Those of you who have been engaging with online selling, you better brace yourselves as the Bureau of Internal Revenue (BIR) hopes to begin imposing a creditable withholding tax before December 2023, according to a BusinessWorld news report. Specifically, this move applies on partner-merchants of online platforms.
To put things in perspective, posted below is an excerpt from the BusinessWorld news article. Some parts in boldface…
THE BUREAU of Internal Revenue (BIR) is hoping to start imposing a creditable withholding tax on partner-merchants of online platforms before the start of December, an official said.
“The process could be shorter, and we might just come up with it before the start of December. It will not be unreasonable to expect it before the start of December,” BIR Assistant Commissioner Jethro M. Sabariaga told reporters on the sidelines of the SGV Tax Symposium last week.
“The longer you withhold this release, you’re hobbling a significant portion of today’s economic transactions,” he added.
The BIR last week released the final draft of the amendments to Revenue Regulation No. 2-98 which currently does not cover income payments by online platform providers.
Under the final draft, the BIR would impose a withholding tax of 1% on one half of the gross remittances by domestic e-marketplace operators to the online merchants for the goods or services sold through their facility.
However, the withholding tax will not apply if annual total gross remittances to an online merchant for the past taxable year has not exceeded P250,000, or if the cumulative gross remittances to an online merchant in a taxable year has not yet exceeded P250,000.
Also exempted are online merchants who are part of a cooperative duly registered with the BIR with a valid Certificate of Tax Exemption.
Mr. Sabariaga said the BIR took note of the suggestions and objections to the draft rules raised by affected sectors. The BIR’s deadline for comments from stakeholders on the final draft ended on Oct. 27.
“This will all be taken into consideration and then be studied and then the final draft will be released and exposed,” he said.
Since then, Mr. Sabariaga said the agency consulted with various industries to come up with the latest version of the draft.
“It’s the first exposition of the draft, you have to consider the various industries, the applicability of the withholding (tax) on the various industries, the rates, the economic provisions of it,” he added
The BIR has been seeking ways to tax the digital economy, particularly as e-commerce surged during the pandemic.
In 2022, the digital economy contributed P2.08 trillion, equivalent to 9.4% of gross domestic product. Of this, e-commerce had the highest growth at 26.5%, with its share to the economy reaching 20% or P416.12 billion.
Let me end this piece by asking you readers: What is your reaction to this recent development? If you have been regularly selling online, do you think you will be covered by the planned withholding tax by the BIR? Do you have all financial and legal records prepared?
You may answer in the comments below. If you prefer to answer privately, you may do so by sending me a direct message online.
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