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House approves on final reading bill imposing 12% VAT on digital transactions

The House of Representatives on Tuesday approved on third and final reading the proposed measure imposing a 12% value added tax (VAT) on digital transactions.

Voting 167-6-1, the lower chamber approved House Bill 7425 or an Act Establishing Digital Taxation in the Philippines.

The proposed bill seeks to amend Section 105-A of the National Internal Revenue with a provision making a non-resident digital service provider such as Netflix, Spotify, and Lazada liable for assessing, collecting, and remitting the VAT on the transactions that go through its platform.

The measure defines digital service provider as "a service provider of a digital service or good to a buyer, through operating 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."

Further, digital service providers may also be:

  • a third party, such as a seller of goods and services who, through information-based technology or the internet, sells multiple products for its own account, or one who acts as an intermediary between a supplier and buyer of goods and services, such as a merchandiser or retailer, who collects or receives payment for such goods and services from a buyer in behalf of the supplier and receives a commission thereon;
  • 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 offers the highest price for it;
  • 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 goods or electronic and online services that can be delivered through an information technology infrastructure, such as the internet.

-- BAP, GMA News