By Karen Ocampo, Partner; Abigael Demdam, Senior Associate; Flourence Katherine S. Enriquez, Senior Associate, Ocampo & Suralvo Law Offices
Published in Asia Business Law Journal, November/December 2022 issue.
Written for Asia Business Law Journal’s comparative feature on tax laws in China, the Philippines and South Korea, this article looks at how the Philippines is approaching the taxation of the digital economy. Earlier proposals to impose income tax on foreign digital companies gave way to proposals to apply VAT to digital transactions.
The article reviews House Bill No. 4122, which would impose 12% VAT on digital goods and services. Under the bill, non-resident digital service providers would register and remit VAT once their sales exceed PHP 3 million and would appoint a local representative, supported by a simplified registration system and electronic invoicing.
The authors identify questions to be resolved, including how providers would establish where a buyer resides or consumes the service, what the compliance regime would involve, and the consequences of non-compliance. Most importantly, they argue that the law should state clearly that registering for VAT does not create a permanent establishment in the Philippines, and should address how registration interacts with corporate-law rules on doing business there.
This article was first published in Asia Business Law Journal, November/December 2022 issue.