The House of Representatives on Tuesday, Sept. 21, approved on its third and final reading House Bill 7425, a measure that seeks to impose value added tax (VAT) on digital transactions.
167 lawmakers voted in favor and six others voted against HB 7425 that will amend the National Internal Revenue Code to tax digital service providers.
Only one lawmaker abstained from voting.
HB7425 seeks to clarify the imposition of VAT on electronic or online sale of services including online advertisement services and provision for digital advertising space; digital services in exchange for a regular subscription fee; and supply of other electronic and online services that can be delivered through the internet.
Albay Rep. Joey Salceda, the principal author of HB 7425, previously stressed the need to impose 12 percent VAT on digital services provided by foreign corporations, including Netflix and Spotify, especially due to the 2019 Coronavirus Disease (COVID-19) pandemic.
"We have now clarified that digital services and the goods and services traded through digital service providers should generally be subject to VAT. This is just a matter of common tax sense," said Salceda, the chairperson of the House Committee on Ways and Means, last July.
"If brick-and-mortar establishments, which are the hardest-hit by the pandemic, have to pay VAT, the giants of e-commerce shouldn’t be exempt," he added.
Salceda also assured that the measure exempts online businesses earning less than Php 3 million from paying or filing VAT.
"If your sales are below P3 million, you are exempt from paying or filing VAT. If your net income as a sole proprietor is below P250,000, you are exempt from paying and filing income taxes. So, the small Facebook online seller will not be taxed. I guarantee you," the congressman said.
