Understanding the Difference Between Business Registration and Withholding Tax
“My online sales are still below ₱500,000. Does that mean I don’t need to register with the BIR?”
It's a question many online sellers ask, and the confusion is understandable.
You’ve probably heard about the ₱500,000 threshold for Shopee, Lazada, TikTok Shop, and other online selling platforms.
But here's something important:
The ₱500,000 threshold is not an exemption from BIR registration.
It’s primarily about whether certain online platforms and digital financial
services providers are required to withhold tax from payments to sellers. And those are two very different things.
Where Does the ₱500,000 Rule Come From?
Under Revenue Regulations No. 16-2023, online marketplaces and digital financial services providers are generally required to withhold creditable income tax from qualifying remittances to sellers.
The withholding rate was subsequently updated under Revenue Regulations No. 5- 2025.
The applicable rate is now 0.5% of gross remittances, subject to the relevant exemptions and conditions.
However, the withholding requirement generally does not apply when the seller qualifies under the ₱500,000 gross-remittance threshold and submits the required documentation.
For this purpose, the threshold considers applicable gross remittances across online marketplaces and digital financial services providers, not simply the sales received through one online store.
Here’s What Many Online Sellers Get Wrong
Let’s say you’re selling online and receiving ₱30,000 a month through a marketplace.
You might think:
“I’m still below ₱500,000 a year, so I don’t need to register.”
Unfortunately, that's not how the rule works.
Business registration and withholding tax are separate obligations.
Even when your gross remittances are below ₱500,000, you generally still need to register if you’re operating a business.
The threshold does not automatically exempt you from income tax, bookkeeping, invoicing, or other applicable tax compliance requirements.
It only affects the specific withholding tax obligation, subject to the conditions established by the BIR.
What Should Online Sellers Do?
1. Register Your Business with the BIR
If you're regularly selling goods or services as a business, comply with the applicable registration requirements.
Once registered, you will receive your Certificate of Registration (BIR Form 2303 or its applicable electronic equivalent).
2. Issue Proper Sales Invoices
Online sales are still business transactions.
Issue invoices as required and maintain proper records of your income and business expenses.
3. Submit a Sworn Declaration When Applicable
If your gross remittances qualify under the ₱500,000 threshold, submit the required BIR-received Sworn Declaration of Gross Remittances to the appropriate marketplace or digital financial services provider.
Under RMC No. 8-2024, the declaration is generally submitted upon application and, when applicable, on or before January 20 of each succeeding taxable year.
Without the required declaration, the platform may be obligated to withhold tax even if your remittances are below ₱500,000.
4. Monitor Your Gross Remittances
Don't monitor only one platform if you're selling through several.
Track your applicable remittances from Shopee, Lazada, TikTok Shop, and other covered providers.
If you exceed the threshold during the taxable year, comply with the required declaration update and applicable withholding rules.
5. File Your Required Tax Returns
Having no withholding tax deducted by a marketplace doesn't necessarily mean you have no income tax obligations.
Your required tax returns depend on your registration, business activities, and applicable tax regime.
And if a platform has withheld creditable income tax, make sure you obtain the appropriate withholding tax certificate, BIR Form 2307, to support any allowable tax credit.
Remember: Withholding Tax Is Not a Separate Business Registration Fee
When a platform withholds 0.5% from qualifying remittances, that amount is generally a creditable withholding tax.
It may be applied against your income tax liability, subject to the applicable rules and proper supporting documents.
That's why understanding your tax obligations matters.
Without proper records, you may overlook taxes already withheld or misunderstand how much you actually owe.
The Bottom Line
Starting small doesn't mean you should ignore business compliance.
And earning below ₱500,000 doesn’t automatically mean you’re exempt from BIR registration or income tax.
The ₱500,000 threshold helps determine withholding obligations. It does not determine whether your online business should be registered.
If you're serious about growing your online business, start by building the right financial and tax compliance habits.
Because a business that grows without proper records can eventually face problems that cost more to fix.
Let ML CPA Help You Get Started Right
At ML CPA Tax and Accounting Services, we help online sellers and growing entrepreneurs understand their registration requirements, organize their financial records, and manage their tax compliance obligations.
Whether you're just starting your online store or already earning consistently, we're here to help you make informed decisions.
Build your business with confidence, not confusion.
ML CPA Tax and Accounting Services We Care Beyond the Numbers.
Disclaimer: This article is for general educational purposes and reflects relevant tax regulations as reviewed in November 2026. Actual registration, withholding tax, and filing obligations depend on individual circumstances and applicable BIR rules.
See related links:
- ▪ BIR Revenue Regulations No. 16-2023
- ▪ BIR Revenue Memorandum Circular No. 8-2024
- ▪ BIR Revenue Regulations No. 5-2025
- ▪ Sworn Declaration of Gross Remittances — Annex A