Withholding tax imposed on e-marketplace, e-financial services operators

The Bureau of Internal Revenue is imposing withholding taxes on electronic marketplace (e-marketplace) operators and digital financial services providers.

Revenue Regulations No. 16-2023 issued 21 December 2023 imposes withholding tax on the gross remittances made by e-marketplace operators and digital financial services providers to sellers/merchants for goods and services sold or paid through the e-marketplace's or digital financial services provider's platform or facility.

Under RR 16-2023, remittances of e-marketplace operators and digital financial services providers to merchants shall be subject to creditable withholding tax rate of 1 percent on one-half of such gross remittances by e-marketplace operators and digital financial services providers.

Exempted from this general rule are the following instances:

• Annual total gross remittances to an online seller/merchant for the past taxable year have not exceeded P500,000; or

• Cumulative gross remittances to an online seller/merchant in a taxable year have not yet exceeded P500,000; or

• The seller/merchant is exempt from or subject to a lower income tax rate pursuant to any existing law or treaty. This, provided the seller/merchant secures the necessary certification, clearance, ruling, or any other document serving as proof of entitlement to the exemption or lower income tax rate and presents such proof to the e-marketplace operator or digital financial services provider.

Gross remittance

Under the RR, gross remittance is defined as the total amount received by an e-marketplace operator or digital financial services provider from a buyer or consumer for goods or services sold or paid through the platform/facility of the e-marketplace operator or digital financial services provider.

Excluded are the following:

• Sales returns/discounts, delivery/shipping fees, and value-added tax and

• Consideration for the use of the e-marketplace or digital financial services platform

The collection of gross remittances shall cover the following payment arrangements:

• Electronic wallet (e-wallet) of the e-marketplace operator being maintained by the online consumer

• Payment of the online consumer using the e-wallet feature of a digital financial services provider for the account of the e-marketplace operator, and

• Payment in cash deposited or transferred to the account of the e-marketplace operator.

Meanwhile, an electronic marketplace is defined as a digital service platform to connect online buyers/consumers with online sellers/merchants, facilitate and conclude sales, process the payment, facilitate shipment/logistics, and post-purchase support within such platforms. It includes but is not limited to the following:

• Marketplace for online shopping

• Food delivery platform

• Platform for booking resort, hotel, motel, inn, house, condominium unit, bed space, room for rent, and other similar lodging accommodations in the Philippines, and

• Other similar online service or product marketplaces.

Digital financial services platform

The RR describes a digital financial services platform as financial technology capable of offering a wide array of services of financial nature made available to the public through the internet, mobile application, or other similar means.