2023 revenue collection goal by 1% after better-than-expected collections in the first half.

In a revenue memorandum order posted on its website on Thursday, the BIR said it now aims to collect PHP 2.64 trillion in revenues this year, slightly higher than its previous target of PHP 2.599 trillion.

The new target is 13% higher than the agency’s actual collection of PHP 2.34 trillion in 2022. The BIR collects about 70% of government revenues.

According to the memorandum order, the BIR targets to collect PHP 2.54 trillion from its operations and PHP 99.7 billion from non-BIR operations.

Under the BIR’s operations, taxes on net income and profits are expected to reach PHP 1.32 trillion. It aims to collect PHP 538.13 billion from VAT, PHP 336.1 billion from excise taxes, PHP 124.65 billion from percentage taxes and PHP 224.15 billion from other taxes.

In June, Finance Secretary Benjamin E. Diokno said that the government would be revising its revenue target amid improved collections.

Data from the Department of Finance showed that state revenues rose by 7.7% to PHP 1.9 trillion in the January-to-June period. Of this, tax collections during the period grew by 7.5%, while nontax revenues increased by 9.1%. — Luisa Maria Jacinta C. Jocson