Foreign digital service tax bill finally hurdles House

The House of Representatives has overwhelmingly approved on third and final reading House Bill (HB) No.4122, which aims to impose a 12 percent value-added tax (VAT) on foreign digital service providers (DSP), such as Netflix and Spotify.

(Ellson Quismorio/ MANILA BULLETIN)

The measure's passage took place during the plenary session Monday afternoon, Nov. 14,

Deputy Speaker and Davao City 3rd district Rep. Isidro Ungab, who presided over Monday's session, said 253 House members voted in favor of the bill. Only four voted in the negative, while one abstained.

If enacted, the bill is seen to take advantage of the current popularity of entertainment-based streaming services, among others, for the purpose of generating more revenue for the government.

A proponent of the measure, Albay 2nd district Rep. Joey Salceda, had earlier estimated that around P19 billion in revenues can be raised with this move.

“For the digital services VAT, it will not be imposed on Filipino businesses. The emphasis is on foreign or non-resident digital service providers. All major ASEAN (Association of Southeast Asian Nations) economies impose VAT on these entities. We’re the only ones that do not,” Salceda earlier remarked.

The bill intends to impose a 12 percent VAT on the digital sale of services, including video-on-demand subscriptions; online advertisements and supply of other electronic services, which can be delivered through mobile applications; online marketplaces; and webcasts, among others.

Its enactment would also mean that the National Internal Revenue Code of 1997 would be amended to include a section requiring foreign DSPs to collect and remit VAT for all transactions done via their platforms.

Also included in the language of HB No.4122 was a provision stating that 5 percent of the revenues from the VAT on DSPs would be set aside for the Creative Industries Development Fund.