VAT on foreign digital services won’t lead to big fee hikes – BIR
FILE PHOTO: Bureau of Internal Revenue (BIR) Commissioner Romeo Lumagui Jr. PHOTO FROM BIR FACEBOOK PAGE
The Bureau of Internal Revenue (BIR) said the new law imposing a 12-percent value-added tax (VAT) on foreign digital services will not result in “substantial” increases in service fees and subscription prices of providers.
“When it comes down to it, we can’t say what effect that will have on the price. But as far as we think, the increase is not that substantial,” BIR Commissioner Romeo Lumagui Jr. said in an interview on Wednesday, October 2.
Lumagui said that even if the value-added tax (VAT) is set at 12 percent, that does not mean that the price increase is also equivalent to 12 percent.
President Ferdinand Marcos Jr. on Wednesday signed into law Republic Act (RA) No. 12023 or the VAT on Digital Services, which requires providers of online search engines, marketplaces, cloud services, online media, online advertising, and digital goods to pay 12 percent VAT.
Among popular brands that are covered by this new tax law are Netflix, Disney Plus, HBO, Google, and Amazon, among others.
Article continues after this advertisementREAD: BIR: It’s up to digital services firms to raise prices after VAT law signing
Article continues after this advertisementLumagui pointed out that the Philippines is late to the game with the new tax measure, as many countries have already implemented similar policies.
“This concept of VAT on digital service providers has been around for a long time and is followed by different countries. Because the concept of that, even prior to this law, VAT should have already been paid where the products are consumed,” he added.
For instance, Singapore, Indonesia, and Malaysia enacted digital tax laws in 2020, and Thailand introduced a VAT on foreign digital service providers in 2021, as reported by Asean Briefing.
“So that is being followed internationally and they should know how much their estimated price was for that subscription, they should know that from the very beginning that it is subject to VAT, because that is what is done in different countries,” Lumagui said.
Moreover, Lumagui noted that during consultations with these companies, they did not signify that they would eventually raise the costs of their products and service fees.
READ: Marcos signs law imposing 12% VAT on digital services from offshore firms
In a separate statement, the Department of Finance believed that the law will strengthen the BIR’s capacity to collect VAT on digital services by detailing compliance measures for foreign digital service providers.
BIR target
In another context, the BIR chief maintained a positive outlook, saying the agency’s performance is “good” despite missing its targets in the past few months.
“We will also intensify the enforcement, so you will see in the next few weeks, we will be more aggressive in our enforcement,” he said.
For the first eight months, the BIR has collected about P1.9 trillion, which is about 63 percent of the P3.05-trillion target for this year.
Lumagui noted that the BIR expects to receive the results of tax collections from the recently imposed one-percent withholding tax on online sellers next month.
