The Philippines is set to implement a 12 per cent value-added tax (VAT) on digital services provided by major tech firms, including Amazon, Netflix, Disney, and Alphabet. This decision aims to create a level playing field for local businesses and was announced by the Bureau of Internal Revenue on Thursday.
President Ferdinand Marcos Jr signed the legislation on Wednesday, extending the VAT to non-resident digital service providers such as streaming services and online search engines. Bureau of Internal Revenue Commissioner Romeo Lumagui stated, “This will promote fair competition amongst businesses that are profiting from consumers here in the Philippines. A level playing field produces better products and services.”
Currently, only domestic digital service providers are required to pay the VAT, leading to concerns about fairness in the market. Netflix has not issued a statement regarding the new law, according to a spokesperson for the Asia-Pacific region. Similarly, Disney, Google, and Amazon have yet to respond to requests for comment.
The government expects to collect 105 billion pesos ($1.9 billion) from this VAT between 2025 and 2029, with plans to allocate 5 per cent of the revenue towards projects that support the creative industries in the Philippines, as per the presidential communications office. It was also noted that educational and public interest services would be exempt from the tax.
According to the revenue agency, digital services provided by foreign companies are considered to be rendered in the Philippines if they are consumed within the country. Since the pandemic, usage of tech services has surged in Southeast Asia; however, these firms now face stricter fiscal tax regulations.
Source: Reuters
