Philippine Bureau of Internal Revenue Implements New Tax Regulation

Jul.18.2024
Philippine Bureau of Internal Revenue Implements New Tax Regulation
The Philippine Bureau of Internal Revenue (BIR) implements new tax law to collect 1% withholding tax from online merchants.

According to a report from the Inquirer on July 17th, the Philippines Bureau of Internal Revenue (BIR) announced on Wednesday the implementation of Revenue Regulation No. 16-2023, starting from July 15th. This regulation imposes a 1% withholding tax on online sellers with annual gross sales exceeding 500,000 pesos (approximately $8,579 USD), aimed at optimizing the tax structure and ensuring tax fairness.


The Commissioner of the Bureau of Internal Revenue in the Philippines, Romeo "Jun" Lumagui Jr., emphasized in a media interview that the new tax measures will not lead to an increase in online commodity prices. Unlike value-added tax (VAT), this tax is classified as income tax and falls under the category of withholding tax.


Revenue Commissioner Romaguera also pointed out that the implementation of withholding tax will help the government to timely understand the dynamics of domestic online transactions, and is expected to generate billions of pesos (equivalent to about $17.15 million) in new revenue from large online merchants. The BIR has been in communication with online platform suppliers such as Shopee and Lazada since last year regarding the withholding tax system, and these platforms have expressed their support and promised not to sell products from unregistered merchants.


The Bureau of Internal Revenue (BIR) is requiring foreign businesses to register as online sellers in the Philippines in order to pay withholding taxes. Foreign companies that are not registered will face a final withholding tax rate of 25%.


Director Lu Magui stated that in the future, the BIR will shift its focus to the tobacco industry. Starting from June, all importers and manufacturers of e-cigarettes must attach tax stamps to their products; if an e-cigarette product does not have an internal tax stamp, it means that no consumption tax has been paid. The product will be confiscated by the financial department, and business owners may face criminal liability for tax evasion.


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