Expanded Withholding Tax (EWT) on Digital-Platform Service Fees in the Philippines
A 2025 practitioner’s guide
1. Why this topic matters
The Philippine digital economy—e-commerce, ride-hailing, food-delivery, online freelancing, streaming, fintech—continues to surge. Every time a digital platform charges a “service fee,” “take-rate,” or “commission” to a Philippine merchant, driver, rider, host, or creator, an income payment is deemed to occur. That triggers the Expanded Withholding Tax (EWT) rules in §57(B) of the National Internal Revenue Code (NIRC) and the seminal Revenue Regulations (RR) 2-98, as repeatedly amended (most recently by RR 31-2020 and RR 11-2023). The Bureau of Internal Revenue (BIR) now routinely checks marketplaces, e-wallet reconciliation files, and even credit-card settlement reports to confirm that the correct amount of EWT has been withheld and remitted.
2. Statutory and regulatory foundation
| Source | Key take-aways for digital platforms |
|---|---|
| NIRC §57(B) | Creates the creditable EWT system and authorizes the Secretary of Finance to “require any person” making income payments to withhold. |
| RR 2-98 (1998) | Baseline list of income payments subject to EWT; still controls classification (e.g., “professional fees,” “service fees,” “commissions”). |
| RR 11-2018 & RR 26-2018 | Introduced the Top Withholding Agent (TWA) concept: TWAs must withhold 1 % on purchases of goods and 2 % on purchases of services. Most leading digital platforms are now certified TWAs. |
| RR 31-2020 | Aligned filing/payment deadlines with the CREATE Act and electronic filing system; Form 0619-E (monthly) and 1601-EQ (quarterly) must show gross payments even when the platform nets its fee. |
| Revenue Memorandum Circular (RMC) 97-2021 | Reiterated that online sellers and service providers must register and that “marketplace facilitators” are withholding agents on their own commissions. |
| RMC 55-2022 | Clarified that withholding applies even if the service fee is merely offset and never physically remitted (i.e., net-settlement). |
| RMC 10-2024 | Detailed data-matching program using e-wallet APIs; letters of authority now routinely issued when declared EWT credits do not reconcile with platform submissions. |
3. What exactly is a “digital-platform service fee”?
| Typical label on settlement statement | Common BIR classification | Usual EWT rate* |
|---|---|---|
| “Seller commission,” “Marketplace fee” (Lazada, Shopee, TikTok Shop) | Commission under RR 2-98 §2.57.2(A)(4) | 10 % (regular payers) or 2 % (if payer or platform is a TWA) |
| “Booking commission” (Grab, Angkas, JoyRide) | Commission / service fee | Same as above |
| “Delivery platform fee” (Foodpanda, GrabFood) | Service fee | 2 % |
| “Subscription fee” for storefront or SaaS (Shopify PH, MyStore) | Rental of intangible (if right to use platform) or professional/service fee | 2 % |
| “Advertising credit” or “boost fee” charged by a resident influencer platform | Advertising service fee | 2 % |
| Payment-processing fee charged by a Philippine PSP (e.g. PayMaya, GCash Payment Gateway) | Bank/financial intermediary service | 2 % (RR 11-2018) |
| Fees paid to Non-Resident Foreign Corporations (NRFCs) (Meta, Google, Amazon) | Not EWT but Final Withholding Tax (FWT) under NIRC §28(B)(1): 25 % (or treaty rate) |
*Assumes payee is a domestic corporation or resident individual and payer is not engaged in BIR’s special industry-specific rates (see Sec. 4 below).
4. Resident vs. non-resident platforms
Resident digital platforms (incorporated or registered branches in the Philippines) Subject to creditable EWT. The withholding agent may be either:
The platform itself (self-withholding on its netted fee), or
The underlying merchant/driver if the platform does not withhold and issues a VAT-inclusive invoice showing the fee separately.
Practical rule: whichever party ultimately remits the tax to the BIR must issue Form 2307 to the other. Double-withholding is prohibited.
Non-resident digital platforms (no PE or branch) Subject to final withholding.
- Philippine payers must withhold 25 % FWT on the gross fee under §28(B)(1), unless a tax treaty reduces the rate (commonly 15 %).
- Because the payer’s credit card company usually remits the fee directly offshore, the payer must still file BIR Form 0619-F and BIR Form 1601-FQ and produce a remittance certificate from the bank.
5. Interplay with Top Withholding Agent rules
Under RR 11-2018, entities classified by the BIR as TWAs must withhold 2 % on all service payments (and 1 % on goods) regardless of the normal RR 2-98 rates. Nearly every large digital platform—and many of their flagship sellers—were formally notified of TWA status between 2021-2024.
Tip for SMEs: If your customer is a TWA, it will withhold 2 % from what it pays you on top of any commission you already pay to the platform. Build this into your pricing or cash-flow projections.
6. Mechanics and compliance timeline
| Step | Responsible party | Deadline |
|---|---|---|
| Prepare withholding computation (gross fee × rate) | Withholding agent (platform or merchant) | On or before date of offset/payment |
| Remit tax via Form 0619-E (EWT) or 0619-F (FWT) | Same | On or before the 10th day (manual) or 15th day (eFPS) of the following month; top-5,000 corporations: within 5 banking days |
| Quarterly return Form 1601-EQ/FQ + Alphalist | Same | Last day of month following the quarter |
| Issue Form 2307 (Creditable W/Tax Certificate) | Withholding agent → payee | Within 20 days from end of quarter (or upon request) |
| Book entries (accrued withholding tax payable) | Both parties | Continuous |
| Annual Reconciliation (mapping 2307s to 1702/1701) | Payee | When filing annual income tax |
Penalties for non-compliance
- 25 % surcharge + 12 % interest per annum + ₱1,000 per return compromise.
- Non-withholding can be assessed as “tax still due” against the withholding agent plus disallowance of expense deduction.
- Criminal prosecution under §255 (§263 for falsified e-receipts) remains rare but real—especially if platform data shows systemic failure.
7. Illustrative scenarios
| Scenario | Who should withhold? | Base & rate | Common pitfalls |
|---|---|---|---|
| Shopee seller pays ₱5,000 commission (netted) | Shopee (self-withhold) | ₱5,000 × 2 % (TWA) | Seller mistakenly withholds again → duplicate liability |
| Restaurant pays Foodpanda 30 % commission out of net remittance | Restaurant (merchant) | 30 % of gross sales × 2 % | Merchant forgets to gross-up because commission was never paid in cash |
| Freelancer buys Fiverr “seller-plus” subscription from NRFC Fiverr Int’l | Freelancer (payer) | US$39 × 25 % final tax | Credit-card bank remits offshore, but freelancer fails to eFPS file 0619-F |
| Advertiser pays Google Ads using GCash | Advertiser | Entire invoice × 25 % (or 15 % under PH-US treaty) | Mistaking a resident payment gateway for a resident ad platform |
8. Interaction with VAT and income tax
EWT does not change the VAT position.
- Resident platforms still charge 12 % VAT on their service fee.
- If you are a VAT-registered merchant, you may claim input VAT on the commission but must base the EWT on the gross amount inclusive of VAT (Rev. Memo Order 55-2010).
EWT is merely a payment on account of the payee’s income tax.
- Resident platforms credit it against quarterly and annual income tax.
- Non-resident platforms cannot credit Philippine EWT, but can claim a Filipino tax credit in their home jurisdiction if a treaty allows.
9. Documentation best practices
- Dual-invoice method: Platform issues one VAT-official receipt for its commission; merchant issues a separate sales/OR for goods or services sold.
- Net-settlement schedule: Show clearly the gross sale, platform fee, EWT, VAT, and net payout—this is the primary audit trail.
- Automated 2307 generator: Several platforms now let merchants download pre-filled BIR Form 2307 each quarter; verify twice before submission.
- Reconciliation matrix: Align e-wallet settlement downloads with 0619-E remittances; the BIR’s 2024 e-Analytics Module matches these automatically.
10. Emerging issues and proposals (2025 forward)
| Proposal | Status | Likely impact on EWT |
|---|---|---|
| VAT on foreign digital services (HB 4122/SB 2528) | House approved 2024; Senate pending | If enacted, NRFCs may be forced to VAT-register, transforming FWT to EWT at 2 % |
| “E-receipt” mandate (TRAIN Law §237 subsystem) | Full roll-out by July 1 2025 | Platforms must embed EWT breakout in the QR-based e-receipt—expect real-time BIR validation |
| Unified online withholding portal (Project RUN-EWT) | Pilot with top 20 platforms | Instant 2307 download; payees no longer attach physical copies to returns |
11. Practical compliance checklist
- Identify every fee you pay to or receive from a platform and map it to BIR income-payment codes.
- Confirm TWA status of both parties—rates change from 10 % to 2 % overnight.
- Automate net-settlement withholding inside your ERP; never rely on manual spreadsheets.
- File 0619-E/F on time even if tax due is zero because the fee was offset.
- Generate and exchange Form 2307 every quarter; keep PDF copies for three retained returns.
- Reconcile to the centavo with your 1601-EQ/FQ and with the platform’s CSV download.
- Stay alert for treaty rates when paying offshore—some treaties slash FWT to 7.5 % (e.g., PH-Hungary).
- Train finance teams to distinguish VAT, EWT, and FWT—penalties accrue separately.
12. Conclusion
Expanded Withholding Tax on digital-platform service fees in the Philippines has evolved from a niche issue into a frontline compliance obligation. The BIR’s data-driven approach means discrepancies are now caught almost immediately. Proper classification, timely remittance, and watertight documentation are no longer optional—they are essential to avoid surcharges, preserve expense deductibility, and maintain platform access. By mastering the rules summarized above, businesses and professionals can navigate the digital marketplace confidently while staying squarely on the right side of Philippine tax law.
Author’s note (May 30 2025): This article reflects all BIR issuances and bills publicly available as of the stated date. Always check for newer regulations or clarificatory RMCs before relying on any tax position.