The House of Representatives approved on third and final reading a bill that seeks to clarify the imposition of value-added tax (VAT) on digital transactions on Monday, November 14, 2022.

House Bill (HB) No. 4122, entitled Imposing Value-Added Tax on Digital Transactions in the Philippines, does not impose new taxes, but clarifies the imposition of VAT on electronic or digital services such as digital advertising, subscription-based services, and other services using information communication technology (ICT)-enabled infrastructure, among others. However, educational services such as online courses and webinars rendered by accredited private educational institutions are exempted from the imposition of VAT.

“It is only right that we allow our businesses to operate on even ground, and this bill rightfully clarifies which digital services to tax. It is not fair to only tax traditional businesses like restaurants and retail stores, and not tax online platforms like Netflix,” said Finance Secretary Benjamin Diokno.

Digital service refers to any service that is delivered or subscribed over the internet or other electronic network. Digital services cannot be obtained without the use of information technology and the delivery of such services may be automated.

Meanwhile, digital service providers (DSPs) provide digital services or goods to a buyer. This may be through operating an online platform for the purpose of buying and selling goods and services or by making transactions for the provision of digital services on behalf of any person.

HB No. 4122 will level the playing field between digital and traditional businesses, especially those that cannot shift to the digital platform. This effectively treats businesses equally regardless of their nature.
 
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