(AFP)

The House of Representatives and the Senate on Thursday, June 27, has achieved consensus to approve the two chambers’ joint version of a bill that seeks to impose value-added tax (VAT) on non-resident digital service providers, Albay 2nd district Rep. Joey Salceda said.

Through a bicameral conference committee—composed of members from the two chambers of Congress—Salceda said lawmakers have reconciled on two contested provisions of the proposed measure.

The two issues are as follows: the withholding tax on percentage taxpayers as proposed by the Department of Finance (DOF) and the earmarking of funds for the local creative sector.

“The bicam quickly agreed on two remaining items. On withholding taxes for percentage taxpayers, we agreed with the DOF proposal, which will allow the Secretary of Finance to set withholding tax rates for those who are not VAT-covered,” Salceda said in a statement.

The economist-solon noted that small taxpayers won't be subjected to excessive audits or complicated compliance.

He pointed out that protections for small businesses, such as the Barangay Micro Business Enterprise Law and the Ease of Paying Taxes with respect to risk-based audits, will still apply.

“What the DOF proposal simply does is instead of paying their percentage taxes at the end of the year, the taxes will be withheld by the e-commerce site,” he noted.

Salceda said the bicam also agreed to earmark 5 percent of incremental revenues, or around P900 million, to the creatives sector.

“Taxes on imported goods help level the playing field. And taxes on imported goods are typically earmarked for domestic support,” he explained.

Salceda, who filed the first version of the proposed VAT on digital service providers in 2020, stressed that during the height of the Covid-19 pandemic an “unfair situation” was established where local providers were subjected to tax while foreign providers were not.

“This unfairness to the domestic sector for at least four years is why the House contingent believes that we owe the resident creatives sector some measure of compensation and support,” the congressman stressed.

Once enacted, companies providing services in the Philippines but not based in the country will now be mandated to pay VAT.

These companies include the likes of streaming services such as Netflix and Spotify, social media sites Facebook, Instagram, and X, and online shopping sites Lazada and Shopee, among others.

Salceda said the proposed legislation is expected to generate as much as P18 billion for the government in its first year alone.

With the measure’s bicam approval, it now awaits ratification from both the House of Representatives and the Senate. After that, the only step remaining is the signature of President Marcos.