Updated taxes for online sellers and e-commerce companies such as Lazada and Shopee took effect this week after an earlier 90-day extension was granted by the Bureau of Internal Revenue (BIR).
“Electronic marketplace operators will begin imposing withholding tax against their sellers/merchants starting July 15, 2024. We have already extended this by 90 days. No further extensions will be given,” BIR commissioner Romeo Lumagui Jr. said.
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The imposition of withholding taxes allows the government to raise revenues in a booming segment amid increasing debt levels.
“[It’s] definitely great news amid the need for more tax/fiscal reform measures to help maintain the country’s relatively favorable credit ratings of 1-3 notches above the minimum investment grade,” Michael Ricafort, chief economist at the Rizal Commercial Banking Corp., told InsiderPH.
Exemptions
The WHT obligation does not apply if annual gross remittances are under P500,000, cumulative gross remittances in a taxable year are under P500,000, or if the seller/merchant is exempt or subject to a lower tax rate by law or treaty.
Equal footing
Ricafort said imposing withholding taxes on the e-commerce sector levels the “playing field with physical stores, based on the principles of fairness.”
“This would help further improve the national government’s fiscal performance and help debt management become more sustainable for the long-term and for the coming generations,” he said.
Lumagui said the imposition of the withholding tax for e-commerce participants is not a new tax per se.
“The BIR aims to level the playing field between brick-and-mortar stores, which are regularly complying with their tax obligations, and online marketplaces. Whether their business is operated online or through physical stores, sellers and merchants have to pay their taxes,” he said.
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.
