The house of representatives approved a bill aiming to impose a 12% VAT on non-resident companies offering digital services to the Philippines.
With House Bill 7425 Digital Taxation is established in the Philippines and global digital service providers such as Netflix, Facebook and Lazada will be liable for collecting and remitting VAT for their services.
A digital service provider can be a company offering its digital services or goods to buyers via their online platform for the purposes of buying and selling goods or services or by making transactions for the provision of digital services on behalf of any person.
The term digital services can be quite broad, and it can include services such as online advertisements, subscription services, online marketplaces, software licensing, webcasts, and more.
This will apply to digital service providers who have a higher gross income than 3 million PHP. One of the aims of this new bill is to help in raising funds (approx. 10 billion PHP) for the fight against COVID-19.
Although digital service taxes are commonly considered as interim measures it is not clear if these laws will be repealed if an agreement is reached at an OECD level. The EU is also planning to impose its own digital services tax from 2023 and onwards in its effort to promote fair taxation of the digital economy.