By Pearl Gumapos
With a vote of 167 yes, six no, and one abstain, the House of Representatives (HOR) on Tuesday (Sept. 21) approved on third and final reading a proposed bill imposing a 12% value-added tax (VAT) on digital transactions.
House Bill (HB) No. 7425, also known as an Act Establishing Digital Taxation In The Philippines, seeks to amend Section 105-A of the National Internal Revenue Code and obligates non-resident digital service providers to collect and remit VAT on transactions passing through their platforms.
Under HB 7425, a VAT will be imposed on any person engaged in the sale, exchange, or lease of goods or properties and services using a digital or electronic platform.
According to the bill, the VAT is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee, or lessee of the goods, properties, or services.
Included in the list of digital service providers are Netflix, Spotify, and Lazada.
The HB defines a digital service provider as a “service provider of digital service or goods to buyers through operating an online platform or by making transactions for the provision of digital services on behalf of any person.”
A digital service provider may be any of the following:
- Third-party seller of goods and services who, through information-based technology or the internet, sells multiple products for its own account, or who acts as an intermediary between a supplier and buyer of goods and services collecting or receiving payment from a buyer in behalf of the supplier and receives a commission thereon
- Platform provider for promotion using the internet to deliver marketing messages
- Host of online auctions through the internet
- Supplier of digital services for a regular subscription fee
- Supplier of electronic and online services delivered through an information technology (IT) infrastructure, such as the internet.
Meanwhile, digital service is defined as “any service delivered or subscribed over the internet or other electronic network and can’t be obtained without the use of IT [information technology].”
Digital services shall include:
- Online licensing of software, updates, and add-ons, website filters and firewalls
- Mobile applications, video games, and online games
- Webcast and webinars
- Provision of digital content such as music, files, images, text, and information
- Advertisement platform
- Online platforms such as electronic marketplaces or networks for the sale, display, and comparison of prices of trade products/services
- Search engine services
- Social networks
- Database and hosting such as website hosting, online data warehousing, file sharing and cloud storage services
- Internet-based telecommunication
- Online training such as provision of distance teaching, e-learning, and online courses and webinars
- Online newspapers and journal subscription
- Payment processing services
– jlo
