A new law has been signed into effect in the Philippines, imposing a 12% value-added tax (VAT) on foreign digital service providers (DSPs). This measure aims to increase government revenue and support the local creative industry.
President Ferdinand R. Marcos Jr. on Wednesday signed into law Republic Act (RA) 12023, which mandates a 12% VAT on services provided through digital platforms, which includes streaming services, online advertising, and e-commerce. Furthermore, 5% of this revenue will be allocated to support the local creative industry.
Foreign businesses that fail to comply with RA 12023 may face temporary suspension of their services within the country.
The law defines digital services broadly as any service delivered or subscribed to over the Internet or electronic network using information technology and automated delivery.
However, the implementation of the VAT on DSPs may lead to increased costs for consumers. The burden of tax is often passed on to users, potentially resulting in higher prices for digital services like Netflix, HBO GO, Disney+, Amazon, and others.
