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VAT on digital services ‘not new tax’—Diokno

The Department of Finance (DOF) clarified that the imposition of value-added tax (VAT) on digital transactions only aims to ensure that everybody pays his fair share of taxes.

Finance Secretary Benjamin E. Diokno said the proposed VAT on electronic or digital services does not impose new taxes, noting that it only clarifies the imposition of consumption levy.

Diokno explained that digital advertising, subscription-based services, and other services using information communication technology (ICT)-enabled infrastructure, among others, were never been exempted from VAT.

Last Nov. 14, the House of Representatives approved on third and final reading a bill “Imposing Value-Added Tax on Digital Transactions in the Philippines,” or House Bill (HB) No. 4122.

“It is only right that we allow our businesses to operate on even ground, and this bill rightfully clarifies which digital services to tax,” Diokno said in a statement on Friday, Dec. 2.

“It is not fair to only tax traditional businesses like restaurants and retail stores, and not tax online platforms like Netflix,” he added.

However, Diokno noted that educational services such as online courses and webinars rendered by accredited private educational institutions are exempted from the imposition of VAT.

Digital service refers to any service that is delivered or subscribed over the internet or other electronic network.

Digital services cannot be obtained without the use of information technology and the delivery of such services may be automated.

Meanwhile, digital service providers (DSPs) provide digital services or goods to a buyer. This may be through operating an online platform for the purpose of buying and selling goods and services or by making transactions for the provision of digital services on behalf of any person.

HB No. 4122 will level the playing field between digital and traditional businesses, especially those that cannot shift to the digital platform.

This effectively treats businesses equally regardless of their nature.

Source: Manila Bulletin

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