The Bureau of Internal Revenue (BIR) has set its sights on implementing a creditable withholding tax of 1% from partner merchants operating on online platforms by the fourth quarter of 2023.
Earlier this year, the BIR put forth a proposal to impose a creditable withholding tax of 1% on one-half of the gross remittances made by online platform providers to their partner sellers or merchants.
In response to concerns and inquiries about the proposed tax, the BIR Commissioner, Romeo Lumagui Jr., defended the initiative, emphasizing that it should not be viewed as a new tax but rather a mechanism for collection within the framework of existing tax laws.
“The proposal is a creditable withholding tax. So it’s not really a new tax. It’s just a mode of collecting,” Commissioner Lumagui stated during a press conference in May.
During an impromptu interview with members of the press on Thursday, Commissioner Lumagui updated reporters on the implementation timeline, stating, “We may start in the fourth quarter… We are aiming for this year, so it would be a full implementation next year.”
The proposed withholding tax is part of the BIR’s efforts to ensure tax compliance within the fast-growing e-commerce sector in the Philippines.
By taxing 1% of the gross remittances, the BIR aims to capture revenue from online merchants and platform providers while streamlining the tax collection process.
While the implementation is yet to begin, the BIR remains determined to meet its target of enforcing the withholding tax by the final quarter of 2023. The move is expected to contribute to the government’s revenue generation and support various public initiatives.
During his second State of the Nation Address (SONA), Pres. Ferdinand ‘Bongbong’ Marcos Jr., lauded the magnanimous support of the digital industry to the country’s economy.
“In 2022, the digital economy contributed 2 trillion pesos, equivalent to 9.4 percent of our GDP,” stated Marcos.
However, some stakeholders in the e-commerce industry have raised questions about the practicality and potential impact of the proposed tax.
Concerns have been expressed regarding the administrative burden it may place on online sellers and the effects on consumer prices.
The BIR has acknowledged these concerns and assured the public that measures will be in place to address any challenges that may arise during the implementation phase.
