Congress just OK’d a 12% tax on digital services like Netflix and Lazada, so you better binge watch your shows NOW!

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Screenshot from Netflix

Better binge-watch those on-demand shows now while they’re cheaper.

Chaired by Albay 2nd District Rep. Joey Salceda, the House Committee on Ways and Means approved on July 29 a substitute bill imposing value added tax on goods and services rendered by foreign and local enterprises via electronic and digital platforms. This comes just as online transactions become the commonplace amid community quarantine protocols.

The bill seeks to amend the National Internal Revenue Code of 1995 to enact additional liabilities to non-resident digital service provider, namely streaming services such as Netflix and Spotify as well as e-commerce websites like Lazada and Zalora, to assess, collect, and remit the value added tax on all their digital transactions.

The bill also plainly identifies who these digital service providers may be:

  • A third party that acts as a conduit for goods and services offered by a supplier to a buyer and receives commission therefore;
  • a supplier of digital services to a buyer in exchange for a regular subscription fee over the usage of the said product or service;
  • a platform provider for promotion that uses the Internet to deliver marketing messages to attract buyers;
  • a host of online auctions conducted through the internet, where the seller sells the product or  service to the person who bids the highest price; and
  • a supplier of electronic and online services that can be delivered through an information technology infrastructure, such as the internet.

Rep. Salceda says that just as brick-and-mortar stores are mandated to remit income taxes, these giant e-commerce companies from outside the that conduct their business here in the Philippines should do so as well.

He also clarifies that the bill seeks to come after big companies where taxes have never been but should be imposed, and not to burden small local businesses.

He expounds, ““If your sales are below P3 million, you are exempt from paying or filing VAT. If your net income as a sole proprietor is below 250,000, you are exempt from paying and filing income taxes. So, the small Facebook online seller will not be taxed, I guarantee you.”

With the bill’s passage, the government could reel P10 billion in revenue, P9 billion of which will result from the business of foreign companies holding base here in the Philippines.

Looks like we’re going to have to think twice before clicking “add to cart” in the future.

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