Professional Documents
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My legal issue is whether or not online streaming platforms are subject to VAT under our current laws
The status quo as of the moment differs from case to case. There are instances where VAT is not imposed
for example when the payment is through credit card. However, if the payment is made thru Globe, for
example, there is a corresponding VAT.
I think this supports my legal issue. There is a confusion as to the VAT-ability of online streaming
platforms. Otherwise, it is my position that there should be no difference, particularly when the only point
of reference is the mode of payment
3. Why did you say that the Netflix Tax of the PH is VAT?
As stated before, Netflix tax comes in various forms. It is my position that the PH Netflix Tax is VAT
owing to the fact that it is our general sales tax and normally the Netflix Tax comes in the form of a sales
tax.
I would argue that it is a sale of service since the customer does not receive any interest in the property. In
fact, the use of the service is limited, for example that it is strictly for personal use.
"The basic distinction between a transaction in goods versus a transaction in services is whether the
customer acquires property from the provider. Implicit in the concept of services income is the notion that
the value conferred on the purchaser does not take the form of a cognizable property interest. Therefore,
generally speaking, if the seller transfers possession of property rights to the purchaser, the transaction
should be characterized as a transfer of property rather than the provision of a service. On the other hand,
if the customer does not receive an interest in property, then the revenue should be characterized as
revenue or income from
services.
5. Does it not fall under the definition of a copyright, what about lease of motion picture films?
I would argue that it does not fall under that definition. That definition presupposes that the copyright be
used in order to reproduce the same, or for a business purpose. In this case, the customer is strictly limited
to use the service for purely personal purposes.
The lease of motion films contemplate also the fact that the lessee is entitled to use the film for business
purposes, thus the lessee is granted a right thereto. In the case of OSPs, the film, music or corresponding
digital product is not leased. The service consist in the provision of a platform, together with the services
associated therewith and this does not extend to the digital products which come with the service.
6. Is it not true that the service is performed in the PH? What is the difference between performance
and consumption?
Confusion in zero rating arises because petitioner equates the performance of a particular type of
service with the consumption of its output abroad. In the present case, the facilitation of the
collection of receivables is different from the utilization or consumption of the outcome of such
service. While the facilitation is done in the Philippines, the consumption is not. Respondent renders
assistance to its foreign clients -- the ROCs outside the country -- by receiving the bills of service
establishments located here in the country and forwarding them to the ROCs abroad. The consumption
contemplated by law, contrary to petitioner’s administrative interpretation,52 does not imply that
the service be done abroad in order to be zero-rated.
Consumption is "the use of a thing in a way that thereby exhausts it."53 Applied to services, the term
means the performance or "successful completion of a contractual duty, usually resulting in the
performer’s release from any past or future liability x x x."54 The services rendered by respondent are
performed or successfully completed upon its sending to its foreign client the drafts and bills it has
gathered from service establishments here. Its services, having been performed in the Philippines, are
therefore also consumed in the Philippines.
Unlike goods, services cannot be physically used in or bound for a specific place when their destination is
determined. Instead, there can only be a "predetermined end of a course"55 when determining the service
"location or position x x x for legal purposes."56 Respondent’s facilitation service has no physical
existence, yet takes place upon rendition, and therefore upon consumption, in the Philippines. Under the
destination principle, as petitioner asserts, such service is subject to VAT at the rate of 10 percent.
Where services or
intangibles can be supplied remotely to customers who may be located
anywhere in the world when they consume the service or intangible, the
supplier’s location and the place of performance are less likely to accurately
predict the likely place of consumption. Place of taxation rules based on those
proxies are thus unlikely to lead to an appropriate result. Moreover, often the
actual place of performance might be unclear. For example, a technician in one
country might take control of a computer in another country to resolve an issue
using key strokes performed thousands of kilometres from the computer, using information and
communication infrastructure located in a number of different
jurisdictions. In such a case, it could be difficult to reach a consistent conclusion
on whether the place of performance is where the technician is, where the
computer is or somewhere in between. (pp 67-68 OECD)
7. How do you propose to carry out your recommendation? (practicality) (see pages 74++ of the
OECD)
It identifies the possible simplification measures for each of the
following core elements of a simplified administrative and compliance
regime:
Registration
Input tax recovery – Refunds
Returns
Payments
Record keeping
Invoicing
Availability of information
Use of third-party service providers
As a general rule, the value-added tax (VAT) system uses the destination principle. However, our VAT
law itself provides for a clear exception (CIR v. American Express)