‘Netflix, Spotify included’: House OKs bill imposing VAT on digital transactions

MANILA, Philippines — The House of Representatives approved Tuesday the bill seeking to impose value-added tax (VAT) on digital transactions, including streaming platforms such as Netflix and Spotify. 

During its session, the lower chamber approved House Bill No. 7425 which seeks to amend the National Internal Revenue Code of 1997, as amended. Some 167 lawmakers voted on the affirmative, six voted on the negative, and one abstained. 

Under the bill, digital service providers (DSPs) shall collect and remit VAT on transactions that go through its platform. The VAT imposed is at 12 percent. 

The VAT imposed covers electronic or digital sale of services such as:

  • Online advertisement services and provision for digital advertising space;
  • Digital services in exchange for a regular subscription fee such as Netflix and Spotify;
  • Supply of other electronic and online services that can be delivered through the internet

The VAT also covers online licensing of software, updates, and add-ons, west filters and firewalls; mobile applications, video games, and online games; webcast and webinars; and provision of digital content such as music, files, images, text and information. 

It also covers search engine services; social networks; internet-based telecommunication; online training such as the provision of distance learning, e-learning, online courses and webinars; online newspapers and journal subscription; ad payment processing services. 

Gabriela Women’s Party Rep. Arlene Brosas, who voted against the measure, said the 12% percent VAT would be the highest digital tax in the ASEAN region. 

She added that consumers would shoulder the VAT. 

“Tatamaan sa panukalang ito ang streaming services tulad ng Netflix at Spotify – mga platforms na tanging libangan ng maraming Pilipino sa ilalim ng pandemya,” Brosas said. 

(This would hit streaming services like Netflix and Spotify, which are the only source of entertainment for many Filipinos amid the pandemic.)

“Magmamahal din ang subscription fees ng premium accounts sa mga applications na pantulong sa pag-aaral ng mga bata tulad ng Canva at subscription-based journals na reference ng mga mag-aaral sa kolehiyo,” she added. 

(Subscription fees for premium accounts of applications that can be used for studying, such as Canva, as well as subscription-based journals that can help in research will also increase.)

Finance Assistant Secretary Daki Napao earlier said that the government would earn P10 billion from the measure—of which P9 billion will come from foreign businesses and P1 billion will come from local companies.

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