Philippine Senate OKs vat on digital transactions

The Senate on Wednesday night approved on second reading a bill that seeks to impose a 12% value-added tax on digital transactions on nonresident foreign online marketplaces with customers in the Philippines.

The Department of Finance expects the tax measure to bring in P83.8 billion in revenue from 2024 to 2028. The House of Representatives approved a similar measure in November 2022.

Under Senate Bill No. 2528, these marketplaces without a physical presence in the Philippines must withhold and remit VAT on transactions coursed through their online platforms.

The Internal Revenue commissioner may order the blocking or suspension of the services of digital providers if they fail to pay the 12% VAT.

Last month, the Asian Development Bank said the government should consider expanding taxes to digital services to enhance revenue collection efforts.

“We believe in the importance of creating an environment where our digital service providers, whether they are nonresident or local, operate under fair and square tax policies,” Senator Sherwin T. Gatchalian, who sponsored the bill, said in his sponsorship speech on Feb. 6.

“We are just collecting the tax that we ought to be collecting from nonresident digital service providers.” — John Victor D. Ordonez