RR No. 16-2023 — Further amends the provisions of Revenue Regulations No. 2-98, as amended, to impose Withholding Tax on gross remittances made by electronic marketplace operators and digital financial services providers to sellers/merchants (Published in Manila Bulletin on December 27, 2023)

REPUBLIC OF THE PHILIPPINES FRUREAU OF INTEENALREVENUE NYYN e

BUREAU OF INTERNAL REVENUE DEPARTMENT OF FINANCE National Office Building Quezon City RECORDS MGIOIVIS.UN 0 l:50 fw bEC 21 2023 jU

DEC2 1'2023

REVENUE REGULATIONS N0. /G- 2023

SUBJECT Further Amending the Provisions of Revenue Regulations No. 2-98, as Amended. to Impose Withholding Tax on Gross Remittances Made by Electronic Marketplace Operators and Digital Financial Services Providers to Sellers/Merchants

TO All Internal Revenue Officials, Employees and Others Concerned

SECTION 1.SCOPE. -- Pursuant to the provisions of Sections 244 and 245 of the National

further amend the provisions of Sections 2.57.2 and 2.57.3 of Revenue Regulations (RR) No. 2-98 sold/paid through the former's platform/facility. to impose a withholding tax on gross remittances made by electronic marketplace (e-marketplace) operators and digital financial services providers to sellers/merchants for goods and services Internal Revenue Code (NIRC) of 1997, as amended, these Regulations are hereby promulgated tc

SECTION 2.AMENDMENTS. - The pertinent provisions of Sections 2.57.2 and 2.57.3

tax on gross remittances by e-marketplace operators and digital financial services providers to online of RR No. 2-98, as amended by RR No. 11-2018, are hereby further amended to impose a withholding

sellers/merchants for the goods and services sold/paid through the former's platform/facility. The amendments shall be read as follows:

and Rates Prescribed Thereon. -- Except as herein otherwise provided, xxx. "SECTION 2.57.2. Income Payments Subject to Creditable Withholding Tax

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gross remittances by e-marketplace..operators and digital financial Financial Services Providers to Merchants. -- On one-half (/) of the services providers to the sellers/merchants for the_goods or services sold/paid through their platform/facility..- One percent (1%) Remittances of Electronic Marketplace_Operators_and Digital

section shall not apply to_the following instances: Provided, however._that the withholding tax imposed under this sub-

(a) If the annual total gross remittances to an online seller/merchant for the past taxable year has not exceeded Five Hundred Thousand Pesos (P500.000.00): or

(b) If the cumulative gross remittances to an online seller/merchant in

a taxable year has not yet exceeded Five Hundred Thousand Pesos (P500.000.00): or

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(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.

The term gross remittance' shall refer to the total amount received by an e- marketplace operator or digitat financial servicesprovider. from a buver/consumer for_the.goods and services sold by or_paid to the seller/merchant through the platform/facility of the e-marketplace operator or digital financial services provider, excluding the following:

(a) sales returns and discounts: separately billed delivery or shipping

fee: and value-added tax, collected by the e-marketplace operator from the online consumer and subsequently remitted to the online seller: and

(b) consideration for the use of the e-marketplace_and/or digital

financial services platform.

For purposes of this sub-section, the collection of gross remittance by the e-marketplace operator shall cover__the following payment arrangements as illustrated below:

Mr. Lauro_purchased a toolbox thru Teendahan. an e-marketplace platform for online shopping:

(a) Thru the electronic wallet (e-wallet) of the e-marketplace operator being maintained by the online consumer:

shipping fee using TDPay, the e-wallet of the e-marketplace. In Mr. Lauro paid the total amount of the value of the goods and

this scenario, his order was paid in advance by using TDPay.

The e-wallet account_of the consumer in the e-marketplace is maintained by cashing in or loading money, which can be used to pay any transaction made within the e-marketplace. In this scenario, the e-marketplace operator has the _control over the

buyer/consumer. money upon debiting the payment from the e-wallet of the online

(b) Thru payment of the online buyer/consumer using the e-wallet feature of a digital financial services_provider_(e.g.. mobile payment services, banking services or credit card) for the account

of the e-marketpiace operator: and

Il:50 bM DEC 21 2023 NAL REVENUE mobile payment service other than his e-wallet in Teendahan, by linking his CashLess account in Teendahan as another mode of In this scenario. Mr. Lauro paid using his e-wallet in CashLess, a

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payment or by transferring of money from his CashLess account to Teendahan's account.

(c) Payment in cash which is personally collected from the

buyers/consumers _by_persons or entities, on behalf of the e- marketplace operator, and deposited or transferred thereafter to the account of the e-marketplace operator.

In this scenario. Mr. Lauro chose cash-on-delivery as his mode of payment. He will pay the rider or delivery partner of the_e- marketplace upon_delivery of his order. Subsequently, the _rider will remit the payment collected from Mr. Lauro to the e- marketplace operator.

For clarity, the following terms shall have the following meaning:

whose business is to connect online buyers/consumers with online sellers/merchants, facilitate and conclude the sales. process the 1. Electronic Marketplace' shall refer to a digital service platform

payment of the products,_goods or services through such digital platform, or facilitate the shipment_of goods _or_provide logistics services and_post-purchase support .within such_.platforms...and otherwise retains oversight over the consummation of the transaction. such as. but not limited to the following:

(a) marketplace for online shopping:

Illustration:

Purchases in an e-marketplace where the payment is collected by

seller/merchant. the .e-marketplace operator..and remits... the same to. the

Teendahan is an e-marketplace platform for online shopping where products of various sellers or businesses can be offered and purchased by customers. A customer will add-to-cart the goods he intends to buy and will proceed to check-out for the delivery and payment instructions.

were delivered to.her and the rider collected the payment in behalf of the seller. Afterwards. .Teendahan remitted .the...payment received from customer to the seller, net of corresponding fees for Ms. Eua purchased a bag from an online seller using Teendahan and chose cash-on-delivery as her mode of payment. The goods

the use of the e-marketplace and withholding tax.

(b) food delivery platform:

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Illustration:

Purchases_in a focd delivery platform where the _payment is collected.by the.platform and remits .the. same .to the seller/merchant.

restaurants which are available for _order by customers are payment instructions. Tara Kain is a food delivery platform where products of yarious reflected _and offered. A customer will add-to-cart the goods he intends to buy and will proceed to check-out for the delivery and

not collect any payment from her anymore considering that the bil withholding tax. restaurant she likes. She paid using the e-wallet in the platform was._already...collected by Tara Kain. Tara Kain subsequently remitted the payment received from the customer to the seller, net of.corresponding fees for the use of the e-marketplace and Ms. Arie ordered thru Tara Kain her favorite sushi in a Japanese and the goods were delivered to her thereafter, hence, the rider dic

(c) platform for booking_ of resort, hotel, motel, inn, house. condominium unit, bed space, room for rent, and_other similar lodging accommodations located in the Philippines: and

Illustration:t

is collected by the platform in advance or upon booking. Booking transactions made thru an online platform which offers condominium units, and any other similar services where payment various_accommodations for resort. hotel, motel, inn, homes.

with the abovementioned accommodations. iStay is a_platform for booking transactions on various locations

and withholding tax. Newlyweds Mr. JC and Mrs. Haidee decided to book for a one- to LT Hotel, net of corresponding fees for the use of the platform week hotel accommodation at LT Hotel in Palawan thru iStay mobile application. Accordingly, iStay will remit the said payment They chose to pay in full using a credit card upon booking thru the

the remittance to LT Hotel pursuant to these Regulations. In this scenario. there are two instances of withholding tax. First the credit_card company shall withhold iStay pursuant to (H Section.2.57.2 of RR No. 11-2018. Second, iStay shall withhold

(d) other similar online service or product marketplaces.

In all the above cases, use of other modes of payments such as credit card, e-wallet of the platform, and other mobile payment

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services similar _in the abovementioned _illustrations shall Hikewise be covered by these Regulations. 2. 'Sellers/Merchants' shall refer to local sellers/merchants for purposes of imposing the creditabie withholding _tax under these Regulations.

3. Digital Financial Services Platform' shall refer to the financial technology_provided by_digital financial services providers which are capable of offering a wide array of services of financial nature

transmission services, and other similar or related services. that are made available to the public through_the internet, mobile application._.r other_similar means, including banking services. insurance and insurance-related services. payment and money

to a digital financial services provider that holds or has the duty to The withholding tax imposed under this sub-section shall cover of. payment..and..money..transmission.relating..to .the. through the website or mobile application of the seller/merchant. provided however, that if the issuer and the acquirer is different, the acquirer to the seller/merchant. For this purpose. the "Issuer"refers safekeep the money or financial assets of mobile payment service on behalf of the buyer/consumer. On the other hand, the "Acquirer" remittances.made..by...digital financial services.providers. to seliers/merchants thru its e-wallet feature or any other similar modes buyer/consumers'.payment._.of the goods and services_.whether purchased directly by such buyer/consumer from physical stores or withholding tax shall only be imposed on the_remittances by the

is a digital financial services provider that processes the transactions of credit or debit card payments on behalf of the seller/merchant. Illustration:

Mr. Ray entered the Wander Feet store owned by.Ms. Micah, a BIR P5,000.00 and_paid using CashLess,_a mobile payment service registered proprietor of the store. He bought a pair of shoes worth (which. for this purpose is considered as the Issuer), by scanning the

the Acquirer (CT Bank). only the remittance of payment from CT CashLess. CT Bank is the Acquirer of Wander Feet. Considering that the Issuer of the money of Mr. Ray (CashLess) is different from subject to withholding tax under these Regulations. Quick Response (QR) code of the Wander Feet's account with Bank (the Acquirer) to Wander Feet (the seller/merchant) shall be

Further, in all payments/remittances/transfers covered under these Regulations, the seller/merchant's account shall, at all times, be under the BIR-registered tradename of the seller/merchant.

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Illustration:

buyer/consumer ordered a rice meal and decided to pay using A restaurant owned by Ms. Tess with a BIR-registered tradename of CashLess, a mobile payment service. Happy Tummy Kitchen accepts different modes of digital_payment such as mobile payment service/e-wallet and._.bank transfer..A

In this scenario, the restaurant shall receive the payment thru the

registered tradename of Happy Tummy Kitchen and not of an any the registered tradename. Accordingly, the digital financial services provider (CashLess) will remit the payment to the restaurant (Happy and withholding tax. mobile._.payment service/e-wallet for the account of.. theirBIR- Tummy Kitchen), net of corresponding fees for the use of the platform individual account, such as the owner's personal account, or other than

such as. but not limited to. withholding taxes on._.payment to the consideration for the use of the digital platform. the e-marketplace. operators and digital financial services providers and commissions on the goods and services actually sold, aside from addition to the existing withholding tax obligations being imposed to transportation contractors for the carriage of goods and merchandise The withholding tax imposed under this sub-section shall be in

BUREAU OF INTE RNAL REVENUE UGCaT mNYNT t 5Dhw DEC 21 2023 }U} Consequently, and in furtherance to the government's thrust to protect respective sellers/merchants the submission of their Certificate of Registration (COR) or BIR Form No. 2303, and include the same as part the_commencement of business in an e-marketplace platform in accordance with Section 236 of the NIRC of 1997, as amended. and uphold the interests of the buyers/consumers..from trade malpractices...e-marketplace. operators.. shall..require..from.their. All online sellers/merchants shall register with the BIR on or before of .e-marketplace.. operators'...minimum.. seller/merchant.

RECORDS MGT.CIVISN accreditation requirements.

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following persons are hereby constituted as withholding agents for purposes of the creditable tax required to be withheld on income payments enumerated in Section 2.57.2: 'SECTION 2.57.3 Persons Required to Deduct and Withhold. - The

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of the tax is really upon the seller although the mode of payment of the tax is through withholding by the buyer, or by the e-marketplace operator or digital were made therein. As such, the tax withheld is considered a part of the consideration agreed upon between the seller and buyer resulting, therefore, to financial services provider, in case the payment for the sale of goods or services Since tax herein involved and being withheld is income tax, the burden

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consideration/selling price and the tax withheid. a net take to the seller of only the difference between the agreed

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purpose shall be separately issued by the BIR. a revenue memorandum issuance prescribing the implementation procedures and timeline for this SEC. 3. TRANSITORY PROVISION. -- After the date of effectivity of these Regulations.

invalid by a competent court, the remainder of these Regulations or any provision not affected by such declaration of invalidity shall remain in force and effect. SEC. 4. SEPARABILITY CLAUSE. - If any provision of these Regulations is declared

of these Regulations are hereby amended, modified or repealed accordingly. SEC. 5. REPEALING CLAUSE. -- All revenue issuances inconsistent with the provisions

following its publication in the Official Gazette or in a newspaper of general circulation, whichever comes first. SEC. 6. EFFECTIVITY. - These Regulations shall take effect after fifteen (15) days

CSS. BENJAMIN E. DIOKNO Secretary of Finance

Recommending Approval: DEC 15 2023

Compssioner gf Internai Revenue RV 028 LUMAGUI, JR.

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