President Ferdinand R. Marcos Jr. joins lawmakers after signing the Value-Added Tax (VAT) on Digital Services Law, projected to generate PhP105 billion in government revenue over five years. PCO

New law imposes VAT on digital services

Arthur Fuentes

ABS-CBN News

<div><iframe src="https://www.facebook.com/plugins/video.php?height=314&amp;href=https%3A%2F%2Fwww.facebook.com%2Fpcogovph%2Fvideos%2F1588744335075126%2F&amp;show_text=false&amp;width=560&amp;t=0" width="560" height="314" style="border:none;overflow:hidden" scrolling="no" frameBorder="0" allowfullscreen=""></iframe></div><div><br/></div><p>MANILA (UPDATE) — President Ferdinand Marcos Jr. on Wednesday signed into law the Value Added Tax (VAT) on Digital Services.</p><p>The measure imposes 12-percent VAT on foreign digital service providers such as streaming platforms Netflix and Amazon, as well as Google, Facebook and other foreign tech firms that provide services in the country.</p><p>“Digital services include online search engines, marketplaces, cloud services, online media, online advertising, and digital goods,” the Department of Finance said.</p><p>The DOF expects the measure to generate P102.12 billion for the government from 2025 to 2028. Critics of the measure however said this could mean higher subscription fees for customers.</p><p>Aside from raising revenues, the measure is also meant to “level the playing field” for Philippine-based digital service providers, the DOF said. Finance Secretary Ralph Recto noted that before this, only local digital service providers were subject to VAT.</p><p>“With this law, we say that if your presence in the Philippine market is as real as your profits, then your tax responsibility should also be equally tangible,” Recto said, even as he insisted that the measure was not a new tax.</p><p>Senator Sherwin Gatchalian, head of the Senate’s tax-writing panel, also said local digital services were at a disadvantage prior to the new measure.</p><p>He said that while local platforms like iWantTFC and Vivamax are subject to VAT, subscriptions to the services of their foreign counterparts such as Netflix and HBO Go are not, creating an uneven playing field between local and nonresident digital service providers.</p><div><strong>&#x27;NOT A NEW TAX&#x27;</strong></div><p>Both Recto and Gatchalian meanwhile insisted that the new law was not a new tax.</p><p>“This is not a new tax mechanism. We are just merely correcting the current system that creates an unfair advantage to foreign digital service providers and weakens the country’s tax base, forgoing much-needed revenues that could have been used to fund crucial public services, infrastructure, and other socio-economic programs,” Recto said.</p><p>“Hindi tayo nagpapataw ng bagong buwis. Kokolektahin lang natin ang buwis na dapat naman talaga nating nakokolekta mula sa mga dayuhang digital service providers,” he added.</p><p>(We are not imposing a new tax. We are just collecting the tax that foreign digital service providers are supposed to be paying.)</p><p>Gatchalian said that under the Tax Code, the sale of services performed in the country is subject to a VAT, which means all digital service providers should be subject to VAT whether they are nonresident or resident.</p><p>Foreign DSPs whose gross sales or receipts for the past year have exceeded P3 million are required to register for VAT, the DOF said. They are also required to designate a representative office or agent to assist in compliance with the provisions of the Tax Code. Non-compliant businesses will be temporarily suspended.</p><div><strong>ONLINE COURSES EXEMPTED</strong></div><p>The law meanwhile exempts educational services, including courses, webinars, and other digital educational offerings, from value-added tax. Digital services sold on a subscription basis to educational institutions recognized by the Department of Education, the Commission on Higher Education, and state universities and colleges are also exempted.</p><p>The implementing rules and regulations (IRR) of the law are expected to be released 90 days from the effectivity of the Act, the DOF said.</p><div><br/></div><div><em></em></div><div><em><span class="fr-video fr-deletable fr-fvc fr-dvb fr-draggable" contenteditable="false" draggable="true"><iframe width="640" height="360" src="https://www.youtube.com/embed/2zzR_EgPMww?&amp;wmode=opaque&amp;rel=0" frameBorder="0" allowfullscreen="" class="fr-draggable"></iframe></span></em><br/></div><div><br/></div>

<p>President Ferdinand Marcos Jr. on Wednesday signed into law the Value Added Tax (VAT) on Digital Services.</p>

President Ferdinand Marcos Jr. on Wednesday signed into law the Value Added Tax (VAT) on Digital Services.

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New law imposes VAT on Netflix, other digital services

New law imposes VAT on Netflix, other digital services

Arthur Fuentes,

ABS-CBN News

Published Oct 02, 2024 11:07 AM PHT

|

Updated Oct 02, 2024 04:43 PM PHT

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