BIR eyes withholding tax on digital payment channel transactions

Aside from sales through online platforms, the Bureau of Internal Revenue (BIR) is also eyeing to collect a creditable withholding tax of 1% on digital payment channel transactions.

“The plan to impose withholding tax is not limited to online platforms, this will also include payment gateway… all payment channels will be required to withhold transactions,” BIR Commissioner Romeo Lumagui Jr. said at a press conference organized by the Philippine News Agency on Friday.

To recall, the taxman is planning to impose a creditable withholding tax of 1% on one-half of the gross remittances of online platform providers to their partner sellers or merchants.

The withholding tax is the amount withheld by a business in payments of goods or services which is directly remitted to the government on behalf of suppliers or employees.

Lumagui said the BIR is still finalizing how it can impose withholding tax on transactions done through digital payment channels.

The BIR chief, however, said the same rules or system on collecting withholding tax on credit card payments would be applied on transactions via digital payment channels.

Under BIR rules, a credit card company withholds 1% of 50% of the gross amount paid to any business entity in relation to the transactions done by cardholders.

Meanwhile, Lumagui said the BIR planned to impose the 1% withholding tax on online sellers by December this year.

The BIR chief advised operators of online platforms to ensure partner-merchants are registered with the BIR before they can be accredited to sell on digital marketplaces.

Lumagui said the taxman will also implement an “Online Kandado” against platforms.

“Meaning we will shut down the site, if the sellers are not registered,” he said. — DVM, GMA Integrated News