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Philippines to Introduce Creditable Withholding Tax on Payments Made by Online Platforms to Suppliers of Goods and Services — Orbitax Tax News & Alerts

The Philippines Bureau of Internal Revenue (BIR) has issued a Briefer and Draft Revenue Regulations on amendments to the provisions of Revenue Regulations (RR) No. 2-98, which prescribes certain withholding tax regulations. The amendments would impose a creditable withholding tax at a rate of 1% on one-half of the gross income payments (remittances) made by online platform providers to suppliers of goods and services selling through a platform. Comments on the draft may be submitted up to 2 May 2023.



With the proliferation of online sales transactions thru the facilities of online platform providers, there is a need for the BIR to take advantage of this opportunity to identify sellers of goods and services who are therefore obliged to declare their income resulting from these transactions for tax purposes. To initially capture these information, a creditable withholding tax should be imposed on the gross remittances of these online platform providers to the sellers. However, the existing provisions of Revenue Regulations (RR) No. 2-98, as amended, do not cover these income payments.

Accordingly, a proposed RR imposing a creditable withholding tax of one percent (1%) on one-half of the gross remittances of the online platform providers to the sellers of the goods and services is hereby submitted for comments to all concerned stakeholders.

The provisions of the proposed RR include the definition of the terms "Online Platform Providers" and "Remittances". It clearly prescribed that obligation of the online platform providers under the proposed RR is in addition to their existing withholding tax obligations. Lastly, the proposed RR adopted certain provisions from RR No. 2-98, as amended, imposing creditable withholding tax on single purchase transactions or sales by irregular suppliers or sellers.