EXECUTIVES of a world-renowned online video streaming service strongly support the pending value-added tax (VAT) bill for foreign digital service providers, stating it would create a fairer competitive environment between local and international providers.
Finance Secretary Ralph Recto met with senior Netflix officials — Indirect Tax Senior Manager Davy Chen and Public Policy Manager for Southeast Asia Shangari Kiruppalini — on Tuesday to discuss the Congress-approved measure and provided clarifications on its provisions.
In June, lawmakers approved a unified version of House Bill 4122 and Senate Bill 2528 during the bicameral conference, proposing a 12-percent VAT on digital services provided by both resident and nonresident digital service providers with no physical presence in the Philippines, including Netflix, Disney and HBO.
The bill requires both resident and nonresident digital service providers to register for VAT if their gross sales in the past 12 months exceeded P3 million or if there are reasonable grounds to expect that their gross sales will exceed P3 million in the next 12 months.
To facilitate the registration of nonresident providers who are not physically present in the Philippines, the bill mandates the Bureau of Internal Revenue (BIR) to set up a simplified automated registration system.
The BIR may be given the authority to block or suspend these services if they fail to withhold and remit the 12-percent VAT on transactions with their Philippine clients.
Recto said Netflix representatives strongly supported the bill, highlighting that this would level the playing field between local and international digital service providers and boost government revenue for development projects.
Besides expressing enthusiasm for the bill’s implementation, Chen and Kiruppalini committed to work with the government for mutual benefits.
On the other hand, the finance chief assured the executives the Philippine government is committed to the growth of the industry.
Recto estimated that the VAT could generate around P20 billion annually, potentially totaling P83.8 billion in revenue from 2024 to 2028.
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