The Bureau of Internal Revenue (BIR) plans to impose a one percent withholding tax on online platform providers that individuals use to sell goods and services amid the continued surge of digital transactions.
In a draft briefer and revenue regulation posted on its website yesterday, the BIR is proposing to impose a creditable 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.
To put it simply, withholding tax is a kind of tax on the salary earned by a certain employee.
Based on the current framework, employers are required to deduct a certain percentage of their employee’s salary, which in turn will be remitted to the BIR.
As online sales transactions continue to increase and further expedited because of the pandemic, the BIR has been looking at ways to tax online sellers.
“There is a need for the BIR to take advantage of this opportunity to identify sellers of goods and services who are, therefore, obliged to declare their income resulting from these transactions for tax purposes,” the BIR said.
The draft revenue regulation, which is still subject to stakeholder comments until May 2, prescribed that the obligation of the online platform providers is in addition to their existing withholding tax obligations.
The proposal also imposes creditable withholding tax on single purchase transactions or sales by irregular suppliers or sellers.
Based on the BIR draft, online platform providers refer to any entity, whether individual or non-individual, which serves as intermediary such as but not limited to a marketplace platform, food delivery platform or its combination, and platform for resort, hotel, motel, inn, and other similar lodging accommodations.
It also covers travel or transportation platforms, payment or remittance platforms, such as electronic wallet, and other services or product platforms where sellers and buyers of goods and services transact their business through the use of information technology and other electronic means.
On the other hand, the term gross remittance will refer to the total amount of the value of the goods or services sold and paid through the online platform facilities.
The BIR said the withholding tax imposed shall be in addition to the existing withholding tax obligations being imposed to the online platform providers.
In cases where the online platform providers do not require business registration of sellers of goods and services, the withholding tax imposed shall be deducted and remitted under certain cases.
These include a single purchase of goods and services amounting to a total P10,000 and when the same buyer and seller have engaged in at least six transactions, regardless of amount per transaction, either in the previous year or current year.
Data showed that there are roughly two million entities involved in online selling as of last year.