Philippines imposes 12% VAT on digital services by tech giants

The Philippines will impose a 12% value-added tax on digital services offered by tech giants such as Amazon, Netflix, Disney, and Alphabet, in a move that aims to level the playing field with domestic players, the country’s Bureau of Internal Revenue (BIR) announced on Wednesday.

Previously, on Tuesday, President of the Philippines Ferdinand Marcos Jr signed into law the imposition of VAT on non-resident providers of digital services such as streaming services and online search engines.

Only domestic digital service providers are currently subject to the 12% VAT, BIR said.

BIR Commissioner Romeo Lumagui said in a statement that the taxation will promote fair competition amongst businesses that are profiting from consumers in the Philippines. A level playing field produces better products and services.

Tech companies like Netflix, Disney, Google and Amazon have not made any comments.

The Philippines aims to collect 105 billion PHP (US$1.9 billion) from the VAT between 2025 and 2029. It plans to allocate 5% of this revenue to fund projects for creative industries, the presidential communications office noted.

According to BIR, digital services provided by foreign firms are considered rendered in the Philippines if the services are consumed in the Southeast Asian nation.

Since the Covid-19 pandemic, tech giants have experienced higher usage in Southeast Asia, but they also face increasingly stringent fiscal tax regimes.