The Bureau of Internal Revenue (BIR) has clarified Revenue Regulation 16-2023 which imposes a withholding tax on the gross remittance of electronic marketplace (e-marketplace) operators and digital financial services providers (DFSPs) to sellers/merchants.
In Revenue Memorandum Circular 8-2024 issued on 15 January 2024, the BIR said the provisions of RR 16-2023 took effect beginning 11 January this year, 15 days from its publication on 27 December 2023.
Under RR 16-2023, fifty percent of the gross remittances of e-marketplace operators and DFSPs to merchants are subject to a creditable withholding tax rate of 1 percent.
RMC 8-2024 provides a transitory period for compliance. E-marketplace operators and DFSPs are allowed 90 days from the date of issuance of the RMC to comply with RR 16-2023.
Also, unregistered sellers/merchants are required to register their business with the BIR within the prescribed period.
The RMC explains that all existing unregistered sellers/merchants selling goods and services in e-marketplaces or DFSP are required to register with the agency and submit a copy of the BIR-issued Certificate of Registration.
After the transitory period, “e-marketplace operators and DFSPs shall not allow unregistered businesses to sell goods and services in their platform/facility.”
Under RR 16-2023, the gross remittances to online sellers/merchants the past taxable year not exceeding P500,000 or the cumulative gross remittances to an online seller/merchant in a taxable year not exceeding P500,000 are exempt from the withholding tax.
RMC 8-2024 clarifies that the annual total gross remittances of P500,000 to an online seller/merchant exempted from the prescribed creditable withholding tax shall consist of the total amount of remittances received by the online seller/merchant from all e-marketplace operators and DFSPs.
In cases where the gross remittance is determined not exceeding the P500,000 threshold, the seller/merchant shall submit a sworn declaration duly received by the BIR, with the e-marketplace or DFSP declaring that the total gross remittance to be received from the e-marketplace operators or DFSPs does not exceed P500,000.
The BIR-received sworn declaration shall then be submitted on or before the 20th day of the first month of each taxable year.
In case the seller/merchant fails to submit the prescribed sworn declaration, regardless of the actual total income or gross remittance, the withholding tax imposed under RR 16-2023 shall automatically be deducted by the e-marketplace operator or DFSP.
Should the gross remittances exceed the P500,000 at any time during the taxable year, the prescribed BIR-received SD shall be immediately submitted to the e-marketplace operators or DFSPs by the sellers/merchants.
If a seller/merchant is exempt from income tax or subject to a lower Income tax rate, he shall submit a duly issued certification to the e-marketplace operator as proof of exemption or entitlement to a lower tax rate.
The new circular also prohibits sellers and merchants to receive payments through their personal or individual accounts instead of a business account.
RMC 8-2024 declares this is not allowed and that the seller/merchant’s account shall, at all times, be under the BIR-registered tradename of the seller/merchant.
The circular also states that in case the e-marketplace platform accepts or collects payment for the goods and remits the same to the seller, this shall be subject to withholding where the withholding tax shall be deducted before the income payment is remitted to the seller.
And if the payment is transmitted to the seller/merchant through different facilities, the last facility which has control of the payment before completely remitting it to the seller/merchant shall be liable to withhold the taxes.
