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TaxesHow to Comply with the Philippine RR 16-2023 Withholding Tax for Online Sellers?

May 8, 2025
Home » How to Comply with the Philippine RR 16-2023 Withholding Tax for Online Sellers?

The e-commerce landscape in the Philippines is flourishing, but rapid growth has prompted stricter tax regulations. In 2024, the Bureau of Internal Revenue (BIR), alongside Republic Act No. 12023, rolled out critical measures to enhance taxation within the digital economy. These rules ensure that revenues from online transactions are properly taxed.

This guide focuses on BIR Revenue Regulations (RR) No. 16-2023’s withholding tax for e-marketplaces. 

Understanding RR No. 16-2023 Withholding Tax for E-Marketplaces (Effective Jan. 11, 2024)

RR No. 16-2023 mandates that e-marketplace operators and Digital Financial Service Providers (DFSPs) withhold a 1% income tax on 50% of gross remittances to sellers for goods and services sold on their platforms. This applies to online sellers with annual gross remittances exceeding PHP 500,000. 

Sellers exempt from income tax or eligible for lower rates under laws or tax treaties are excluded, but platforms must verify exemptions. RMC No. 8-2024, issued January 15, 2024, clarifies implementation, with full compliance required by April 14, 2024. Non-compliance may lead to fines or service disruptions.

Which Businesses are Affected? 

  • E-Marketplace Operators (e.g., Shopee, Lazada): Platforms enabling online sales are required to withhold and remit the 1% tax to the BIR. 
  • DFSPs (e.g., GCash, PayMaya): Digital payment or service providers handling e-commerce transactions must also comply. 
  • Online Sellers: Those with annual earnings exceeding PHP 500,000 on these platforms face a 1% tax on 50% of their remittances, unless exempt. The PHP 500,000 threshold spares smaller sellers, encouraging micro-entrepreneurs while focusing on larger vendors. Platforms and DFSPs are tasked with calculating, withholding, and reporting the tax.

Steps to Comply with RR No. 16-2023

To adhere to RR No. 16-2023, e-marketplace operators, Digital Service Providers (DSPs), and affected sellers should follow these steps:

  1. Identify Taxable Sellers: Determine sellers exceeding the PHP 500,000 annual gross remittance threshold for the 1% withholding tax on 50% of their remittances.
  2. Verify Exemptions: Confirm exemptions or lower tax rates for sellers under existing laws or tax treaties, ensuring proper documentation.
  3. Set Up Withholding Systems: Implement or update systems to accurately calculate and withhold the 1% tax on applicable transactions.
  4. Remit and Report Taxes: Timely remit withheld taxes to the BIR and submit required reports as per Revenue Memorandum Circular (RMC) No. 8-2024.

Educate your team on the regulation and compliance processes to avoid errors. Consider finding a tax consultation service to clarify your obligations.

For larger businesses in particular, tax computation can be complex. We recommend outsourcing your accounting needs to a reputable firm. It’s often more cost-effective than expanding your in-house team.

How to File the Withholding Tax

Filing the 1% withholding tax under RR No. 16-2023 is straightforward for e-marketplace operators and Digital Financial Service Providers (DFSPs) if you follow these clear steps:

  1. Gather Transaction Data: Collect details of all taxable transactions, including seller information, gross remittances, and the withheld tax (1% of 50% of remittances for sellers earning over PHP 500,000 annually).
  2. Complete BIR Form 1601-EQ: Fill out BIR Form 1601-EQ (Quarterly Remittance Return of Creditable Income Taxes Withheld) to report the total tax withheld for the quarter, ensuring accuracy.
  3. Submit the Form: File BIR Form 1601-EQ either electronically through the BIR’s Electronic Filing and Payment System (eFPS) or in person at your local Revenue District Office (RDO) by the last day of the month after the taxable quarter.
  4. Pay the Withheld Tax: Settle the tax amount via authorized agent banks, BIR collection agents, or eFPS-integrated online payment platforms, meeting quarterly deadlines.
  5. Provide Seller Certificates: Issue BIR Form 2307 (Certificate of Creditable Tax Withheld at Source) to sellers within the required timeframe, showing taxes withheld for their tax credit claims.
  6. Keep Organized Records: Store all remittance records, tax calculations, and Forms 1601-EQ and 2307 for at least three years, using accounting software to simplify tracking and prepare for potential BIR audits.
  7. Stay on Top of Deadlines: Avoid penalties like a 25% surcharge, 12% annual interest, or a PHP 1,000 fine per return by filing and paying on time. Set reminders to stay compliant.

Refer to the BIR’s guide for Form 1601-EQ here for additional information.

By following these steps and keeping records organized, you can comply with BIR requirements smoothly. 

Summary of RR No. 16-2023 Compliance

RR No. 16-2023 regulates the digital economy by imposing a 1% withholding tax on half of gross remittances by e-marketplace operators and Digital Financial Service Providers (DFSPs) to sellers earning over PHP 500,000 annually Exemptions apply for sellers under specific tax laws or treaties, but platforms must verify these. To comply, businesses must identify taxable sellers, implement withholding systems, file BIR Form 1601-EQ quarterly, remit taxes, and issue BIR Form 2307 to sellers. 

Non-compliance risks penalties or service disruptions. Staying organized and proactive ensures adherence to BIR regulations.

Refer to Revenue Memorandum Circular (RMC) No. 8-2024 here for further details or consult a tax expert for guidance.

Need to Check if Your Business is Compliant? Find Help Here.

BusinessRegistrationPhilippines.com offers expert tax and accounting services to simplify withholding tax compliance. Outsourcing many of your accounting and bookkeeping tasks to us is often more cost-effective than expanding your in-house team. Reach out today to schedule an initial consultation with one of our experts. 

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What is the Meaning of Withholding Tax in the Philippines

The e-commerce landscape in the Philippines is flourishing, but rapid growth has prompted stricter tax regulations. In 2024, the Bureau of Internal Revenue (BIR), alongside Republic Act No. 12023, rolled out critical measures to enhance taxation within the digital economy. These rules ensure that revenues from online transactions are properly taxed.

This guide focuses on BIR Revenue Regulations (RR) No. 16-2023’s withholding tax for e-marketplaces. 

Understanding RR No. 16-2023 Withholding Tax for E-Marketplaces (Effective Jan. 11, 2024)

RR No. 16-2023 mandates that e-marketplace operators and Digital Financial Service Providers (DFSPs) withhold a 1% income tax on 50% of gross remittances to sellers for goods and services sold on their platforms. This applies to online sellers with annual gross remittances exceeding PHP 500,000. 

Sellers exempt from income tax or eligible for lower rates under laws or tax treaties are excluded, but platforms must verify exemptions. RMC No. 8-2024, issued January 15, 2024, clarifies implementation, with full compliance required by April 14, 2024. Non-compliance may lead to fines or service disruptions.

Which Businesses are Affected? 

  • E-Marketplace Operators (e.g., Shopee, Lazada): Platforms enabling online sales are required to withhold and remit the 1% tax to the BIR. 
  • DFSPs (e.g., GCash, PayMaya): Digital payment or service providers handling e-commerce transactions must also comply. 
  • Online Sellers: Those with annual earnings exceeding PHP 500,000 on these platforms face a 1% tax on 50% of their remittances, unless exempt. The PHP 500,000 threshold spares smaller sellers, encouraging micro-entrepreneurs while focusing on larger vendors. Platforms and DFSPs are tasked with calculating, withholding, and reporting the tax.

Steps to Comply with RR No. 16-2023

To adhere to RR No. 16-2023, e-marketplace operators, Digital Service Providers (DSPs), and affected sellers should follow these steps:

  1. Identify Taxable Sellers: Determine sellers exceeding the PHP 500,000 annual gross remittance threshold for the 1% withholding tax on 50% of their remittances.
  2. Verify Exemptions: Confirm exemptions or lower tax rates for sellers under existing laws or tax treaties, ensuring proper documentation.
  3. Set Up Withholding Systems: Implement or update systems to accurately calculate and withhold the 1% tax on applicable transactions.
  4. Remit and Report Taxes: Timely remit withheld taxes to the BIR and submit required reports as per Revenue Memorandum Circular (RMC) No. 8-2024.

Educate your team on the regulation and compliance processes to avoid errors. Consider finding a tax consultation service to clarify your obligations.

For larger businesses in particular, tax computation can be complex. We recommend outsourcing your accounting needs to a reputable firm. It’s often more cost-effective than expanding your in-house team.

How to File the Withholding Tax

Filing the 1% withholding tax under RR No. 16-2023 is straightforward for e-marketplace operators and Digital Financial Service Providers (DFSPs) if you follow these clear steps:

  1. Gather Transaction Data: Collect details of all taxable transactions, including seller information, gross remittances, and the withheld tax (1% of 50% of remittances for sellers earning over PHP 500,000 annually).
  2. Complete BIR Form 1601-EQ: Fill out BIR Form 1601-EQ (Quarterly Remittance Return of Creditable Income Taxes Withheld) to report the total tax withheld for the quarter, ensuring accuracy.
  3. Submit the Form: File BIR Form 1601-EQ either electronically through the BIR’s Electronic Filing and Payment System (eFPS) or in person at your local Revenue District Office (RDO) by the last day of the month after the taxable quarter.
  4. Pay the Withheld Tax: Settle the tax amount via authorized agent banks, BIR collection agents, or eFPS-integrated online payment platforms, meeting quarterly deadlines.
  5. Provide Seller Certificates: Issue BIR Form 2307 (Certificate of Creditable Tax Withheld at Source) to sellers within the required timeframe, showing taxes withheld for their tax credit claims.
  6. Keep Organized Records: Store all remittance records, tax calculations, and Forms 1601-EQ and 2307 for at least three years, using accounting software to simplify tracking and prepare for potential BIR audits.
  7. Stay on Top of Deadlines: Avoid penalties like a 25% surcharge, 12% annual interest, or a PHP 1,000 fine per return by filing and paying on time. Set reminders to stay compliant.

Refer to the BIR’s guide for Form 1601-EQ here for additional information.

By following these steps and keeping records organized, you can comply with BIR requirements smoothly. 

Summary of RR No. 16-2023 Compliance

RR No. 16-2023 regulates the digital economy by imposing a 1% withholding tax on half of gross remittances by e-marketplace operators and Digital Financial Service Providers (DFSPs) to sellers earning over PHP 500,000 annually Exemptions apply for sellers under specific tax laws or treaties, but platforms must verify these. To comply, businesses must identify taxable sellers, implement withholding systems, file BIR Form 1601-EQ quarterly, remit taxes, and issue BIR Form 2307 to sellers. 

Non-compliance risks penalties or service disruptions. Staying organized and proactive ensures adherence to BIR regulations.

Refer to Revenue Memorandum Circular (RMC) No. 8-2024 here for further details or consult a tax expert for guidance.

Need to Check if Your Business is Compliant? Find Help Here.

BusinessRegistrationPhilippines.com offers expert tax and accounting services to simplify withholding tax compliance. Outsourcing many of your accounting and bookkeeping tasks to us is often more cost-effective than expanding your in-house team. Reach out today to schedule an initial consultation with one of our experts.