The House ways and means panel approved a bill that would impose a 12% Value-Added Tax (VAT) on some local and digital goods and services providers as well as electronic transactions.
The still unnumbered substitute bill, which is a consolidation of three measures and a resolution, seeks to amend Section 105-A of the National Internal Revenue. It has a provision that would make a non-resident digital service provider such as Spotify, Netflix, Lazada, and others responsible for assessing, collecting, and remitting the VAT on the transactions processed on its platform.
“The Committee hereby approves the Unnumbered Substitute Bill on HBs No 6765, 6944, and 4531, integrating the concerns under HR No. 685. The Secretariat is hereby directed to file the appropriate Committee Report,” Albay 2nd District Rep. Joey Salceda, one of the principal authors of the bill, said.
The bill defines a digital service provider as “an entity that provides digital service or goods to a buyer through an online platform for purposes of buying and selling of goods or services or by making transactions for the provision of digital services on behalf of any person.”
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12% value-added tax on digital services
Moreover, digital service providers may also be:
- a third party that acts as a conduit for goods or services offered by a supplier to a buyer and receives commission therefor;
- a platform provider for promotion that uses the internet to deliver marketing messages to attract buyers;
- a host of online auctions conducted through the internet, where the seller sells the product or service to the person who bids the highest price;
- a supplier of digital services to a buyer in exchange for a regular subscription fee over the usage of the said product or service; and
- a supplier of electronic and online services that can be delivered through an information technology infrastructure, such as the internet.
Salceda said big companies such as Netflix are selling to the Philippines, so they should pay VAT.
“Digital service providers from outside [the country] gain profit from our constituents, but they don’t pay tax [to Philippine government]. This bill levels the playing field for local digital service providers,” Deputy Speaker Sharon Garin; also one of the authors of the measure, added.
The measure is expected to generate P10 billion in revenue for the government, P9 billion of which would come from foreign companies that are based in the Philippines.