BIR Introduces 1% Withholding Tax on Online Merchants
The Bureau of Internal Revenue Philippines (BIR) has imposed a 1 percent withholding tax on online merchants with annual sales of more than 500,000 pesos (about $8,579) starting July 15 to ensure tax fairness for e-commerce. The tax chief emphasized that the new tax will not lead to an increase in the price of goods and that the BIR will tighten its supervision of the vape market to ensure tax compliance.
Implementation of Tax Regulation No. 16-2023
The Philippine Bureau of Internal Revenue (BIR) issued an updated announcement on Wednesday that Tax Regulation No. 16-2023 will be implemented starting July 15, imposing a 1 percent withholding tax on online merchants with annual sales of more than 500,000 pesos (about $8,579), aiming to improve the tax structure and ensure tax fairness, the Inquirer reported on July 17th.
Assurance of No Price Increase for Online Goods
In an interview, Philippine Revenue Authority (PRA) Director General Romeo “Jun” Lumagui Jr. emphasized that the new tax measure will not lead to an increase in the price of online goods and that the value-added tax (VAT), which is different and which is an income tax, falls within the scope of the withholding tax.
Monitoring Online Transactions and Expected Revenue
President Lumagui also noted that the implementation of the withholding tax will help the government monitor online transaction trends in the country. It is expected to generate billions of pesos (about $17.15 million) in new revenue from large online merchants. Since last year, the BIR has been coordinating with major e-commerce platforms such as Shopee and Lazada regarding the withholding tax system. These platforms have expressed their support and committed not to sell products from unregistered merchants.
Tax Obligations for Foreign Online Businesses
For foreign businesses, the BIR requires them to register as a commercial online business in the Philippines to pay the withholding tax; unregistered foreign businesses will face a final withholding tax rate of 25%.
BIR to Strengthen Oversight of the Vape Industry
Director Lumagui said that the BIR will shift its focus to the tobacco industry next. Since June, all buyers and manufacturers of vapes have been required to attach excise tax stamps to their products. If an vape brand lacks an internal tax stamp, it indicates that excise taxes have not been paid. Such products will be confiscated by authorities, and the owners may face criminal charges for tax evasion.
