The Bureau of Internal Revenue (BIR) is working on automated systems to be used by nonresident digital service providers (DSPs) in their registration with the tax agency as well as for the filing of returns and remittance of value added taxes (VAT), according to an official of the Department of Finance (DOF).
Euvimil Nina Asuncion, DOF director, said in a presentation in a recent Senate ways and means hearing that the DOF is grateful to the House of Representatives for passing House Bill No. 7425, which clarifies that local and cross-border DSPs are subject to VAT.
“We wish to emphasize that this proposed measure does not impose new taxes but merely strengthens and streamlines the BIR’s authority to collect VAT on digital transactions by providing measures on how DSPs can comply with their VAT obligations in the Philippines,” Asuncion said.
She said while generally, the measure covers both foreign and domestic DSPs, it is mainly focused on the VAT liability regime of non-resident DSPs.
Under this regime, DSPs are liable for assessing, collecting and remitting the VAT on the transactions that go through their platforms.
“Although the bill clarifies that digital services are subject to VAT, its main purpose is to streamline and strengthen the BIR’s authority to collect VAT from non-resident foreign DSPs. Resident online sellers are not affected by the bill since they are still subject to the current tax regime,” Asuncion said.
“The proposed tax measure includes the P3 million VAT threshold under the NIRC (National Internal Revenue Code), as amended. Taxpayers, both resident and non-resident, who do not meet the threshold are not required to register for VAT purposes. Hence, online sellers who do not have gross sales and/or receipts exceeding P3 million, specifically small online sellers, will not be liable for VAT,” she added.
Asuncion said for the simplified automated registration system for non-resident DSPs, they have been working with the BIR to create the system that these foreign DSPs will use to comply with their tax obligations.
