Withholding Tax Liability of E-marketplace Operators
By: Atty. Mabel L. Buted
"The RR now presents a situation where withholding of tax is imposed on pass-through remittances. To recall, before RR No. 16-2023, withholding of tax is made only on purchases considered as assets or expenses of the payor withholding the tax, and the obligation to withhold is imposed on the person having control of the payment and who, at the same time, records and claims the assets and expenses. Here, the pass-through payments facilitated by the digital platforms are neither considered income nor expenses of the e-marketplace operators and DFSPs. Further, although they are the ones in control of the payments subject to withholding tax, they do not claim these as assets or expenses. The said payments are still the assets or expenses of the buyer or customer, although the payments are made through them. "
 Mabel L. Buted +632 8403-2001 loc.160 |
Earlier this year, we were greeted with RR No. 16-2023 which became effective on January 11, 2024.
This revenue regulations imposes an additional withholding tax obligation on the part of e-marketplace operators and digital financial services providers (“DFSPs”). They are those who offer digital services platforms which connect online buyers/consumers with online sellers/merchants in their purchase/sale, payment, delivery, and post-purchase support transactions.
They are required to withhold expanded withholding tax (EWT) on the gross remittances made to sellers/merchants for the goods and services sold or paid through the use of their platform or facility. The tax rate is 1% based on one-half (1/2) of the gross remittances. This applies when the annual total gross remittances to the online seller/merchant in a taxable year exceeded P500,000.00. The sellers/merchants must submit a sworn declaration of their income to the e-marketplace operators and DFSPs for the latter to determine if withholding of tax is due and proper. Upon withholding of tax, the e-marketplace operators and DFSPs will provide the sellers/merchants Certificate of Creditable Tax Withheld at Source (BIR Form No. 2307).
Further, under RR No. 16-2023, the e-marketplace operators and DFSPs are required to allow only BIR-registered sellers and merchants to use their facility. They must require from the sellers their BIR Certificate of Registration as part of their minimum accreditation requirements.
This new withholding tax obligation poses some questions and issues.
The RR now presents a situation where withholding of tax is imposed on pass-through remittances. To recall, before RR No. 16-2023, withholding of tax is made only on purchases considered as assets or expenses of the payor withholding the tax, and the obligation to withhold is imposed on the person having control of the payment and who, at the same time, records and claims the assets and expenses. Here, the pass-through payments facilitated by the digital platforms are neither considered income nor expenses of the e-marketplace operators and DFSPs. Further, although they are the ones in control of the payments subject to withholding tax, they do not claim these as assets or expenses. The said payments are still the assets or expenses of the buyer or customer, although the payments are made through them.
Having said this, can the e-marketplace operators and DFSPs report as income the payment received from the buyer as well as claim the same as an expense upon remittance to the seller? Does the revenue regulations also affect the current obligation of the buyer to withhold? If the transaction and payment are made through the online facilities of the e-marketplace operators and DFSPs, will both the buyer and the e-marketplace operators and DFSPs withhold the tax? In any case, the merchant must be allowed to claim as tax credits all taxes withheld on its income.
Due to the advancement in the digital market where it is possible for any person to trade, market, and sell any product, goods, or services online, the government must have issued the RR with the intention to regulate the digital market and to check and monitor the payment of taxes on income circulating in the market. But for the government to fully achieve these objectives, the law must still be capable of being effectively administered. We seek and appreciate further clarity on the matters and concerns raised above.
The author is a junior partner of Du-Baladad and Associates Law Offices (BDB Law), a member-firm of WTS Global.
The article is for general information only and is not intended, nor should be construed as a substitute for tax, legal or financial advice on any specific matter. Applicability of this article to any actual or particular tax or legal issue should be supported therefore by a professional study or advice. If you have any comments or questions concerning the article, you may e-mail the author at This email address is being protected from spambots. You need JavaScript enabled to view it. or call 8403-2001 local 160.