Taxman coming for Netflix, et al.

The Bureau of Internal Revenue (BIR) is working on a system to collect value-added tax (VAT) from foreign digital service providers, including global giants like Amazon, Google, Netflix and Spotify.

“Currently, the BIR, through technical assistance from the Asian Development Bank, is developing the online registration and update system (Orus) that will allow taxpayers, both residents and nonresidents, to register with the BIR online. The Orus is expected to be rolled out before the end of the Duterte administration,” Nina Asuncion, director of Department of Finance (DOF), told a Senate ways and means committee hearing on the imposition of 12-percent VAT on digital transactions on Monday afternoon.

“There will be a separate web system for online filing of VAT returns and online remittance of VAT to the government. We are also looking at the possibility of having the tax payments by nonresident digital service providers made through foreign banks and in foreign currency. Currently, the BIR and the DOF are discussing with a local partner who will develop the tax payment system for these nonresident digital service providers. We have also invited stakeholders to provide comments on the proposed user interface and processes the BIR is designing for the payment system to be used by non-resident digital service providers,” Asuncion said.

The House already passed House Bill (HB) No. 7425, which clarified that all digital service providers —whether operating just locally or across borders—are subject to VAT.

“This proposed measure does not impose new taxes, but merely strengthens and streamlines the BIR’s authority to collect VAT on digital transactions by providing measures on how digital service providers can comply with their VAT obligations in the Philippines,” Asuncion pointed out.

Asuncion said HB 7425, if passed into law, will pave the way toward simplified online registration for foreign digital service providers for VAT purposes, similar to procedures they undergo in other countries.

“The registration of nonresident digital service providers with the BIR under the simplified automated registration system will be for VAT purposes only,” she said.

“Their registration under this system will not be for intents and purposes considered as having established tax residence in the Philippines,” she added.

Under HB 7425, Asuncion said digital service providers would be liable for assessing, collecting, as well as remitting the VAT slapped on transactions which went through their online platforms. INQ