MANILA, Philippines — Lawmakers in the House of Representatives (HOR) approved on third and final reading a proposed measure imposing a 12% value-added tax (VAT) on all digital transactions in the country.
With 167 ‘yes’, six ‘no’ and one abstention, the lawmakers approved House Bill 7425 which seeks to amend Section 105 of the National Internal Revenue Code (NIRC).
The proposed measure hopes to impose taxes on digital service providers that operate through online platforms to generate new sources of funds for the country’s COVID-19 response.
The proposed bill seeks to clarify the imposition of VAT on online advertisement services, digital services in exchange for a regular subscription fee, and supply of other electronic and online services that can be delivered through the Internet.
One of the principal authors of the bill, Albay Representative Joey Salceda, stressed that the bill seeks to require foreign corporations selling digital services to pay for and impose VAT on their services.
The proposed bill specifically refers to digital services as mobile applications, video games and online games, and webcasts and webinars as well as online licensing or software, updates and add-ons, website filters and firewalls.
It also addresses digital content such as music, videos, graphics and the likes; search engine services; social networks; online training as well as database and hosting.
“We have now clarified that digital services and the goods and services traded through digital service providers should generally be subject to VAT. This is just a matter of common tax sense,” Salceda said.
Meanwhile, the lawmaker guaranteed exemptions for small businesses or those having sales below P3 million and a sole proprietor with a net income of P250,000 and lower.
“So, the small Facebook online seller will not be taxed. I guarantee you,” he said.
Books and other printed materials being sold online will also be exempted from VAT in the proposed bill.