Both the Senate and the House of Representatives have approved a consolidated bill that imposes value-added tax (VAT) on digital services.
The House ratified the bicameral conference committee report reconciling House Bill 4122 with Senate Bill 2528 on July 30, while the Senate ratified it a day earlier.
Senate Ways and Means Committee Chair Sherwin Gatchalian emphasized that the bill clarifies the VAT liability of nonresident digital service providers for digital services consumed in the Philippines. This measure strengthens the Bureau of Internal Revenue’s (BIR) authority to impose and collect VAT on digital transactions.
“One of the provisions of this reconciled version is the issuance of digital sales or commercial invoices with simplified requirements,” said Gatchalian. “To further strengthen compliance, the bill empowers the Commissioner of the BIR to block or suspend the services of providers who violate VAT provisions. This ensures that no violations slip through, whether from digital or traditional service providers.”
Gatchalian also highlighted the commitment to a fair tax environment for both local and nonresident digital service providers, stating, “We believe in the importance of creating an environment where our digital service providers operate under fair and square tax policies.”
According to the bill, digital services provided by non-resident digital service providers will be deemed performed in the Philippines if consumed within the country. These providers will be responsible for assessing, collecting, and remitting the VAT. This includes online search engines, marketplaces, cloud services, online media and advertising, and digital goods.
Online marketplaces will be required to remit VAT on transactions of non-resident sellers conducted through their platforms under certain conditions. Additionally, 5 percent of the incremental revenues will be allocated to the development of creative industries for five years following the bill’s enactment.
The bill is now awaiting the signature of President Ferdinand Marcos, Jr.