The bill would eliminate the VAT exclusion currently applicable to certain goods and services and impose a 19% VAT rate. The 19% VAT rate would apply to personal computers and laptops with a value of up to approximately USD 500, and smart phones and tablets with a value of up to approximately USD 220, among other things. The 19% VAT rate also would apply to public utilities rendered to medium- and high-income housing, software licenses for the commercial development of digital content, website hosting and cloud-computing services.
Under the bill, solar panels, power inverters for solar panels and charger controllers would no longer be excluded from VAT. The bill would impose a 5% VAT on those items.
The bill would characterize certain goods that are exempt from VAT as excluded from VAT, meaning taxpayers would no longer be able to claim a VAT credit for the VAT paid on those goods. This provision would apply to certain foods (meat, chicken, fish, milk, eggs, rice), vitamins, antibiotics and other medicines. It also would apply to scientific books, newspapers and magazines (including online subscriptions to such content).
The bill would allow taxpayers to claim an input VAT credit for the VAT paid on the acquisition, import, construction or formation of productive fixed assets. Currently, taxpayers may credit the VAT paid against their income tax due.
Under the current law, a VAT exemption applies to certain products (clothing, garments, electrical appliances, computers, communication devices, sports equipment, toys and school supplies) three days per year provided the value of those products does not exceed certain thresholds. The bill would extend the three-day VAT exemption to online sales and increase the thresholds.
Source EY
