President Ferdinand R. Marcos Jr. signs into law the Value Added Tax (VAT) on Digital Services Act (Republic Act No. 12023) in Malacanang Palace Wednesday morning. RA 12023 imposes a 12 percent VAT on foreign digital service providers to generate additional revenue for the government and level the playing field for local providers. Speaker Ferdinand Martin G. Romualdez, Senior Deputy Speaker Aurelio “Dong” Gonzales, Jr., Deputy Speaker David “Jayjay” Suarez, Albay 2nd District Rep. Joey Salceda, Sen. Sherwin Gatchalian, Senate President Francis “Chiz” Escudero, and Finance Secretary Ralph Recto, were among the officials who witnessed the event.
“We are not imposing new taxes.”
THIS was how President Ferdinand R. Marcos Jr. on Wednesday explained the newly signed “Value-Added Tax on Digital Services Law”.
The law aims to level the playing field of the digital landscape in the Philippines.
In his speech during the ceremonial signing of the law at the Malacañan Palace, President Marcos said the newly-signed law bridges the gap brought about by the rapid change in the digital world.
“With this law, we say that if your presence in the Philippine market is as real as your profits, then your tax responsibilities should also be equally tangible,” the President said.
“But make no mistake, we are not imposing new taxes, we are simply strengthening the authority and streamlining the process of the BIR to collect value-added tax on digital services,” he added.
The Value-Added Tax on Digital Services Law strengthens and streamlines the authority of the Bureau of Internal Revenue (BIR) to collect VAT on digital services, including digital media, digital music, digital video games, video-on-demand, and digital ads.
It covers digital platforms such as Netflix, Spotify, Amazon and Lazada, among other digital service providers (DSPs).
“Local business and international digital platforms now compete on equal terms. We no longer will be playing by different sets of rules. If you are reaping the rewards of a fruitful digital economy here, it is only right that you contribute also to its growth,” President Marcos said.
“After all, whether you are a small tech start-up or a global tech giant based halfway around the world, if you are making money here in the Philippines, you are part of our community. And with that comes a shared responsibility,” the President added.
Exempted from the law are digital educational services, including online courses and webinars offered by private institutions and the sale of online subscription-based services to educational institutions recognized by government agencies.
Among these institutions are the Department of Education (DepEd), the Commission on Higher Education (CHED) and state universities and colleges.
Under the law, the BIR Commissioner has the authority to suspend the business operations of non-compliant taxpayers, including the blocking of digital services of non-compliant service providers.
The law will be implemented by the Department of Information and Communications Technology (DICT) through the National Telecommunications Commission (NTC).
The Department of Finance (DOF), upon recommendation of the BIR and in coordination with the DICT and NTC, and upon consultation with the stakeholders, is directed to issue the implementing rules and regulations (IRR) of the law no later than 90 days from its effectivity.
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