Bureau of Internal Revenue Commissioner Romeo Lumagui Jr. (File photo)
MANILA – The Bureau of Internal Revenue (BIR) said on Thursday the value-added tax (VAT) on resident and non-resident digital service providers is not a new tax.
“This is not a new tax. RA No. 12023 only ensures that the VAT being paid by local digital businesses, will also be paid by foreign digital businesses,” BIR Commissioner Romeo Lumagui Jr. said in a statement.
Signed into law by President Ferdinand R. Marcos Jr. on Wednesday, RA No. 12023 imposes a 12-percent VAT on electronic or online sale of services, such as 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 via the internet.
RA No. 12023 provides that digital service providers, in the course of trade or business, render services which are subject to VAT.
Digital service refers to any service that is supplied over the internet or other electronic network with the use of information technology and where the supply of the service is essentially automated.
This includes online search engines, online marketplace, e-marketplace, cloud service, online media and advertising, online platform, or digital goods.
The BIR said digital services delivered by non-resident digital service providers are considered rendered in the Philippines if the digital services are consumed in the Philippines.
Lumagui said the law levels the playing field between local brick and mortar companies and digital service providers, whether or not the latter have offices in the Philippines.
He said the new law also promotes fair competition because it equalizes the VAT to be paid by both local and foreign companies, as long as they are doing business in the Philippines.
"The BIR supports RA No. 12023. This will promote fair competition amongst businesses that are profiting from consumers here in the Philippines. A level playing field produces better products and services," he said.
The BIR earlier estimated that around PHP105 billion in revenues is expected to be collected in five years due to the new law. (PNA)
