Value-Added Tax on Digital Transactions

The measure proposes to subject both resident and non-resident digital service providers to a value-added tax of 12 percent. The measure defines digital service providers as those companies engaged in digital advertising, subscription-based services, and other online services. It is an administration priority measure and one of the five tax measures being pushed by the Department of Finance.

On November 14, 2022, the House version of the measure, HB 4122, was passed in the House in the third reading. Meanwhile, the Senate version, SB 2528, was passed in the second and third reading on May 20 and 22, respectively. Recently on June 27, the final draft of the measure was ratified by the bicameral conference committee.

While the copy of the ratified draft is not available to the public, Representative Joey Salceda disclosed to reporters some provisions contained in the draft. According to Representative Salceda:

“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. We obtained assurances that small taxpayers will not be subject to excessive audits or complicated compliance.”

https://www.pna.gov.ph/articles/1227812