Bill putting 12% tax on digital services passes on second reading in congress

The House of Representatives last Tuesday November 8, passed on second reading House Bill 4122 seeking a 12% value added tax (VAT) to digital services like Netflix, Amazon Prime, Disney+ and other foreign digital services providers.

Once the proposed measure passes, it will affect hundreds of thousands of local subscribers.

House Bill 4122 passed during the second reading following some amendments by the plenary. It wants to impose a 12% value-added tax (VAT) on registered non-resident digital service providers (DSPs) except for those providing services to the government, which shall be charged with only 5 percent VAT.

Prior to the amendments, HB 4122 wanted to ‘level the playing field’ between traditional and digital businesses by imposing VAT on digital service providers.

Exempted from VAT are educational services including online courses and webinars of private institutions and among others.

Aside from leveling the playing field, the proposed measure also aims to generate more revenues for the government from new sources. The lower house will reportedly vote for its final approval in 3 days, Friday. November 11.