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Philippines Imposes 12% VAT on Foreign Digital Services

Philippine president Ferdinand Marcos, Jr. signed Republic Act No. 12023 into law on Wednesday, making foreign digital retailers, storefronts, media, platforms, and search engines and the services they offer subject to the country's 12% value-added tax. The new law will affect digital media streaming services such as Crunchyroll, Netflix, and other similar services, as well as digital storefronts such as Steam, or retailers such as Amazon, Lazada, and Shopee.

RA 12023 does not affect educational services, including online education, webinars, and other similar services. The law also does not affect online banking, or financial intermediaries functioning as quasi-banking services.

The government projects that the new imposition of VAT on non-resident digital services will bring in 79.5 billion pesos (about US$1.4 billion) in revenue for the government over the next four years. The law states that 5% of the incremental revenue earned from the new law will be used exclusively for developing native creative industry.

To implement the new law, the Bureau of Internal Revenue (BIR) must first finalize and publish the law's implementing rules and regulations (IRR) within 90 days of the law's signing, with the BIR then free to implement the law at least 120 days after publishing the IRR.

Sources: Official Gazette of the Republic of the Philippines, The Philippine Inquirer (Julie M. Aurelio), Variety (Patrick Frater)