Bill imposing VAT on non-resident digital service providers approved by bicam —Salceda

The bicameral conference committee on Thursday approved the bill imposing a 12%  value-added tax (VAT) on non-resident digital service providers, according to Albay Representative Joey Salceda.

Salceda, who chairs the House Committee on Ways and Means, said the bill will level the playing field, given that foreign digital service providers are currently allowed to have unfettered and untaxed access to the Philippine market, including at the peak of the displacement of traditional goods by digital services during the COVID-19 pandemic.

“While resident content producers were subject to VAT and income taxes, foreign service providers were not. This created an unfair situation where local creators are taxed while imported content is not,” Salceda said in a statement.

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

Salceda said that the proposed measure is expected to generate as much as P18 billion in its first year of implementation.

He also said both the Senate and the House of Representatives agreed on two key points: the withholding tax on percentage taxpayers as proposed by the Department of Finance (DOF), and the earmarking of around P900 million of funds collected under the bill for the local creatives sector.

“On withholding taxes for percentage taxpayers, we agreed with the DOF proposal which allows the Secretary of Finance to set withholding tax rates for those who are not VAT-covered. We obtained assurances that small taxpayers will not be subject to excessive audits or complicated compliance,” Salceda said.

“We also negotiated with the Department of Finance to keep the earmarking provision in the House version.” 

The lawmaker said the enactment of the measure into law would not affect the protection provided for small business under the Barangay Micro Business Enterprise Law and the Ease of Paying Taxes.

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

Under the bill, taxpayers subject to percentage tax are limited to those who fall below the P3 million VAT threshold set under the Tax Reform for Acceleration and Inclusion (TRAIN) law. —KBK, GMA Integrated News