Complete Tax Guide for Online Sellers
A 2026 guide to taxes for Philippine online sellers on Shopee, Lazada, and TikTok Shop: income tax, percentage tax vs VAT, the 1% marketplace withholding under RR 16-2023, BIR registration, and the P250k and P500k thresholds explained with worked examples.
Last Updated: January 1, 2025
Quick Answer
Online sellers in the Philippines pay income tax on profit and either 3% percentage tax (if non-VAT) or 12% VAT once sales exceed P3 million. Marketplaces like Shopee and Lazada also withhold 1% creditable tax once your yearly remittances pass P500,000. Estimate your liability with our percentage tax calculator.
Calculate with Income Tax CalculatorKey Takeaways
- check_circleOnline selling income on Shopee, Lazada, and TikTok Shop is fully taxable and requires BIR registration, regardless of where the money is paid.
- check_circleChoose between the 8% flat rate (replaces income and percentage tax) and graduated rates (0-35%) plus 3% percentage tax; the 8% option usually wins for low-expense sellers.
- check_circleMarketplaces withhold 1% creditable tax on HALF of your gross remittances (effective 0.5%) once your yearly remittances exceed P500,000, under RR 16-2023.
- check_circleThe first P250,000 of taxable income is income-tax-free, and the P3 million VAT threshold separates 3% percentage tax from 12% VAT.
- check_circleThe 1% withholding is an advance credit, not an extra tax; collect BIR Form 2307 each quarter to claim it.
- check_circleRMC 38-2026 introduced a digital BIR Registration Seal badge for compliant online sellers.
Tax Obligations
BIR Registration
Register as self-employed using BIR Form 1901 on or before you start earning, regardless of income level (NIRC Section 236). You receive your TIN and Certificate of Registration (Form 2303).
Annual Income Tax Return
File Form 1701 (or 1701A if you use the 8% flat rate or the optional standard deduction), reporting your full-year income and tax due.
Quarterly Income Tax Return
File Form 1701Q for the first three quarters, reporting cumulative income and any creditable withholding tax.
Quarterly Percentage Tax
If you are non-VAT (gross sales below the P3,000,000 threshold), file Form 2551Q and pay 3% percentage tax on gross receipts. Not required if you elected the 8% flat rate, which already covers percentage tax.
Registration Process
Get or verify your TIN
If you do not yet have a Tax Identification Number, secure one. If you were previously employed, transfer your records to the RDO covering your business address.
- • Valid government ID
File BIR Form 1901 at your RDO
Submit the registration form for self-employed individuals at the Revenue District Office covering your address.
- • BIR Form 1901
- • Valid ID
- • Proof of address
- • DTI Certificate (if using a business name)
Pay the DST and get your Certificate of Registration
Pay the P30 loose documentary stamp tax. The P500 annual registration fee was abolished in 2024 under the Ease of Paying Taxes Act (RA 11976). You then receive your Certificate of Registration (Form 2303).
- • BIR Form 2303 (issued to you)
Register your books of accounts
Register manual, loose-leaf, or computerized books of accounts before recording transactions.
- • Books of accounts
Register receipts or sales invoices
Apply for Authority to Print (Form 1906) or register for BIR e-invoicing, then issue official receipts or sales invoices to buyers and clients.
- • BIR Form 1906
Choose your tax regime
Elect either the 8% flat tax on gross receipts above P250,000, or graduated rates plus 3% percentage tax. The 8% option is often simpler and cheaper for smaller earners.
Applicable Taxes
Income Tax
Progressive annual tax on individual and corporate income, filed via BIR forms with rates from 0% to 35%.
Learn MorepaymentsPercentage Tax
3% tax on gross sales for non-VAT businesses, filed quarterly with BIR Form 2551Q.
Learn MorepaymentsValue Added Tax
Philippine VAT is a 12% consumption tax on goods and services. File BIR Form 2550Q quarterly, within 25 days of quarter-end.
Learn MoreTax Calculators for Online Sellers
Income Tax Calculator
The Bureau of Internal Revenue (BIR) requires Filipino taxpayers to compute and pay income tax on their earnings. If you're wondering how much tax you'll pay...
Calculate NowpercentPercentage Tax Calculator
Calculate 3% percentage tax for non-VAT registered businesses with gross annual sales ≤ ₱3M (per NIRC Section 116, current rate effective July 2023).
Calculate Nowreceipt_longVAT Calculator
Value Added Tax affects every business transaction in the Philippines once your annual gross sales exceed ₱3,000,000. The 12% VAT rate applies to most goods ...
Calculate NowCommon Questions
Yes. The BIR requires all online sellers to register as self-employed taxpayers, regardless of sales volume. Even if your income is below the P250,000 tax-exempt threshold, you must register and file returns; you simply pay zero income tax until your taxable income exceeds P250,000.
Under RR 16-2023, marketplaces like Shopee and Lazada withhold a 1% creditable income tax on one-half of your gross remittances (an effective 0.5%). It applies only once your total annual remittances exceed P500,000, and you credit it against your income tax using BIR Form 2307.
P500,000 is the annual remittance level at which the 1% marketplace withholding begins. If your combined remittances across all platforms stay at or below P500,000 in a year, you can file a sworn declaration so the platforms do not withhold. Above it, withholding is mandatory.
Most small sellers pay either the 8% flat rate on gross sales above P250,000 (which replaces both income tax and percentage tax) or graduated income tax of 0-35% on profit plus a 3% percentage tax. VAT of 12% applies only once yearly sales exceed P3 million.
Usually yes for sellers with low expenses, because 8% on gross sales (minus P250,000) replaces both income tax and the 3% percentage tax in one simple payment. Sellers with high inventory, shipping, and ad costs often pay less under graduated rates because their deductions reduce taxable profit.
Only if your gross sales exceed P3 million in a 12-month period. Below that you can remain non-VAT and pay 3% percentage tax (or use the 8% option). Once you cross P3 million you must register for VAT and charge 12%, but you can claim input VAT on your purchases.
No. It is a creditable advance payment of your income tax. The platform gives you a BIR Form 2307 showing the amount withheld, and you subtract that from your income tax due when you file. If too much was withheld, it reduces your final bill or becomes a refundable credit.
The BIR can trace marketplace remittances and digital payments. Non-compliance can mean a 25% surcharge, 12% annual interest, and compromise penalties on unpaid tax, plus possible closure of your store. Registering and filing on time is far cheaper than penalties.