On 18 August 2020, the Committee on Ways and Means submitted a Bill, House Bill No. 7425 to the House of Representatives, which would serve as a substitute Bill of all the previous bills on the digital transactions tax. The Bill proposed to impose a 12% VAT rate on the sale of goods or properties including those digital or electronic in nature; services including those rendered electronically ‘Sale or exchange of services’ means the performance of all kinds of services in the Philippines, whether rendered electronically or otherwise, including supply by resident or non-resident of digital services such as online advertisement services, supply by resident or non-resident of subscription- based services, and supply of electronic and online services delivered through online platform. The Bill proposed that books and other printed materials sold electronically may be exempt from VAT. The Bill provides for a transition period of 180 days from the effectivity of the Act before VAT can be imposed to nonresident digital service providers.

The Bill defines a digital service providers (DSps) as a service provider of digital services or goods, whether residents or non-residents of the Philippines, through operating an online platform or by making transactions for the provision of digital services to a certain buyer. This contains third party who sells products for its own account, or for others as an intermediary through information-based technology or the internet; a platform provider for promotion/marketing messages through internet; a host of online auctions conducted through the internet; a supplier of digital services to a buyer in exchange of a regular subscription fee over the usage of the said product or service; and a supplier of goods or online services that can be delivered through an information technology infrastructure, such as the internet. It also defines the buyer in the platform. The Bureau of Internal Revenue (BIR) introduced a simplified registration system for the non-resident DSPs. Further, such VAT-registered nonresident DSPs may issue an electronic invoice or receipt subject to the rules prescribed by the Secretary of Finance upon the recommendation of the Commissioner of Internal Revenue.