4 years after Congress approved the push for a 12% VAT on digital services in 2020, President Bongbong Marcos has formally signed it into law, meaning digital platforms like Netflix, Spotify, Disney+, Apple Music, and more are subject to tax.
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Under Republic Act 112023, all services provided by resident and non-resident digital service providers regardless if they have a physical presence in the Philippines are subject to an additional 12% VAT. The law also adds a new provision to the Tax Code, where “digital services delivered by foreign digital service providers are considered performed or rendered in the Philippines if the digital services are consumed in the Philippines.”
Aside from digital streaming platforms, other services like search engines, eCommerce platforms, cloud services, online media, advertising, digital platforms, and digital goods are also subject to tax. “It doesn’t seem fair that giant companies not based in the Philippines but earn significant profits by selling their services to Filipinos are not subject to the same taxes,” Sen. Chiz Escudero explained back in September on imposing taxes on all digital services.
While some parties are against the additional taxes, other countries in Southeast Asia have started imposing VAT on digital services. According to the ASEAN Briefing, Singapore, Indonesia, and Malaysia introduced digital tax back in 2020, with Thailand following suit in 2021.