Draft Bill to impose VAT on nonresident digital or electronic service providers and marketplace platforms
The Philippines’ House has approved a bill (House Bill 7425 (HB 7425)) to implement VAT on “digital or electronic” supplies sold by foreign provider via the an online platform. However, it is still not clear when this will be implemented due to COVID-19 related delays. This would likely include a VAT annual sales registration threshold of PHP 3million (approx. €51,400 or $59,500).
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COVID-19 drives taking e-services
The Philippines is anxious to raise funds with a worsening budget deficit following the COVID-19 medical and economic crisis. A 12% VAT on digital services could raise P 10 billion per annum. The bill does not give an implementation date, but does indicate a six-month implementation period once the legislation passes. The proposed House Bill not only focuses on digital services but also on the sale of goods through marketplaces. Marketplaces are suggested as the collectors of VAT on behalf of sellers.
What digital services liable to Philippines VAT?
The House bill defines digital services as “any service delivered or subscribed over the internet or other electronic network which cannot be obtained without the use of information technology.” The law goes further:
- The supply of advertising space and other services for the purpose of online advertisement
- The supply of digital services in exchange of a regular subscription fee
- The supply of electronic or online services that can be delivered through an IT infrastructure such as the internet
This would likely include income from
- Software licensing
- Database services
- Online telecoms services
- E-learning
- Streaming and download media
- Mobile apps
- E-books and newspapers
- SaaS and cloud-based software
- Hosting and other internet services
- Online advertising
- Membership to dating memberships
- Online gaming
- Search engine services
Marketplace liabilities
It would not just be the responsibility of the provider, but potentially also any intermediary or marketplace selling the service of an underlying supplier – termed a network orchestrator.
Asia Pacific VAT on digital services
| Comments (click for details) | Rate | Date | Threshold | Comments |
| Australia | 10% | Jul 2017 | AUD $75,000 | |
| Azerbaijan | 12% | Jan 2017 | – | |
| Armenia | 20% | Jan 2022 | AMD 115million | |
| Bangladesh | 5% - 15% | Jul 2019 | – | B2B and B2C |
| Bhutan | 7% | Jul 2021 | Nu 5million | |
| Cambodia | 10% | Mar 2022 | KHR 250m | |
| China | 6%-13% | N/a | Nil | Withholding VAT; B2B and B2C |
| Fiji | 9% | TBC | FJD 300,000 | |
| India | 18% | Jul 2017 | - | |
| Indonesia | 11% | Aug 2020 | IDR600m or 12k customers | |
| Japan | 10% | Oct 2015 | JPY 10 million | |
| Kazakhstan | 12% | Jan 2022 | Nil | |
| Kyrgyzstan | 12% | Jan 2022 | Nil | |
| Laos | 10% | Feb 2022 | LAK 400m | |
| Malaysia | 8% | Jan 2020 | RM500,000 | |
| Nepal | 13% | Jul 2022 | Rupees 2m | Also 2% DST |
| New Zealand | 15% | Oct 2016 | NZD 60,000 | |
| Pakistan | 2% | Sep 2021 | Nil | Marketplace Withholding VAT |
| Palau | 10% | Jan 2023 | $300,000 | |
| Philippines | 12% | 2024 ? | P 3million | |
| Singapore | 9% | Jan 2020 | S$ 100,000 | |
| South Korea | 10% | Jul 2015 | Nil | |
| Sri Lanka | 18% | 2025? | LKR 60m | Proposals only |
| Taiwan | 5% | May 2017 | NTD 480,000 | |
| Tajikistan | 14% | Jan 2021 | ||
| Thailand | 7% | Sep 2021 | 1.8m Baht | |
| Uzbekistan | 12% | Jan 2020 | Nil | |
| Vietnam | 10% | Dec 2020 | – |
