Since yesterday, July 15, 2024, the Bureau of Internal Revenue (BIR) now requires online marketplaces to collect withholding tax from sellers on their platforms. This comes after a previous 90-day extension granted earlier.
So, what does this mean for you as an online seller? Here’s the breakdown:
- Online marketplaces will now withhold 1% of your earnings (after halving the total amount received from sales) and remit this to the government as withholding tax. Don’t worry, this tax will be credited towards your total income tax liability at the end of the year, so it’s not an additional burden.
- This new regulation applies to sellers on various online platforms, including online shopping sites, food delivery apps, booking websites, and similar online services. However, there’s good news for smaller businesses – sellers with annual gross sales below P500,000 are exempt from this withholding tax.
The BIR is implementing this change to ensure a level playing field for all businesses. They want to make sure online sellers are properly declaring their income and paying taxes, just like traditional brick-and-mortar stores.
It’s important to remember that withholding tax is not a new tax, but rather a way for the government to collect taxes in advance. This simplifies the process for both sellers and the BIR.
Finally, a note for digital financial service providers (those handling payments for online transactions): you have an extension until October 12, 2024 to adjust your systems to comply with the new tax collection regulations.
Source: GMANews
