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Negros Oriental port project awarded

THE PHILIPPINE Ports Authority (PPA) has awarded the P273-million Bulado port expansion project in Guihulngan, Negros Oriental to WTG Construction and Development Corp.

In a notice of award issued on Jan. 18, 2024, the PPA instructed the company to comply with the requirements within 10 days from the receipt. This includes posting the required performance security in the form and the amount stipulated in the instructions to bidders.

“Failure to enter into said contract or provide the Performance Security shall constitute a sufficient ground for cancellation of this award and forfeiture of your Bid Security,” the PPA said.

Meanwhile, the PPA issued a memorandum order creating a team called the PPA-Hinoba-an Port Services (PPA-HPS) “to ensure continuous delivery of cargo handling (CH) and other related services” at the port of Hinoba-an in Negros Occidental.

“The PPA-HPS shall henceforth manage and operate the CH services at the Port of Hinob-an, with power, functions and duties as may be necessary to enable it to carry out its purposes,” the PPA said.

The guidelines governing the PPA-HPS in managing the port include collection of the existing CH fees, rental rates, and other charges for CH services.

It also includes the disbursement of funds to finance the necessary expenses of operations and inventory of properties in the custody of the CH operator as of takeover date, among others. — Sheldeen Joy Talavera

ICRC provides agriculture aid

AN OFFICER of the International Committee of the Red Cross presents marginalized residents of Cabadbaran City with a donation of post-harvest facilities. — PHILIPPINE STAR/JOHN FELIX M. UNSON

COTABATO CITY — The International Committee of the Red Cross (ICRC) has equipped 107 marginalized families in Cabadbaran City, Agusan del Norte, with post-harvest facilities to enhance their agricultural productivity, which has been adversely affected by armed conflicts in their villages.

Local officials in Cabadbaran City and Agusan del Norte province confirmed that the recipients of the ICRC’s corn sheller and corn mill machinery are residents caught up in deadly clashes between state forces and the New People’s Army (NPA) in recent months.

Rachel T. Malaguit, ICRC’s press relations officer in the country, said on Monday that among those who got post-harvest facilities, placed inside a newly constructed shelter, were residents of Sitio Lusong in Barangay Puting Bato.

Earlier, over 100 of these families received the necessary training from ICRC experts and local government agriculturists. 

The training covered inter-cropping, hillside farming, plant contouring techniques, and crop post-harvest management.

“Armed conflicts cause severe consequences for civilians, such as the loss of jobs and livelihood. We hope that this farm equipment will have a positive impact on the lives of the people and pave the way for them to have a brighter future,” said Ishfaq Muhammad Khan, a senior ICRC official in the Philippines.

Ms. Malaguit added that the local governments of Cabadbaran City and Agusan del Norte played a crucial role in facilitating the distribution of the farm equipment to villagers. — John Felix M. Unson

BoI to allow return of registrants to PEZA after WFH legal opinion

THE Board of Investments (BoI) said it will allow registered business enterprises (RBEs) to voluntary return to the jurisdiction of the Philippine Economic Zone Authority (PEZA).

“The BoI supports the allowing of those who have transferred to BoI to seamlessly be able to go back to their PEZA registration if they prefer it,” Department of Trade and Industry (DTI) Undersecretary and BoI Managing Head Ceferino S. Rodolfo told reporters on Monday.

RBEs seeking to offer employees work-from-home (WFH) arrangements exceeding the PEZA maximum were allowed to transfer their registrations to the BoI last year, as a workaround to tax incentive rules requiring that most of the work performed by RBEs be conducted on premises.

PEZA, as the economic zone regulator, grants incentives tied to the performance of work within the ecozones, while the BoI has no such location-based rules.

“Once ecozones and freeport zones locators are given work flexibility, we also support allowing those who have transferred to BoI to take advantage of this legal solution to go back to PEZA,” Mr. Rodolfo added.

Asked to comment on the legal opinion issued by the Department of Justice (DoJ) on Section 309 of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, Mr. Rodolfo said that the opinion only clarifies the law as it is generally understood.

“The DoJ legal opinion essentially confirms the existing mechanism that provides the flexibility that now allows us to continue to attract business process outsourcing (BPO) investments into the Philippines,” he said.

However, he said that the BoI is reiterating the DTI recommendation to the House of Representatives of setting a 30% WFH limit for RBEs in ecozones and freeports.

Jack Madrid, president of the IT and Business Process Association of the Philippines (IBPAP), said that the organization also welcomes the legal opinion.

“(WFH) is not a new topic for the industry. We have become the ‘poster boy’ for work flexibility, but I feel that the industry is speaking for the entire workforce because WFH in some shape or form has affected the future of work, not just the IT-BPM (information technology and business process management) industry,” he said.

However, he said that concerns were raised following the news that came out after the DoJ posted its legal opinion.

“While we welcome the opinion and clarification, the headlines are a bit of a concern because you know when employees read a headline like that, it could discourage them from the industry,” he said.

He said that the industry is facing reputational risk when reports emerge about limits on work flexibility.

“When we have a supply problem and then they read a headline about constraints on work flexibility, this could damage the reputation of our industry and also our country, because our investors also look at headlines and may see an instance of changing the rules,” he added.

Nonetheless, he said the IBPAP is pleased that the government has given IT-BPMs a legal pathway towards 100% WFH arrangement while enjoying the incentives provided under CREATE.

“Most of our investors are in PEZA, and allowing the paper transfer of locators in PEZA gives them the capability to transfer to BoI which in turn gives them 100% work flexibility,” he said.

“This was a very good legal solution to give more flexibility. And I’m happy to receive information that the DoJ opinion will not affect the work arrangements of those currently enjoying 100% work flexibility after the paper transfer to BoI. So, that is certainly a significant clarification,” he added.

In the DoJ legal opinion dated Jan. 3, Justice Secretary Jesus Crispin C. Remulla said that Section 309 of the CREATE Act “requires registered projects under an investment promotion agency (IPA) administering an ecozone or freeport to be exclusively conducted or operated within the geographical boundaries of the zone or freeport.”

“Any project or activity conducted or performed outside the zone or free port shall not be entitled to the incentive under CREATE Act. This locational prohibition does not apply to enterprises registered with the BoI as it does not administer an ecozone or freeport,” Mr. Remulla said.

However, he noted that there are pending legislative measures which seek to allow RBEs in the books of IPAs, such as PEZA, to enter into voluntary WFH arrangements without losing their tax incentives.

“Until the enactment of new legislation amending the law, business enterprises located in economic or freeport zones must continue to conduct their activities within the zone boundaries if they wish to continue availing of their tax incentives under the CREATE Act,” he said.

“Likewise, these enterprises are not prohibited from adopting WFH arrangements but will no longer be eligible to continue enjoying the tax incentives,” he added. — Justine Irish D. Tabile

Direct sugar procurement budget of P5B equivalent to 10-15% of harvest, SRA says

REUTERS

THE Sugar Regulatory Administration (SRA) said that the government’s direct procurement plan with a budget of P5 billion will have the capacity to acquire 10-15% of the sugar harvest directly from farmers.

The funding level for the program implies a capacity to purchase 1.75–1.8 million 50-kilogram bags of sugar, SRA Administrator Pablo Luis S. Azcona said on Monday.

“The P5 billion, for the sugar industry, that’s a very limited budget. It could take out roughly 10-15% of the remaining production,” Mr. Azcona told reporters.

Mr. Azcona said that the current harvest is now at 60% as of Jan. 15. This translates to about 1 million metric tons (MT).

At the start of the harvest, the regulator estimated production of 1.85 million MT during the crop year.

Last week, the government said it allocated P5 billion for the direct purchase of sugar from farmers to close the gap between farmgate and retail prices. The plan was adopted after consulting with the Department of Agriculture, the Philippine International Trading Corp. (PITC), and industry representatives.

He added that PITC will oversee the sugar purchasing, which will either be sold directly to retail markets or used as a buffer stock to ensure adequate supply.

“We are discussing whether PITC will purchase at a higher price. The farmers were hoping for P2,700 to P2,800 (per 50-kilo bag) or better,” Mr. Azcona said.

Current trading prices for raw sugar range from a low of P2,200–P2,300 per 50-kilo bag to a high of P2,500. This is below the P3,000 per 50-kilo bag the regulator projected at the start of the milling season.

He added that purchased sugar could be refined and sold at a retail price of P85 per kilo.

He said the SRA is seeking industry recommendations on how to execute the sugar procurement in a manner that will reduce retail prices.

“We were tasked to do it as quick as we can. The plan is everybody hand-in a written recommendation, and we all sit down within this week to work out all the other suggestions and issues involved,” he said. “We are trying to get this out before the month ends.”

Mr. Azcona added that the SRA will also be meeting with the national price council to address the prevailing high sugar prices.

“We have a very ample supply, and there is no reason for the retail price to remain high,” he added.

Late last year, industry groups called for government intervention to stop the declining trading prices of sugar.

The United Sugar Producers Federation of the Philippines said that raw sugar has declined to P2,300–P2,500 per 50-kilo bag, which is below the cost of production.

Meanwhile, Mr. Azcona said that there has been a decline in the demand for sugar since September.

“There is about a 20% drop in the demand for sugar. We are thinking that manufacturers are finding alternatives to sugar… We are trying to find out. We need to take a look at our numbers again,” he added. — Adrian H. Halili

Farmers allocated P10B in fertilizer, fuel subsidies

DA.GOV.PH

THE Department of Budget and Management (DBM) said over P10 billion was allocated for fuel and fertilizer assistance to farmers in the 2024 budget.

Some P9.561 billion will go to fertilizer discount vouchers, a program run by the Department of Agriculture’s (DA) National Rice Program.

Some P6.161 billion will be used in conjunction with the DA’s hybrid seed program while P3.4 billion will fund fertilizer subsidies for inbred certified seed varieties.

“The fertilizer assistance program is expected to be implemented within the major rice-producing provinces and promote balanced fertilization to increase rice productivity,” the DBM said.

Meanwhile, the remaining P510.4 million will go to fuel assistance, including the operating expenses incurred in the distribution of the assistance. — Luisa Maria Jacinta C. Jocson

Marcos issues energy efficiency order to government agencies

PHILSTAR FILE PHOTO

PRESIDENT Ferdinand R. Marcos, Jr. has ordered government offices to conserve and use energy more efficiently in anticipation of increased power demand brought about by El Niño.

The Palace released an administrative order (AO) signed on Jan. 16, which cited the need to accelerate the rollout of a long-term program aimed at reducing government consumption of electricity and petroleum products.

Under the order, government agencies and state-controlled firms are subject to random spot checks by inspectors and must hire auditors to conduct energy audits.

The organizations subject to the AOs are also required to update their inventory of energy-consuming equipment such as cars and lighting, among others, and submit a timeline for replacing them with more energy-efficient products.

They must also adopt low-cost energy efficiency and conservation measures such as maintaining a temperature of 24 degrees Celsius in air-conditioned spaces, turning off unused lights and air-conditioning units, and activating sleep settings on office equipment.

Government agencies are also required to draft procedures to monitor their energy consumption.

El Niño is expected to lead to a significant increase in power demand, with the Energy department projecting peak demand to hit 13,917 megawatts (MW) in the Luzon grid, 2,891 MW in Visayas and 2,584 MW in Mindanao.

“There is a need to intensify efficient utilization and conservation efforts of electricity and fuel to mitigate power demand amidst the ongoing El Niño phenomenon,” the President said in the AO. — Kyle Aristophere T. Atienza

Pompano touted as possible bangus alternative

PHILIPPINE STAR/EDD GUMBAN

THE Department of Agriculture (DA) said that it hopes to increase pompano production, with the goal of offering the saltwater fish to consumers as an alternative to bangus, or milkfish.

In a statement on Monday, Agriculture Secretary Francisco Tiu Laurel, Jr. said that the DA will support the production, post-harvest processing, and marketing of the pompano in public markets.

“The DA, through (the Bureau of Fisheries and Aquatic Resources) will promote pompano production as part of the government’s push to expand mariculture parks and modernize the aquaculture industry,” Mr. Laurel added.

He said the BFAR will assist in improving the breeding of the fish in specialized facilities.

“Increasing fish production through aquaculture is part of the DA’s efforts to modernize agriculture, boost food production, and ensure food security,” the DA said.

Pompano production in 2022 amounted to 457 metric tons (MT), against 16,004 MT worth of imports during the year.

The DA said it is collaborating with Santeh Feeds Corp. to expand pompano production.

“In the company’s floating sea cages, thousands of imported fry of short-finned pompano are being raised to help reduce fish imports, provide a healthier protein source for consumers, and possibly open export opportunities,” it said.

The company’s fish farm in Silaguin Bay, Zambales, has 44 floating cages, with the capacity for about 3-4 tons of pompano.

The DA said that it takes nine months to culture pompano. Fish up to 500 grams are sold in public markets, while fish weighing 800 grams and above are for export. — Adrian H. Halili

PHL-US FTA needs to be tech-focused — DTI

REUTERS

THE Department of Trade and Industry (DTI) said that the Philippines and the US should pursue a free trade agreement (FTA) focused on technology and innovation, going beyond the usual negotiating points involving tariffs and market access.

The DTI, quoting Trade Undersecretary Rafaelita M. Aldaba at the Consumer Electronics Show Summit in Las Vegas, said that the department will advocate for a “more nuanced approach in trade relations” amid impending negotiations with the US.

Ms. Aldaba said that the potential FTA should also safeguard intellectual property rights, promote sustainable trade practices, and address aspects of digital trade, data privacy and cybersecurity.

The other key elements are advocating for open and fair trade while protecting domestic industries, setting standards and rules, and ensuring fair labor standards.

“The agreement should emphasize technological innovation, research and development (R&D), education, and the integration of emerging technologies in trade,” Ms. Aldaba said.

The Philippines is an active participant in the discussions of the Indo-Pacific Economic Framework for Prosperity (IPEF) which was launched by the US in 2022.

“The IPEF focuses on supply chains, clean energy, decarbonization, infrastructure, tax, and anti-corruption measures,” the DTI said.

The other IPEF participants are Malaysia, Vietnam, Indonesia, Singapore, Thailand, Brunei, South Korea, Japan, India, Fiji, Australia, and New Zealand. — Justine Irish D. Tabile

MB approves $3.32B in public-sector foreign borrowing in Q4

The main office of the Bangko Sentral ng Pilipinas in Manila. — BW FILE PHOTO

THE Monetary Board (MB) approved borrowing by government entities worth $3.32 billion in the fourth quarter, bringing external loan approvals to $14.49 billion for 2023.

The fourth-quarter total is 65.8% higher than the $2 million worth of foreign borrowing by the public sector that the MB approved a year earlier.

Quarter on quarter, foreign borrowing rose 23%.

In 2023, the MB approved 24 separate medium- to long-term instances of foreign borrowing, including two bond issuances ($4 billion), 12 project loans ($5.67 billion), and 10 program loans ($4.82 billion).

The $14.49 billion brought government external borrowing in 2023 up 40.4% year on year.

According to the Bangko Sentral ng Pilipinas (BSP), foreign borrowing in 2023 funded the National Government’s economic recovery, environmental protection and climate resilience programs, as well as general financing requirements.

It also funded pandemic response programs and projects in agriculture and education.

The 1987 Constitution requires the Monetary Board to approve any foreign loan agreement that is entered into by the National Government.

“The BSP promotes the judicious use of resources and ensures that external debt requirements are at manageable levels, to support external debt sustainability,” the central bank added.

The BSP reported that the external debt service bill rose 132.8% to $11.938 billion at the end of October.

The debt service bill was equivalent to 3.5% of gross domestic product (GDP), against 1.6% a year earlier.

The BSP also estimates that outstanding external debt increased 10.1% to $118.833 billion at the end of September, from $107.91 billion a year earlier. Debt levels were up 0.8% from the end of June.

External debt refers to all types of borrowings by Philippine residents from nonresidents, following the residency criteria for international statistics.

The external debt ratio, or external debt as a percentage of GDP, was 28.1%, slightly lower than 28.5% in the previous quarter.

The government borrows from domestic and external sources to help fund a budget deficit, which is capped at 5.1% of GDP this year. — Keisha B. Ta-asan

BPOs target staffing level exceeding 2M by 2025

PIXABAY

THE IT and Business Process Association of the Philippines (IBPAP) said that it hopes to exceed the two-million mark in industry headcount by 2025, citing the competitiveness of the Philippine workforce.

In a briefing on Monday, IBPAP President Jack Madrid, whose industry is also known as the business process outsourcing (BPO) sector, said the association’s members posted substantial growth in jobs created last year.

“The IT-BPM (information technology and business process management) industry continues to grow. We ended last year with 1.7 million direct jobs for Filipinos, up 8%, and we generated well over $35 billion in revenue for the economy,” Mr. Madrid said.

Last year, Mr. Madrid said that the industry is targeting 7-8% growth in headcount and $39 billion in revenue for 2024.

“But I’m really excited about 2025 because this is when we will cross the 2 million job level. And, you know that’s quite significant. It took… almost 20 years to hit 1 million jobs and we’re attempting to do the second million in less than six years. So it’s really quite a feat,” he said.

However, he said that the industry currently faces a challenge in meeting demand for Filipino IT-BPM workers, pointing to the need for talent upskilling.

“We are an indispensable pillar of the economy, with 1.7 million employees and growing … the only thing that’s holding us back is really the availability of talent,” Mr. Madrid said.

“So we should take seriously the importance of upskilling and reskilling our existing workforce, and also the upcoming generation of job seekers,” he added.

Meanwhile, he said that the global IT-BPM industry will continue to grow and will attract more entrants into a field dominated by India and the Philippines.

“We have more competition and so if we want to increase direct investment, I think our industry is one such pathway. We are rich in human capital, we are big in services exports. So, let us continue to work on strengthening the skills of the Filipino workforce,” he added.

He said that another pathway to competitiveness and attracting more IT-BPM investment is to allow more work flexibility.

“In the past two years, there has been a gradual uptick in going back to on-site. If I were to venture a guess as to the aggregate number, we’re probably at about 60% on-site,” he said.

He added that some jobs can be done remotely while others require collaboration with some global customers, who prefer their transactions to be done in the workplace due to privacy concerns.

“I think the important thing is not the number, what’s important is the flexibility that we give our employees and the flexibility that we also give to our investors because all other IT-BPM destinations are offering work from home flexibility, including India,” he said.

“And so for us to remain competitive, we need to provide flexibility to both investors and employees,” he added. — Justine Irish D. Tabile

RCEP seen unlocking services exports

PARTICIPATION in the Regional Comprehensive Economic Partnership (RCEP) will further enhance opportunities in the services trade and support overall economic growth, according to a research paper published by the Philippine Institute for Development Studies (PIDS).

“Despite being a marginal trading arrangement, RCEP can provide additional opportunities for Filipinos to generate income by providing business and professional services to both ASEAN member states and ASEAN free trade agreement partners in RCEP,” according to the “Harnessing the Opportunities in Services Trade under RCEP: Perspectives from the Philippines” research paper.

The paper, written by John Paolo R. Rivera and Tereso S. Tullao, Jr., said increased demand for services in the post-pandemic global economy provides “an opportunity for the Philippines to drive its economic recovery, growth, and development.”

“The Philippines can expand its contributions to trade in services while supporting its own economy through enhanced linkages and partnerships, comparable workforce skills, amendments to laws hampering liberalization — all of which play a role in improving the business environment in the country,” PIDS said.

“Thus, the expected implementation of RCEP can complement the Philippines’ initiatives toward economic recovery through an avenue to transform itself as one of the region’s hubs for manufacturing, innovation, research and development, and as a center for training and education,” it added.

RCEP came into force in June. Other RCEP members are the nine other ASEAN states, Australia, China, Japan, South Korea, and New Zealand.

“The opportunities RCEP offers can only be maximized by enhancing the Philippines’ strengths in competitiveness, language proficiency, cultural adaptability, human capital, and government participation,” the paper said.

The Philippines can attract more investors and enterprises to do business in the country through RCEP, it said.

“This can eventually develop human capital, infrastructure, tourism, and other industries, enhancing domestic productivity in the long run,” it said.

“While liberalizing the economy will pose competition with domestic enterprises and infant industries, protection can still be accorded. Liberalization can be considered for industries where the Philippines has inadequacies, such as utilities, telecommunications, construction, and infrastructure. These areas have been the country’s key constraints that impede economic takeoff,” it added.

The paper said that the Philippines can also take advantage of trading opportunities such as business services in China.

“More specifically, professional organizations in accounting and auditing (e.g., the Philippine Institute for Certified Public Accountants) may directly benefit from this opportunity. Filipino and Filipino-Chinese certified public accountants (CPAs) proficient in Mandarin are deemed viable candidates, as outlined by the RCEP commitments,” it said.

“However, it must be noted that there are market access and national treatment limitations… these can be considered threats to the Philippines, as Filipino and Filipino-Chinese CPAs proficient in Mandarin need to hurdle China’s CPA examination,” it added. — Luisa Maria Jacinta C. Jocson

Withholding tax rules on digital commerce

The evolving narratives of personal growth and determination at the start of the new year bear a striking parallel to the transformative changes unfolding in digital commerce. Just as people face a crucial checkpoint in the fourth week of 2024, electronic marketplace (e-marketplace) operators and digital financial services providers (DFSPs) are also navigating a pivotal moment. The Bureau of Internal Revenue (BIR) recently implemented groundbreaking withholding tax rules pursuant to Revenue Regulations (RR) No. 16-2023 and Revenue Memorandum Circular (RMC) No. 8-2024 issued on Dec. 21 and Jan. 15, respectively. This move, aimed at reshaping the taxation framework, mirrors the determination seen in individuals striving for self-improvement.

The commitment to fairness and transparency in taxation aligns with the collective spirit of renewal and fresh beginnings that the new year often brings. The challenges and opportunities posed by the new regulatory framework underscore the parallel paths of personal and economic development, highlighting the dynamic nature of progress in the first month of the year.

EFFECTIVITY OF WITHHOLDING TAX OBLIGATION
The revenue regulations that imposed withholding tax obligations on e-marketplace operators and DFSPs took effect on Jan. 11, or 15 days after its publication in the Manila Bulletin on Dec. 27.

On the other hand, RMC No. 8-2024 was issued and published on Jan. 15.

RATE OF WITHHOLDING TAX
In general, e-market place operators and DFSPs are required to withhold 1% tax on one half of their gross remittances to sellers and merchants of goods and services using their platforms or facilities. Remittances to sellers and merchants are not subject to withholding tax if (a) the annual total gross remittance for the past taxable year is P500,000 or below; (b) the cumulative gross remittance for the taxable year is P500,000 or below; or (c) the seller or merchant is exempt from or subject to a lower income tax pursuant to law or treaty.

COVERED TAXPAYERS
The following taxpayers are affected by the new regulations:

• e-marketplace operators: those that develop and/or provide a digital platform that connects online buyers with sellers to facilitate sales. These platforms handle various aspects, including processing payments, organizing product shipments, and providing post-purchase support. They oversee transaction processes and cover a range of services, such as online shopping, food delivery, and booking accommodations like resorts, hotels, and rental spaces in the Philippines. Essentially, e-marketplace operators offer digital platforms that serve as online hubs for various services and products. Examples are marketplaces for online shopping, food delivery platforms, and booking platforms for resorts, hotels, and similar lodgings.

• DFSPs: those that provide financial technology. These providers use internal systems, mobile applications, or similar methods to deliver various financial services to the public. These services include banking, insurance, payment and money transmission services, and other related financial offerings. In essence, digital financial service providers provide a broad range of financial solutions through digital platforms.

• Sellers/merchants of goods and services: local sellers/merchants for purposes of imposing creditable withholding tax.

OBLIGATIONS OF E-MARKETPLACE OPERATORS AND DFSPs
E-marketplace operators and DFSPs are required to carry out the following:

• Ensure sellers/merchants are registered with the BIR by collecting their Certificate of Registration (CoR or BIR Form No. 2303) before allowing them to use the e-marketplace or DFSP platforms.

• Request certification or documentation from sellers/merchants exempt from or subject to a lower income tax rate under existing laws or treaties.

• Mandate sellers/merchants to submit a copy of the BIR-received Sworn Declaration (SD); an automatic withholding tax deduction under RR No. 16-2023 shall apply for failure to submit SD and for failure to submit within the prescribed period.

• Monitor buyers/customers’ gross payments, deduct the withholding tax as per RR No. 16-2023, and remit it to the respective sellers/merchants. If a payment reaches the seller/merchant through multiple channels, the last facility (e-marketplace operators and DFSPs) that has control of the payment before fully remitting it to the seller/merchant is responsible for withholding taxes under RR No. 16-2023.

• Issue the Certificate of Creditable Tax Withheld at Source (BIR Form No. 2307) to sellers/merchants within the prescribed period stated in the Tax Code or upon their request.

OBLIGATIONS OF SELLERS/ MERCHANTS
Sellers/merchants using the e-marketplace facility or DFSP must register their business with the BIR and provide a copy of the BIR-issued CoR to the e-marketplace operator. All sellers/merchants currently not registered with the BIR but selling goods and services in an e-marketplace facility must register their businesses with the BIR within the transitory 90-day period.

If the expected annual gross remittance from e-marketplace operators or DFSPs is below P500,000, sellers/merchants need to submit a BIR-received SD to the e-marketplace or DFSP, declaring this limit. The BIR-received SD must be submitted before the 20th day of the first month of each taxable year.

Failure to submit the required SD will result in the automatic deduction of withholding tax by the e-marketplace operator or DFSP. If the annual gross remittances exceed P500,000 during the taxable year, sellers/merchants must promptly submit the required BIR-received SD to the e-marketplace operators or DFSPs.

If a seller/merchant is exempt from income tax or qualifies for a lower income tax rate under existing laws or treaties, they should provide the e-marketplace operator with a duly issued certification as evidence of their exemption or eligibility for the lower rate.

WHAT COMPRISES GROSS REMITTANCE?
The P500,000 gross remittance limit includes all payments received by an online seller/merchant from all e-marketplace operators and DFSPs. If any e-marketplace operator or DFSP finds that the total remittances on its platform surpass P500,000 at any point during the taxable year, the required withholding tax will be automatically deducted from the exceeding amount. This withholding tax will also apply to subsequent remittances.

COMMENCEMENT OF OBLIGATION TO WITHHOLD
E-marketplace operators and DFSPs’ obligation to withhold commences:

1. Upon receipt by the e-marketplace operator and DFSP of the BIR-received SD indicating that the sellers/merchants have exceeded the P500,000;

2. When the seller/merchant failed to submit the required BIR-received SD to the e-marketplace operator or DFSP within the described period; or

3. When the e-marketplace operator or DFSP has determined that its total gross remittances to the concerned seller/merchant have exceeded the P500,000 threshold.

PAYMENTS/REMITTANCES TO SELLERS/MERCHANTS
Sellers/merchants are not allowed to receive payments in their personal accounts. All payments, remittances, or transfers must go to their BIR-registered tradename. The BIR will monitor the usage of accounts under the registered tradename of the seller/merchant.

TRANSITORY PERIOD
E-marketplace operators and DFSPs have a 90-day window from the issuance date of this circular on Jan. 15, or until April 14, to adhere to any additional policies or requirements set by the BIR. This transitory period allows them the opportunity to make necessary adjustments and ensure full compliance with the provisions outlined in RR No. 16-2023 before the official enforcement of the prescribed creditable withholding tax.

Existing unregistered sellers and merchants must fulfill the specified requirements detailed in this circular within the same 90-day period. Violators of any provision of RR No. 16-2023 are liable for penalties.

Truly, we are entering a new era of taxation for digital marketplaces, marking a crucial milestone in shaping the rules for the digital economy. This change signifies a shift in how these digital businesses are taxed, representing a significant step toward creating fairer taxation rules for everyone in and out of the digital landscape.

Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.

 

Paul Vinces C. Leorna is a manager from the Tax Advisory & Compliance division of P&A Grant Thornton. P&A Grant Thornton is one of the leading audits, tax, advisory, and outsourcing firms in the Philippines, with 29 Partners and more than 1000 staff members. Tweet us: GrantThorntonPH, like us on Facebook: P&A Grant Thornton,

pagrantthornton@ph.gt.com

www.grantthornton.com.ph

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