In a move aimed at bolstering government revenue, the Philippines has introduced a 12% value-added tax (VAT) on digital services offered by foreign firms. This includes popular platforms like Netflix, Spotify, YouTube, and Amazon, among other digital service providers (DSPs) — which have previously enjoyed tax exemptions.
President Ferdinand Marcos Jr. signed the new law into effect, stating that it’s a matter of fairness.
“If your presence in the Philippine market is as real as your profits, then your tax responsibilities should also be equally tangible,” Marcos said in his speech earlier during the ceremonial signing at the Malacañan Palace.
The VAT will cover a wide range of digital services, including online marketplaces, streaming services, and cloud storage. However, certain educational institutions and financial services will be exempt.
The government estimates that the new tax could generate Php105 billion in additional revenue over the next few years. A portion of these funds will be allocated to support the creative industries.
While the law has been met with some concerns about its potential impact on consumers and businesses, the government insists that it’s a necessary step to ensure a level playing field for both local and foreign DSPs.
The government will release the implementing rules and regulations (IRR) for the new VAT law within 90 days of its enactment. Once the IRR takes effect, the Bureau of Internal Revenue (BIR) will have a 120-day transition period to establish the necessary systems for its implementation.
Those who can’t afford or don’t use such services won’t be affected. Admit it or not, they are luxuries.