House OKs bill imposing VAT on nonresident DSPs on final reading

The House of Representatives on Monday passed on third and final reading House Bill 4122, which requires nonresident digital service providers (DSPs) to collect and remit value-added tax on the transactions that pass through their platform.

House Bill 4122, which received 253 yes votes, four no votes and zero abstentions, specifically imposes a 5% VAT on registered nonresident DSPs providing services to the government. Otherwise, a 12% VAT is imposed.

In addition, the measure requires nonresident DSPs to register for VAT if gross sales or receipts for the past year have exceeded P3 million and provides a transition period of 180 days from the effectivity of the Act to enable the Bureau of Internal Revenue to establish implementation systems before VAT is imposed on DSPs.

Further, House Bill 4122 requires nonresident digital service providers to designate a representative office or agent which will be a resident corporation registered under Philippine law to assist in the compliance of the provisions of the Code.

House Bill 4122, however, exempts educational services including online courses and webinars of private institutions from VAT and the sale of online subscription-based services to educational institutions recognized by the Department of Education, Commission on Higher Education, and state universities and colleges.

It also precludes nonresident DSPs from claiming creditable input tax and simplifies invoicing and registration requirements for VAT-registered nonresident DSPs.

President Ferdinand "Bongbong" Marcos Jr. had included the imposition of VAT on digital service providers among his administration's goals during his first State of the Nation Address in July. — BM, GMA Integrated News