The Philippines is aligning with global tax trends by imposing a 12% value-added tax (VAT) on non-resident digital service providers under Republic Act 12023, signed into law by President Ferdinand Marcos Jr. The new measure targets digital platforms like Netflix, Amazon, and Disney+, aiming to capture revenue from the growing digital economy.
Key services affected include streaming, digital marketplaces, advertising, and cloud services. Providers earning over P3 million annually must register with the Bureau of Internal Revenue (BIR) and appoint a local representative. Non-compliance may result in suspension of services.
Exemptions include educational courses offered by institutions accredited by the Department of Education, Commission on Higher Education, and TESDA, along with financial services.
The law is expected to generate significant revenue, with forecasts of P105 billion over five years, benefiting the government and the country’s creative sector, which will receive 5% of the generated revenue.
The implementation will follow a phased approach, with regulations and a transition period to set up the necessary infrastructure.
This tax move is designed to level the playing field between local businesses and international tech giants, ensuring that all entities contributing to the digital economy support the country’s fiscal growth.
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