The Bureau of Internal Revenue (BIR) has reminded digital enterprises to pay their taxes because like traditional businesses, they are covered by the Tax Code and have tax compliance obligations.
Marissa Cabreros, deputy commissioner of the BIR's legal group, issued the reminder at a recent workshop on trade facilitation as she expressed hope that ongoing international and domestic initiatives including proposed legislation will help overcome the challenges and issues in taxing persons engaged in digital trade.
Cabreros stressed the need for taxation in the digital economy, saying it will level the playing field between traditional enterprises and digital businesses as the economy shifts from brick-and-mortar to virtual.
She also said there is an increased urgency to find new sources of revenue to fund the Philippines' efforts to recover from the adverse impact of the Covid-19, and in anticipation of the increasing digitalization of the country's economy.
She said international initiatives such as the OECD (Organization for Economic Cooperation and Development) Inclusive Framework focus mostly on closing tax loopholes to ensure multinational enterprises pay their fair share of taxes wherever they operate and generate profits.
In the Philippines, Cabreros said initiatives include House Bill 372, which seeks to impose value-added tax (VAT) on digital transactions. The proposed legislation is currently pending before the Senate Committee on Ways and Means.
The bill proposes to impose VAT on the online sale, barter, and exchange of goods and services, including sale or lease of properties in the Philippines. It also covers digital advertising, subscription-based services and other online services that can be delivered through the internet.
In addition, the bill obliges nonresident digital service providers (DSPs) to assess, collect and remit the VAT on the transactions that go through their online platforms.
DSPs will also be liable to register for VAT if their gross sales or receipts for the past 12 months exceed P3 million or if their gross sales or receipts for the next 12 months are expected to exceed this threshold.
Cabreros said that under the current Tax Code, persons engaged in the digital economy remain, in general, subject to income tax; business tax, either VAT or percentage tax; and other appropriate national internal revenue taxes.
Source: Manila Times