• October 6, 2022

A committee at the House of Representatives has approved a proposed measure that imposes a 12% value-added tax (VAT) on foreign or non-resident digital service providers (DSP).

During a hearing last August 17, the House Committee on Ways and Means approved a substitute bill consolidating House Bills (HB) 372, 3253, and 3341. The bill seeks to level the playing field between traditional and digital businesses by clarifying the imposition of VAT on DSPs.

According to Albay Representative Joey Salceda, the panel’s chairperson, if enacted, the VAT on non-resident digital service providers is expected to raise P9 billion in government revenues.

A digital service provider is defined as a company or individual providing digital service to a buyer through online platforms to buy and sell goods and services.

Digital services include online licensing or software, updates and add-ons, website filters and firewalls, mobile applications, video games and online games, and webcasts and webinars. It also includes the provision of digital content (music, files, images, etc.); online advertising spaces; electronic marketplaces; search engine services; social networks; database and hosting; and online training.

If it becomes law, the bill would mandate collecting VAT from companies providing services in the Philippines but are not based in the country, including Facebook, Netflix, Spotify, and others services.

However, committee member and Gabriela party-list Rep. Arlene Brosas said taxing such services could mean additional expenses to consumers.

“This (VAT) will be passed on to the consumers, and that is why we prefer that we tax corporations rather than consumption-based services,” she said.

In reply, Salceda said that these service providers “are already passing it on now when they pay VAT in other countries.”

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