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House panel approves bill proposing 12% VAT on digital service providers like Netflix, Spotify

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The Philippines House Committee in Ways and Means has approved a bill that proposes to impose a 12% Value Added Tax (VAT) on digital services provided by local and foreign companies.

Initially proposed back in May, it aims to amend Section 105-A of the National Internal Revenue which will make foreign digital companies like Netflix, Lazada, Spotify, and more, to remit the VAT from the transactions happening on their platform.

The bill will also define these online service providers 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.”

Digital service providers are also defined as follows:

  • 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.

House panel chairman Joey Salceda states that big companies such as Netflix are selling their services in the Philippines, hence they should pay VAT. Although, they don’t have to pay income tax since they are not required to have a domicile in the country.

Salceda clarifies that the bill doesn’t aim to burden small online businesses like Facebook online sellers, and will only impose tax on big companies. The regular taxing laws will be applied in this new bill.

This means that a company is exempted from filing VAT if the sales are below Php3 million. Sole proprietors who make Php250,000 and below are also exempted.

Salceda added that, as per the impact studies that they conducted, the new tax bill will “not be felt by the most vulnerable households, will be felt only very mildly by the richest households, but it will certainly generate new revenues for our COVID-19 response,” 

As per Daki Napao, Finance Assistant Secretary, the bill could raise Php10 billion for the government, with Php9 million on them coming from foreign companies that are based here in the Philippines.

Via: GMA News

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