Philippines Making Steps Towards Imposing VAT on Non-Resident Digital Service Providers

The Philippine government has been working continuously for almost two years on the long-expected project related to introducing VAT obligation on taxable sales of digital services and products from Non-Resident Digital Service Providers (DSPs).

Last November, the House of Representatives, on the third and final reading, adopted House Bill No. 4122, which imposes the VAT obligation on Foreign DSPs for sales of digital services/products to consumers based in the Philippines.

After being adopted by the House of Representatives, the bill has been submitted to the Senate for the next steps of mandatory legislative procedure.

Timeline

Based on the adopted version by the House of Representatives of House Bill No. 4122, the National Internal Revenue Code Amendment should be effective six months after being adopted.

Impact

The main purpose of the Bill, as mentioned above, is to impose a VAT liability on Non-Resident Digital Service Providers which are providing a taxable supply of digital services and goods to consumers based in the Philippines or where the place of collection of such digital goods/services is within the Philippines.

The Digital Service Providers which are within the scope of the Bill are:

• Foreign Subscription-based Digital Platforms;

• Foreign Suppliers of Digital Goods and Services;

• Online Marketplaces.

When the Bill becomes effective, the Foreign DSPs must assess, collect, calculate, and remit VAT to the responsible Tax Authority, following the “specially” designated procedures for this category of taxpayers. 

The VAT rate levied on this type of transaction should be 12%.

Following the latest procedural ongoings, when this Bill is in question, it could be expected that from 2024 the Philippines will impose the VAT obligation to foreign DSPs.