Thursday, August 18, 2022

PBBM Pushes VAT To Be Imposed On Digital Service Providers Like Spotify And Netflix

PBBM Pushes VAT To Be Imposed On Digital Service Providers Like Spotify And Netflix


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In his first State of the Nation Address (SONA), President Ferdinand “Bongbong” Marcos Jr. said that the government’s tax system would be adjusted to include the imposition of value-added tax (VAT) on digital service providers.

This is for the government to generate a PHP 11.7 billion income as the government is losing billions of pesos due to the number of Filipinos that prefer buying online rather than going to the mall.

President Marcos’ chief economic manager, Finance Secretary Benjamin Diokno, has also been vocal in proposing the passage of legislation imposing taxes on streaming service payments and other digital transactions.

“In response to recent developments and on the basis of fairness, we intend to tax online purchases because if you buy a product from a regular store, you pay tax, and I think we should also pay tax [on] online sales,” he said.

Secretary Diokno also believes that digital transactions have the tendency to evade imposing taxes, unlike purchases made over-the-counter.

On September 21, 2021, the House of Representatives approved on final reading a proposal imposing a 12% percent value-added tax on digital transactions to generate new funding sources for the country’s COVID-19 response efforts. House Bill 7425 seeks to amend Section 105 of the National Internal Revenue Code and seeks to clarify the imposition of VAT on online advertisement services, digital services in exchange for a regular subscription fee, and the supply of other electronic and online services that can be delivered through the Internet.

Representative Joey Salceda, the principal author of the bill, said foreign corporations selling digital services such as Netflix, Spotify, and others, will have to pay for and impose VAT on their services. It includes online licensing or software, updates and add-ons, website filters and firewalls, mobile applications, video and online games, and webcasts and webinars.

The bill was then passed to the Senate as the Upper House would need its approval before it could be presented to the President for its enactment into law.

In May 2022, it was learned that the Bureau of Internal Revenue is working on a system to collect VAT from foreign digital service providers, including global giants Amazon, Google, Netflix, and Spotify.

“Currently, the BIR, through technical assistance from the Asian Development Bank, is developing the online registration and update system (Orus) that will allow taxpayers, both residents and nonresidents, to register with the BIR online. The Orus is expected to be rolled out before the end of the Duterte administration,” Nina Asuncion, director of the Department of Finance, said.

She also said that if House Bill 7425 will be passed into law, it will pave the way toward simplified online registration, which was also mentioned by President Marcos, that the tax compliance procedures would also be simplified, easing the payment of taxes.


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