What is the Philippine RR 16-2023 Withholding Tax for Online Sellers?

May 5, 2025

The e-commerce sector in the Philippines is thriving, but with growth comes increased regulatory oversight. In 2024, the Bureau of Internal Revenue (BIR) in the Philippines, alongside Republic Act No. 12023, introduced key regulations to strengthen taxation in the digital economy. These regulations aim to ensure that income from digital transactions is taxed appropriately.

Before we dive into Revenue Regulations (RR) No. 16-2023, here’s a quick summary of the 2024 regulations affecting online businesses.

1. Revenue Regulations No. 15-2024 (Issued Sep. 9, 2024)

Mandates registration of online businesses, including digital goods sellers, to enforce VAT and tax compliance.
Authorizes BIR to issue Closure Orders for non-compliance, ensuring VAT remittance for digital goods.

Learn more about registering your online business here.

2. Republic Act No. 12023 (VAT on Digital Services Act, Effective Oct. 18, 2024)

Imposes 12% VAT on digital goods (e.g., software, e-books) and services by resident/nonresident DSPs consumed in the Philippines.
Requires DSPs with over PHP 3M in sales to register with BIR; B2B buyers or DSPs remit VAT.
Non-compliance risks service suspension.

Learn more about this law and how to comply with it here.

3. Revenue Regulations No. 16-2023 (Effective Jan. 11, 2024):

Applies 1% withholding tax (0.5% effective) on gross remittances by e-marketplace/DFSPs, including digital goods sales.
Supports VAT compliance by requiring seller BIR registration; excludes sellers with ≤PHP 500,000 remittances.
Complies with 12% VAT on digital goods under existing laws, per RMC No. 8-2024.

Our guide below explains (RR) No. 16-2023 and provides a step-by-step process for properly filing the withholding tax, ensuring compliance, and avoiding penalties.

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

RR No. 16-2023 requires e-marketplace operators and Digital Financial Service Providers (DFSPs) to withhold a 1% income tax on half of the gross remittances paid to sellers or merchants for goods and services sold through their platforms.

This also applies to online sellers whose annual or cumulative gross remittances exceed PHP 500,000 in a taxable year. Sellers exempt from income tax or subject to lower rates under existing laws or tax treaties are excluded, but e-commerce platforms must verify these exemptions.

The BIR issued Revenue Memorandum Circular (RMC) No. 8-2024 on January 15, 2024, to clarify implementation, giving businesses until April 14, 2024, to comply fully. Non-compliance risks penalties, including fines or service disruptions.

Who Is Affected?

E-Marketplace Operators (e.g., Shopee, Lazada): Platforms facilitating online sales must withhold the tax and remit it to the BIR.
DFSPs (e.g., GCash, PayMaya): Digital payment or service providers handling e-commerce transactions must also comply.
Online Sellers: Those earning over PHP 500,000 annually via these platforms will have 1% of half their remittances withheld, unless exempt.

The PHP 500,000 threshold exempts smaller sellers, supporting micro-entrepreneurs while targeting larger vendors. Platforms and DFSPs bear the responsibility of calculating, withholding, and reporting the tax.

Steps to Comply with RR No. 16-2023

To meet the requirements of RR No. 16-2023, businesses should first confirm if your business falls under the regulation.

Identify Taxable Sellers: Determine sellers exceeding the PHP 500,000 annual gross remittance threshold for the 1% withholding tax on 50% of their remittances.
Verify Exemptions: Confirm exemptions or lower tax rates for sellers under existing laws or tax treaties, ensuring proper documentation.
Set Up Withholding Systems: Implement or update systems to accurately calculate and withhold the 1% tax on applicable transactions.
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 withholding tax under RR No. 16-2023 involves specific forms and deadlines. Follow these steps to ensure accurate and timely submission:

Prepare BIR Form 1601-EQ:
- Use BIR Form 1601-EQ (Quarterly Remittance Return of Creditable Income Taxes Withheld) to report the 1% withholding tax.
- Indicate the tax withheld under the “Expanded Withholding Tax” section, using the appropriate Alphanumeric Tax Code (ATC), such as WI160 for individuals or WC160 for corporations.
Calculate the Tax:
- For each eligible seller, compute 1% of 50% of their gross remittances for the quarter. For example, if a seller’s gross remittance is PHP 1,000,000, the taxable base is PHP 500,000, and the withholding tax is PHP 5,000.
- Aggregate the withheld amounts for all sellers to report the total on Form 1601-EQ.
File and Pay Quarterly:
- File Form 1601-EQ quarterly, within 10 days after the end of each quarter (April 10, July 10, October 10, January 10).
- Use the BIR’s Electronic Filing and Payment System (eFPS) for online submission. Log in to the eFPS portal, complete the form, and pay via authorized banks or online payment channels.
- For non-eFPS users, file manually at the Revenue District Office (RDO) where your business is registered and pay through authorized agent banks
Obtain BIR Form 2307:
- Provide each affected seller with BIR Form 2307 (Certificate of Creditable Tax Withheld at Source) within 20 days after the quarter or upon the seller’s request.
- Form 2307 details the tax withheld, which sellers can use as a tax credit when filing their annual income tax return.
Maintain Records:
- Keep detailed records of remittances, tax calculations, and Forms 1601-EQ and 2307 for at least three years, as the BIR may conduct audits.
- Use accounting software to streamline record-keeping and ensure accuracy.
Monitor Deadlines:
- Missing filing or payment deadlines incurs penalties, including a 25% surcharge, 12% annual interest, and a PHP 1,000 compromise penalty per return. Stay proactive to avoid these costs.

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

Final thoughts

RR No. 16-2023 helps regulate the digital economy by ensuring fair e-commerce taxation. By filing BIR Form 1601-EQ quarterly, issuing Form 2307, and keeping proper records, businesses can stay compliant and avoid penalties.

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.

Navigating Philippine business regulations isn’t always easy. Beyond securing the necessary permits, proper accounting must be handled by a qualified professional. Unfortunately, failure to adhere to these strict regulations can lead to costly fines or even get your business suspended.

That’s where Triple i Consulting comes in. Outsourcing many of your accounting and bookkeeping tasks to us is often more cost-effective than expanding your in-house team. So let our experienced lawyers and accountants provide comprehensive support for your business, so you don’t have to stress over the paperwork.

You can find a list of our accounting services here.