'Digital service providers must register once VAT approved'

MANILA -- Foreign digital service providers will be required to register their businesses with the Philippine government once a law imposing value added tax on them is passed, a lawmaker said Monday.

The Department of Finance (DOF) is pushing for a VAT on foreign digital service providers, saying this can raise P96.72 billion in revenues for the government.

• Digital VAT seen yielding P96.7 billion for gov't

"The first step is to register," said Senator Sherwin Gatchalian, who heads the upper chamber's tax panel.

"All of these websites will have to register in the Philippines, and after registering, VAT will be inputted in their retail cost to consumers here in the Philippines."

He also said there is a way for the government to track which businesses won't register.

"If these websites will not register, or these websites will fail to collect VAT, the recourse for the (Bureau of Internal Revenue) is to close down the website. Based on the information from (Department of Information and Communications Technology) they have the tools to do so."

"But they have to review whether those tools are readily implementable and can be implemented on a global scale," he added.

Gatchalian also said that taxing foreign digital service providers who operate in the Philippines isn't an act of double taxation.

"For example, if you order from Amazon, Amazon has so many services eh. They have data services, they have digital services, they have products, online products. Those online products, if it goes beyond P10,000 you pay VAT once the products come to, here, the Philippines, and they are at the Customs jurisdiction."

"In other words, for online products, we already pay 12 percent VAT. So it’s the digital services that are not being imposed 12 percent VAT. In other words, everything in the Philippines, whether services, products, are being imposed 12 percent VAT," he explained.

The House of Representatives in November passed a bill imposing VAT on nonresident digital service providers.

• VAT on Netflix, Spotify other digital services approved by House on final reading

Gatchalian said they hope to complete their work on the Senate's counterpart measure by the end of the year.

--ANC, 10 July 2023