BIR: Buyers need not worry over e-seller tax

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MANILA, Philippines — The Bureau of Internal Revenue (BIR) on Wednesday said the directive for digital marketplace operators, such as Shopee and Lazada, to collect a 1-percent withholding tax on the sales of merchants using their online platforms should not result in a price increase, as this is a tax that should be incorporated into the sellers’ income.

“For the consumers, we should not be afraid of that because it should not result in an increase in the prices of online products. It is not the same as the value-added tax (VAT) that is imposed and added to the price of the product. This is an income tax, the withholding tax,” BIR Commissioner Romeo Lumagui Jr. said in an interview.

READ: BIR: Online sellers must now pay withholding tax

The BIR announced on Tuesday that Revenue Regulation No. 16-2023 requiring online merchants earning more than P500,000 annually to be subjected to a 1-percent withholding tax took effect on July 15.

The circular was issued in December last year and was supposed to start last April, but the BIR gave a 90-day extension to allow the affected online marketplace operators, sellers, and e-wallet service providers enough time to prepare.

“For other businesses, they should be happy with what [the BIR] is doing because this will level the playing field. And doing business in our country is equal. Because those involved in brick-and-mortar stores pay taxes” while those selling online do not, Lumagui added.

On questions regarding the “fairness” of the tax imposition, Lumagui stressed that the withholding tax was primarily aimed at ensuring efficient tax collection rather than targeting small online sellers.

Increase in tax revenues

“The primary reason for imposing the withholding tax systems is for the government to be able to have visibility in online transactions in the country,” he said, adding that the BIR was expecting to collect billions of pesos in new revenues from big online sellers.

Lumagui also noted that the BIR had been in dialogue since last year with online platform providers, among them Shopee and Lazada, regarding the withholding tax system.

“They are supportive and they also assured us that no one will sell on their platforms without being registered with the BIR. We have a remedy there because if the online sellers do not register, they would not be allowed to sell on the platforms,” he added.

For foreign merchants, he said they have to register in the country as a business online seller and would thus be covered by the 1-percent withholding tax. However, those foreign businesses that do not register, would be subject to a higher final withholding tax of 25 percent.

The BIR chief also said that the agency’s tax collection performance has been meeting expectations, reflecting the agency’s effective tax administration and enforcement strategies.

Next target: Tobacco sector

For the second half of this year, Lumagui said they would focus on collecting tobacco sector revenues.

Since June, the BIR has mandated all vape importers and manufacturers to attach stamps on their products.

The absence of internal revenue stamps on vape products means nonpayment of excise, subject the vape products to seizure by the BIR and exposing their business owners to criminal liability for tax evasion.

The BIR said it has seen an increase in the number of registered vape products, resulting in higher tax collections.

It collected P1.36 trillion from vape product sales in the first semester, which was up by 11.74 percent from the same period last year.

The BIR aims to increase this to P3 trillion for the year.

“This is what we are doing in the second semester. I hope it will be enough [for us to] impose (our rules) and strictly monitor vape products. And we are still chasing the illicit trade in cigarettes,” Lumagui said.