Philippine President Ferdinand Marcos Jr. signed a law introducing a 12% value-added tax (VAT) on foreign digital services. The new law, Republic Act 12023 (Value Added Tax on Digital Services Act), will affect streaming giants like Netflix, Disney, and HBO, among others.
Marcos emphasized that the law aims to create a fair business environment, ensuring that foreign digital service providers (DSPs) contribute to the economy just like their local counterparts.
“If you are making money here in the Philippines, you are part of our community, and with that comes a shared responsibility,” said the President.
The government expects to collect approximately P105 billion over the next five years from this measure. This revenue will fund projects such as building 42,000 classrooms and constructing 7,000 kilometers of farm-to-market roads. According to the government, a portion of the proceeds will also support the local creative industry, ensuring that artists and content creators receive direct benefits.
Finance Secretary Ralph Recto noted that the new VAT policy does not introduce a new tax but corrects a gap in the existing system. The move addresses an imbalance where foreign DSPs were previously not subject to the same taxes as local businesses. Recto added that this change will help foster fairness and competition within the marketplace.
The Bureau of Internal Revenue (BIR) will oversee tax collection from foreign DSPs whose earnings in the Philippines exceed P3 million annually. Non-compliant companies could face temporary suspension.