On third and final reading, Congressmen voted 167-6 with one abstention to pass House Bill No. 7425, which proposes to levy a 12% value-added tax on digital service provider transactions, including popular streaming services Netflix and Spotify.
The House of Representatives has approved legislation to levy a value-added tax (VAT) on popular digital streaming platform Netflix and other major digital service providers (DSPs).
On the third and final reading of House Bill No. 7425, which proposes to impose a 12 percent VAT on DSP transactions, including major streaming services Netflix and Spotify, lawmakers voted 167-6 with one abstention on Tuesday night’s session.
The bill seeks to alter the National Internal Revenue Code in order to level the playing field between traditional and internet enterprises.
According to the bill, a DSP is “an business that offers digital services or products to a buyer through an online platform for the purposes of buying and selling goods or services or by conducting transactions for the supply of digital services on behalf of any person.”
The proposed VAT on Netflix and Spotify will also encompass the electronic or digital sale of services such as online adverts and the provision of digital advertising space, as well as the supply of other electronic and online services that can be provided over the internet.
It includes online software licensing, updates and add-ons, west filters and firewalls; mobile apps, video games, and online games; webcasts and webinars; and the distribution of digital material such as music, files, pictures, text, and information.
It also intends to tax search engine services, social networks, internet-based telephony, online training, such as the provision of distant learning, e-learning, online courses, and webinars, online newspapers and journal subscriptions, and ad payment processing services.
Albay Rep. Joey Salceda, head of the House Ways and Means Committee and the bill’s primary author, said the legislation should not be considered a “new tax” because it merely “closes loopholes for large foreign corporations.”
“We imposed no new taxes. We’re simply clarifying that they should be VATed. In general, if you sell, you pay VAT, unless you fall under the exemptions for small businesses,” he explained during the virtual hearing.
Salceda noted during the virtual hearing.
He emphasized that the law does not apply to tiny online businesses.
“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,”
the legislator added.
Salceda has stated that the proposal may generate around P29.1 billion in additional yearly income to assist the government in dealing with the pandemic.