12% Tax on Digital Services Approved by Congress

by | Jul 29, 2020 | Finance, Mentions, Social Media

The Bill to impose a 12% Tax on digital services has been approved by the House Committee on Ways and Means. This means that all services (which include streaming services like Netflix, online shopping platforms like Lazada, music platforms from Spotify, and digital advertising from Facebook and Google) will be subject to a VAT and will be a bit more expensive for users. 

This bill was a follow-up to the proposed House Bill No. 6765, or “The Digital Economy Taxation Law of 2020”, filed by Albay Representative and House Ways and Means Chairman, Joey Salceda, and authored by House Deputy Speaker Sharon Garin along with Salceda. 

The purpose of this proposed bill is to bolster government funds in order to better combat the current pandemic. The 12% virtual tax itself is significantly higher than the average 5% digital tax of other countries in the world. However, it was clarified by Salceda that this bill will not tax small businesses, who will retain their VAT exemption status. 

Digital service providers are defined by the bill as:

  • a third party that acts as a conduit for goods or services offered by a supplier to a buyer and receives commission;
  • a platform provider for promotion that uses the internet to deliver marketing messages to attract buyers;
  • a host of online auctions conducted through the internet, where the seller sells the product or service to the person who bids the highest price;
  • a supplier of digital services to a buyer in exchange for a regular subscription fee over the usage of the said product or service; and
  • a supplier of electronic and online services that can be delivered through an information technology infrastructure, such as the internet.
Digital Tax

As COVID-19 continues to affect businesses, industries and institutions around the country, many Filipinos have turned to the online world to fulfill their wants and necessities. With the approval of the 12% tax on such digital services, the long term impact of this bill on Filipino consumers remains to be seen. 

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