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Salceda’s panel approves 12 percent VAT on online services

The House of Representatives’ ways and means committee on Wednesday approved a bill imposing a 12-percent value-added tax on digital transactions.

Albay Rep. Joey Sarte Salceda, the panel’s chairman, said the committee adopted its report on the bill where the VAT would be imposed on online transactions or services such as Netflix.

“Why should they be exempt? when you buy canned goods you pay 12-percent [VAT],” Salceda said.

Under the approved committee report, foreign corporations selling digital services such as Netflix, Spotify, Facebook, Google and other global internet companies that do business in the Philippines will have to pay for and impose VAT on their services.

“We are imposing no new taxes. We are simply clarifying that they should be VATed. In general, if you sell, you pay VAT unless you fall under the exemptions for small businesses,” Salceda said.

The bill defines digital service as “any service delivered or subscribed over the internet or other electronic network that cannot be obtained without the use of information technology.”

Digital services include online licensing of software; mobile applications; video games; webcast and webinars; digital contents such as music, files, images, test and information; advertisement platforms; electronic marketplaces; search engine services; social network services; database and website hosting; online data warehousing; file sharing; cloud storage services; internet-based telecommunication; online training; e-learning; online newspapers; journal subscriptions and payment processing

The bill would amend sections of the National Internal Revenue Code of 1997 to impose taxes on transactions done online.

Salceda said the bill could generate P10.66 billion in revenues once enacted, but small businesses would continue to be VAT-exempt.

“If your sales are below P3 million, you are exempt from paying or filing VAT,” Salceda said.

“If your net income as a sole proprietor is below 250,000, you are exempt from paying and filing income taxes. So, the small Facebook online seller will not be taxed. I guarantee you.”

Topics: House of Representatives , value-added tax , digital transactions , Joey Sarte Salceda
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