BIR clarifies tax exemption for small-scale online sellers

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The Bureau of Internal Revenue (BIR) has clarified that small-scale online sellers are exempted from the creditable withholding tax under Revenue Regulation No. 16-2023 and Revenue Memorandum Circular No. 8-2024.

According to BIR Commissioner Romeo D. Lumagui Jr., the exemption is in relation to the Creditable Withholding Tax of one percent (1%) on one-half (1/2) 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.

“Small-scale online sellers are exempted from withholding tax. The BIR is sympathetic to small businesses in its approach to taxing online sellers/merchants,” Commissioner Lumagui stated.

The exemption applies to sellers/merchants who have not exceeded Five Hundred Thousand Pesos (P500,000.00) in annual total gross remittances in the past taxable year, or whose cumulative gross remittances in a taxable year have not yet exceeded the same amount, or those who are duly exempt from or subject to a lower income tax rate pursuant to any existing law or treaty.

However, online sellers whose annual gross remittance exceeds P500,000 will be subjected to withholding tax. Commissioner Lumagui emphasized that it is only fair for them to pay taxes, as it is the responsibility of all businesses to register and pay their taxes.

“We have to be fair to the retail sector and brick and mortar stores who are regularly paying their 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,” he said.

The BIR has a friendly and approachable stance as regards the taxation of online sellers, according to Commissioner Lumagui. The agency is willing to provide guidance and explanation to this new sector of society and educate them regarding their tax obligations.

For 2024, the BIR is focused on providing excellent taxpayer service, which includes educating all kinds of taxpayers, including online sellers, Commissioner Lumagui added.

Revenue Regulation No. 16-2023 and Revenue Memorandum Circular No. 8-2024 cover the definitions, taxations, and the obligations of online sellers and online platforms regarding the withholding tax system.

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