The Bureau of Internal Revenue (BIR) said any changes in the subscription fees due to the imposition of value-added tax (VAT) on both foreign and local digital service providers (DSP) will only be reflected by next year.
However, BIR commissioner Romeo Lumagui Jr. said there is a possibility the charges will not increase at all.
“We can’t say if the prices will increase, again, these companies already know (that they have to pay taxes). In other countries they already pay taxes, in fact we are already lagging in this aspect,” Lumagui said in a televised interview yesterday.
“So maybe, when they set the pricing, they already knew that they will eventually be subject to VAT, so there’s a possibility that the price will not increase. But of course, we cannot guarantee that,” he added.
Republic Act (RA) No. 12023 or the VAT on Digital Services, signed into law by President on October 2, mandates a 12 percent VAT on all digital services consumed in the Philippines. At present, only local DSPs are subject to paying the 12 percent VAT. The law impacts non-resident digital service providers such as streaming services and online search engines.
“Under the law we have 90 days to draft the implementing rules and regulations (IRR) and after that, there needs to be systems development in the BIR so that they can register and pay online,” Lumagui said.
“So we are given another 120 days after the promulgation of the IRR so that the DSPs can comply. So maybe around next year,” the BIR chief added, when asked when the changes in pricing, if ever there will be any, is expected to be implemented.
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.
Lumagui also gave examples, such as streaming platform Netflix and Spotify.
“Even before this law was passed, we coordinated with these big companies and they know their responsibilities and they will comply, so we have good discussions with these companies,” the BIR chief said.
Meanwhile, Cristina Roque, acting secretary of the Department of Trade and Industry said RA) No. 12023 is a significant step towards creating a more equitable and inclusive digital economy in the Philippines.
“By ensuring that all digital service providers, regardless of origin, contribute their fair share to the country’s tax system, we are promoting healthy competition and supporting the growth of our local micro, small and medium enterprises,” Roque said in a statement.
