President Ferdinand Marcos Jr. has officially signed Republic Act No. 12023 into law, imposing a 12% value-added tax (VAT) on digital services provided by foreign companies to consumers in the Philippines.
The law aims to create a level playing field between local businesses and global digital giants like Netflix, Amazon, and Disney+.
Which were previously exempt from Philippine taxation despite generating significant revenue from Filipino users.
During the signing ceremony at Malacañang Palace, Marcos emphasized that this is not a new tax.
Instead, it clarifies and strengthens the Bureau of Internal Revenue’s (BIR) authority to collect VAT from foreign digital service providers.
“If your presence in the Philippine market is as real as your profits, your tax obligations should also be equally real,” Marcos said.
Digital Services Affected
The VAT on Digital Services Law targets foreign digital service providers offering goods, services, and subscriptions to Filipino consumers.
Affected platforms include:
- Streaming Services:
- Netflix
- Spotify
- YouTube Premium
- Amazon Prime Video
- Disney+
- App Stores & Software:
- Apple App Store
- Google Play Store
- Microsoft
- Adobe Creative Cloud
- Freelancing Platforms:
- Upwork
- Fiverr
- Toptal
- Cloud & Hosting:
- Amazon Web Services
- Google Cloud
- Dropbox
- E-Commerce Platforms:
- Shopify
- Etsy
- Online Learning:
- Udemy
- Coursera
- LinkedIn Learning
- Gaming Platforms:
- Steam
- Epic Games Store
- PlayStation Store
These platforms are required to register with the BIR, collect the 12% VAT on transactions, and remit it to the Philippine government.
Filipino users will see changes in their subscription fees and purchase costs starting June 1, 2025.
The Department of Finance projects the VAT to generate ₱105 billion in additional revenue over the next five years, with a portion benefiting the local creative industry.
The law will take effect once the implementing rules are issued within 90 days.
A 12% VAT shall be imposed on the gross sales derived by DSPs from the supply or delivery of digital services consumed in the Philippines.
Digital services refer to solutions delivered through digital platforms that leverage data from connected products. These services aim to help users optimize their product usage, leading to benefits such as reduced time, lower consumption costs, and increased efficiency.
Healthcare: Medical services, hospital care, and the supply of certain medical products may also be exempt from VAT. Financial services: Many financial services, like insurance and banking, are VAT-exempt.
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