BIR: ‘No guarantee’ of steady prices under digital VAT law

THERE is “no guarantee” that foreign digital service providers will continue with their current pricing schemes now that they are being charged value-added tax (VAT), the Bureau of Internal Revenue (BIR) said on Thursday.

“Pwedeng hindi naman tumaas din ang presyo nila (foreign digital service providers). Pero of course, hindi natin ma-ga-guarantee na hindi tataas ang presyo,” (It is possible prices won’t rise, but there is no guarantee,” BIR Commissioner Romeo D. Lumagui, Jr. said in a television appearance.

In a statement issued separately, the BIR said Republic Act (RA) No. 12023 “is not a new tax” but “ensures that the VAT being paid by local digital businesses, will also be paid by foreign digital businesses.”

The law aims to “promote fair competition amongst businesses that are profiting from consumers here in the Philippines,” Mr. Lumagui said.

Under the new law, the government expects to collect P105 billion from digital services VAT in the next five years.

RA 12023, which amended the National Internal Revenue Code of 1997, imposes a 12% VAT on foreign digital service providers. A 5% VAT will also be imposed on registered foreign suppliers rendering services to the government.

The law requires foreign digital service providers with gross sales or receipts over P3 million in the past year to register for VAT payments.

The BIR noted that digital services delivered by foreign digital providers are considered rendered in the Philippines if the services are consumed within the country.

Foreign digital service firms should also designate a representative office or agent in the Philippines.

Nonresident digital service providers include online search engines, online marketplace, e-marketplace, cloud service, online media and advertising, online platform, or digital goods. — Beatriz Marie D. Cruz