The Bureau of Internal Revenue (BIR) has introduced new regulations that impact online sellers and Digital Financial Service Providers (DFSPs) like PayMongo. This article will provide a clear overview of BIR Revenue Regulations (RR) No. 16-2023 and Revenue Memorandum Circular (RMC) 8-2024, explaining who is affected, how taxes are calculated, necessary compliance steps, and potential exemptions. Understanding these changes is crucial for ensuring your business's tax compliance.
What is the New BIR Revenue Regulation and When Does it Take Effect?
The new BIR Revenue Regulation refers to BIR Revenue Regulations (RR) No. 16-2023 and Revenue Memorandum Circular (RMC) 8-2024.
Effective Date: This regulation will take effect starting October 12, 2024.
Purpose: The primary goal of this regulation is to enhance tax compliance among all online sellers and facilitate more efficient tax administration. It shifts part of the responsibility of withholding tax to e-marketplaces and Digital Financial Service Providers (DFSPs) such as PayMongo.
Key Provision: PayMongo will implement a 1% creditable withholding tax deduction on gross remittances of local sellers/merchants, specifically on 50% of their gross remittances that exceed ₱500,000.
Which Merchants Are Affected?
Currently, the new BIR Revenue Regulation directly affects merchants who are transacting using PayMongo's e-commerce plugins.
If your business uses a PayMongo plugin for platforms such as Shopify, WooCommerce, Magento, or PrestaShop, then your transactions are covered by this new tax regulation.
Required Documents
You need to submit the following documents to PayMongo:
Sworn Declaration:
Requirement: This declaration must be received, verified, and stamped by BIR before you submit it to PayMongo.
BIR Registration (BIR 2303)
Tax Calculation for Affected Merchants
The 1% withholding tax is calculated as follows:
It applies to 50% of your gross remittances exceeding ₱500,000.
It is important to note that this deduction is only applied if your gross remittances exceed ₱500,000.
Example Computation (Hypothetical):
If your Annual Gross Remittance is ₱600,000.00
Gross Remittance exceeding ₱500,000 = ₱100,000.00
50% of ₱100,000 = ₱50,000
Withholding Tax (1% of ₱50,000.00) = ₱500.00
This ₱500.00 will be withheld by PayMongo from your payout.
Can I Be Exempted from the New Regulation?
Yes, certain merchants can be exempted from the new BIR Revenue Regulation if they provide valid proof of their exemption
The exempted categories and their required proof are:
Local Businesses with Tax-Exempt Status:
Proof Required: Your BIR Registration (Form 2303) stating that your business is Tax-exempt, or a Certificate of Tax Exemption, or a Revenue Memorandum Order (RMO) on Tax Exemptions for Non-stock, non-profit organizations.
Foreign Merchants with No Local Registration (e.g., no DTI / SEC registration in the Philippines):
Proof Required: Consularized or Apostilled registration documents from your country of origin.
Businesses with Exempted Line of Businesses per the NIRC-RMO:
Proof Required: Specific documentation related to your industry's exemption as per the National Internal Revenue Code (NIRC) and relevant Revenue Memorandum Orders (RMO).
For questions regarding specific exemptions, you can send an email to [email protected] for assistance.
Consequences of Non-Compliance
Failure to comply with the new BIR Revenue Regulation by not submitting the required documents to [email protected] can lead to significant repercussions:
Tax Deduction Regardless of Volume: If you do not submit your Sworn Declaration, you will be subject to the 1% withholding tax regardless of your business's transaction volume, even if your gross remittance does not reach the ₱500,000 threshold.
Inability to Credit Withholding Tax: If you fail to submit your BIR Registration (Form 2303), you will not have proof of your Tax Identification Number (TIN) associated with the withheld tax. This means you will not be able to reduce your tax due when filing your quarterly income tax return (e.g., for Q1 2024, as per the original communication), effectively leading to you remitting tax twice to the BIR.
Withholding Tax Refund (Important Clarification): The 1% withholding tax collected under this regulation is NOT claimable through payouts. To claim this refund, you must submit BIR Form 2307 to the Bureau of Internal Revenue (BIR) yourself. The amount withheld can then be credited against your tax liabilities when you file your income tax return.