Last October 2, 2024, President Ferdinand Marcos Jr. signed a bill that aims to impose Value Added Tax (VAT) on foreign digital services available in the Philippines.
Now a law, the measure will impose a 12 percent VAT on digital services provided by foreign companies. That includes streaming platforms like Netflix, Spotify, and Disney+, as well as other paid services from Facebook, Google, and more.
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The Department of Finance said that the new measure will cover “online search engines, marketplaces, cloud services, online media, online advertising, and digital goods.”
While critics say the providers will only transfer the obligation to the users by increasing subscription fees, the DOF said they expect to generate Php102.12 billion from 2025 to 2028 from the new measure.
Apart from raising revenues for the government, the new rule also wants to “level the playing field” for digital service providers based in the Philippines. Before the rule, only local providers like iWantTFC and Vivamax are mandated to pay VAT.
DOF Secretary Ralph Recto and Senator Sherwin Gatchalian pointed out that the new measure is not a “new tax mechanism”.
“We are just merely correcting the current system that creates an unfair advantage to foreign digital service providers and weakens the country’s tax base, forgoing much-needed revenues that could have been used to fund crucial public services, infrastructure, and other socio-economic programs,” Recto said in a statement.
Gatchallian also cited the Tax Code, which says that all sales of services performed in the Philippines are subject to VAT, whether the provider is resident or nonresident.