Revenue Memorandum Circular · RMCWithholding tax

RMC No. 8-2024

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Document type: RMC
Number: 8
Year: 2024
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REVENUE MEMORANDUM CIRCULAR NO. 8-2024 issued on January 15, 2024 clarifies the provisions of Revenue Regulations (RR) No. 16-2023 imposing Withholding Tax on gross remittances made by electronic marketplace (e-marketplace) operators and digital financial services providers (DFSPs) to sellers/merchants. The Withholding Tax obligation of e-marketplace operator and DFSPs shall take effect after fifteen (15) days following the publication of RR No. 16-2023 in a newspaper of general circular or the Official Gazette, whichever comes first. RR No. 16-2023 was first published in Manila Bulletin on December 27, 2023. Thus, RR No. 16-2023 shall take effect on January 11, 2024. The e-marketplace operators and DFSPs are allowed a period of ninety (90) days from the date of issuance of the Circular to comply with the relative policies or requirements of other government agencies, if any, and to give them an opportunity to adjust and properly comply with the provisions of RR No. 16-2023 prior to the actual imposition of the prescribed Creditable Withholding Tax. Further, existing unregistered sellers/merchants shall comply with the applicable requirements enumerated in Q4 - A4 of the Circular within the same prescribed period. The gross remittances of ₱500,000.00 not subjected from Creditable Withholding Tax shall consist of the total amount of remittances received by the online seller/merchant from e- marketplace operators and DFSPs; provided, however, that, in case any of the e-marketplace operators and DFSPs has determined that the gross remittances in its online platform exceeded ₱500,000.00 anytime during the taxable year, the prescribed Withholding Tax shall be automatically deducted from the particular remittance exceeding the said threshold and the same shall be imposed on subsequent remittances. Seller/Merchants are required to register their business with the BIR and submit a copy of the BIR-issued Certificate of Registration as part of the documentary requirements by e- marketplace operator prior to the use of the e-marketplace facility. If the gross remittance received from the e-marketplace operators or DFSPs is determined and/or expected not to exceed the threshold of ₱500,000.00, seller/merchants shall submit a Sworn Declaration (SD) duly received by the BIR and in the form prescribed in Annex "A" of the Circular upon application (or within the transitory period in case of existing participant sellers/merchants of e-marketplace operators and DFSPs) with e-marketplace or DFSP declaring that the total gross remittance to be received from the e-marketplace operators or DFSPs shall not exceed ₱500,000.00. The BIR-received SD shall be submitted thereafter on or before the 20th day of the first month of each taxable year. In case of failure to submit the prescribed SD, regardless of the actual total income or gross remittance, the Withholding Tax imposed by RR No. 16-2023 shall automatically be deducted by the e-marketplace operator or DFSP. Should the gross remittances exceed the ₱500,000.00 at any time during the taxable year, the prescribed BIR-received SD shall be immediately submitted to the e-marketplace operators or DFSPs by the sellers/merchants. If a seller/merchant is exempt from Income Tax or subject to a lower Income Tax rate pursuant to any existing law or treaty, he/she shall submit a duly issued certification to the e- marketplace operator as proof of exemption or entitlement to a lower tax rate pursuant to the provisions of Section 2 of RR No. 16-2023, which states: '(c) if the seller/merchant is duly exempt from or subject to a lower income tax rate pursuant to any existing law or treaty. Provided that, the concerned seller/merchant is able to secure the necessary certification, clearance, ruling, or any other document serving as proof of entitlement to the said exemption or lower income tax rate. The said proof of entitlement shall be submitted by the seller/merchant to the e-marketplace operator or digital financial services provider concerned.' All existing sellers/merchants selling goods and services in an e-marketplace not yet BIR- registered shall register their businesses with BIR pursuant to the Tax Code, as amended. Moreover, after the transitory period prescribed under the Circular, e-marketplace operators and DFSPs shall not allow unregistered businesses to sell goods and services in their platform/facility. E-marketplace operators and DFSPs are required to observe the following: a. Ensure that all sellers/merchants applying for the use of the e-marketplace or DFSP platforms are registered with the BIR by requiring the submission of their Certificate of Registration (BIR Form No. 2303) prior to allowing sellers/merchants to use the e- marketplace facility or DFSP platform, as the case may be. b. Require sellers/merchants who are duly exempt from or subject to a lower Income Tax rate pursuant to any existing law or treaty to submit the necessary certification or any other document as proof of entitlement to the said exemption or lower Income Tax rate. c. Require sellers/merchants to submit a copy of the BIR-received SD. In case the sellers/merchants failed to submit the BIR-received SD, regardless of the actual income or gross remittances, the Withholding Tax shall be automatically deducted under RR No. 16-2023. Further, when the seller/merchant failed to submit the required BIR-received SD to the e-marketplace operator or DFSP within the prescribed period, the Withholding Tax shall likewise be automatically deducted. d. Monitor the gross payments of buyers/customers and deduct the Withholding Tax prescribed under RR No. 16-2023 before subsequently remitting the same to the concerned sellers/ merchants. e. Provide sellers/merchants the Certificate of Creditable Tax Withheld at Source (BIR Form No. 2307) within the period prescribed under the Tax Code, and other relevant revenue issuances, or upon request by the sellers/merchants. The Withholding Tax obligation of the e-marketplace operator and DFSP in cases where the accumulated gross remittances to a seller/merchant exceed the prescribed ₱500,000.00 threshold shall commence: a. Upon receipt by the e-marketplace operator and DFSP of the BIR-received SD indicating that the sellers/merchants have exceeded the ₱500,000.00; or b. When the seller/merchant failed to submit the required BIR-received SD to the e- marketplace operator or DFSP within the prescribed period; or c. When the e-marketplace operator or DFSP has determined that its total gross remittances to the concerned seller/merchant have exceeded the ₱500,000.00 threshold. The sellers/merchants are not allowed to receive payments through their personal/individual accounts. In all payments/remittances/transfers covered under RR No. 16- 2023, the seller/merchant's account shall, at all times, be under the BIR-registered tradename of the seller/merchant. The BIR shall monitor usage of account under the registered tradename of the seller/ merchant. In case the e-marketplace platform accepts or collects payment for the goods and remits the same to the seller, this shall be subject to withholding pursuant to RR No. 16-2023 where Withholding Tax shall be deducted before its remittance of the income payment to the seller. In the event that the payment is transmitted to the seller/merchant through different facilities, the last facility which has control of the payment before completely remitting the same to the seller/merchant shall be liable to withhold the taxes under RR No. 16-2023. The violation of any of the provisions of RR No. 16-2023 shall be subject to appropriate penalties under the Tax Code, relevant laws, rules and regulations.

Research aid

Issuance analysis

Structured from the available issuance text · Withholding tax

RMC No. 8-2024 clarifies RR No. 16-2023, which imposes creditable withholding tax on gross remittances by e-marketplace operators and digital financial services providers (DFSPs) to online sellers/merchants. The obligation takes effect on January 11, 2024 (15 days after RR No. 16-2023's December 27, 2023 publication in Manila Bulletin), with a 90-day transitory period from the Circular's issuance for operators, DFSPs, and existing unregistered sellers to comply. Remittances up to a total of ₱500,000.00 per seller/merchant per taxable year are not subject to withholding, but once the threshold is exceeded, tax is automatically deducted on the excess and all subsequent remittances. Sellers/merchants must register with the BIR, submit a BIR-received Sworn Declaration if they expect not to exceed the threshold, and present proof of income tax exemption or lower rate where applicable; failure to submit the Sworn Declaration triggers automatic withholding regardless of actual income. Operators and DFSPs must verify seller registration, monitor gross payments, withhold before remitting, issue BIR Form No. 2307, and deal only with BIR-registered sellers using accounts under their registered tradename. The last facility controlling the payment before remittance to the seller is liable to withhold, and violations are subject to penalties under the Tax Code.

Purpose

To clarify the provisions of RR No. 16-2023 on the withholding tax on gross remittances made by e-marketplace operators and DFSPs to sellers/merchants, including its effectivity date, transitory compliance period, the ₱500,000.00 threshold mechanics, and the registration, Sworn Declaration, and certification requirements of sellers/merchants and platform operators.

In brief

RMC No. 8-2024 clarifies RR No. 16-2023's creditable withholding tax on remittances by e-marketplace operators and DFSPs to online sellers/merchants, covering its January 11, 2024 effectivity, the ₱500,000.00 annual threshold, Sworn Declaration and BIR registration requirements, operator duties, and a 90-day transitory compliance period.

Keywords

e-marketplace operatorsdigital financial services providers (DFSPs)Creditable Withholding Tax₱500,000.00 thresholdSworn Declaration (SD)BIR Form No. 2303BIR Form No. 2307RR No. 16-2023BIR-registered tradename

Key points

The withholding tax obligation of e-marketplace operators and DFSPs takes effect after 15 days following publication of RR No. 16-2023; since it was first published in Manila Bulletin on December 27, 2023, it takes effect on January 11, 2024.
E-marketplace operators and DFSPs are given 90 days from the Circular's issuance to comply with other government agencies' requirements and to adjust before actual imposition of the creditable withholding tax; existing unregistered sellers/merchants must comply with the applicable requirements in Q4-A4 within the same period.
Gross remittances totaling up to ₱500,000.00 received by an online seller/merchant are not subjected to creditable withholding tax; once any operator or DFSP determines the threshold was exceeded during the taxable year, withholding is automatically deducted on the excess remittance and on all subsequent remittances.
Sellers/merchants whose remittances are not expected to exceed ₱500,000.00 must submit a Sworn Declaration in the form prescribed in Annex "A"; the BIR-received SD is submitted on or before the 20th day of the first month of each taxable year, and failure to submit it triggers automatic withholding regardless of actual income or gross remittance.
All sellers/merchants must register their business with the BIR and submit the BIR-issued Certificate of Registration before using an e-marketplace facility; after the transitory period, operators and DFSPs shall not allow unregistered businesses to sell on their platforms.
E-marketplace operators and DFSPs must verify seller registration via BIR Form No. 2303, require proof of income tax exemption or lower rate where claimed, require the BIR-received SD, monitor gross payments and deduct withholding tax before remitting, and issue BIR Form No. 2307 (Certificate of Creditable Tax Withheld at Source).
The withholding obligation commences upon receipt of a BIR-received SD indicating the ₱500,000.00 threshold was exceeded, upon the seller/merchant's failure to submit the required SD within the prescribed period, or upon the operator/DFSP determining total gross remittances exceeded the threshold.
Sellers/merchants may not receive payments through personal/individual accounts — accounts must at all times be under their BIR-registered tradename — and where payment passes through different facilities, the last facility controlling the payment before remitting it to the seller/merchant is liable to withhold; violations are subject to penalties under the Tax Code.

Forms referenced

BIR Form No. 2303 (Certificate of Registration) must be submitted by sellers/merchants to operators/DFSPs as proof of BIR registration before using the platform.
BIR Form No. 2307 (Certificate of Creditable Tax Withheld at Source) must be provided by operators/DFSPs to sellers/merchants within the period prescribed under the Tax Code or upon request.
Sworn Declaration (SD) in the form prescribed in Annex "A" of the Circular, to be duly received by the BIR and submitted by sellers/merchants not expecting to exceed the ₱500,000.00 threshold.

Tax types

Creditable Withholding Tax on gross remittances made by e-marketplace operators and DFSPs to sellers/merchants, as imposed under RR No. 16-2023.
Income tax — referenced in relation to sellers/merchants exempt from or subject to a lower income tax rate pursuant to existing law or treaty, who must submit proof of entitlement.

Affected taxpayers

E-marketplace operators, which must withhold creditable withholding tax on gross remittances to sellers/merchants, verify seller registration, and issue BIR Form No. 2307.
Digital financial services providers (DFSPs), which are subject to the same withholding, monitoring, and documentation obligations as e-marketplace operators.
Sellers/merchants selling goods and services through e-marketplaces or DFSP platforms, who must register with the BIR, submit the Sworn Declaration or exemption certifications, and receive payments only through accounts under their BIR-registered tradename.
Existing unregistered sellers/merchants, who must register with the BIR and comply with applicable requirements within the prescribed transitory period.
Buyers/customers whose gross payments on the platforms are monitored by operators and DFSPs for withholding purposes.