As the government is ready to apply a 12% value-added tax (VAT) on digital services supplied by foreign businesses, Philippine users of popular online services could soon see their subscription rates rising.
Officially approved Republic Act 12023 on October 2, 2024, President Ferdinand Marcos Jr. mandated VAT on non-resident digital service providers (DSPs). This action will impact digital media, streaming platforms, online markets, cloud computing, and a broad spectrum of services overall.
Notable organizations most likely to change their subscription rates in response to the VAT include streaming behemoths such as the following:
- Netflix
- Disney Plus
- HBO Go
- Prime Video
- Spotify
This may also include big platforms like
- Lazada
- Shopee
- Amazon.
The new law claims that the VAT will apply to a range of digital services, from online gaming and marketing to video-on-demand and digital music. The law seeks to guarantee that international DSPs fairly support the Philippine economy, therefore fostering a more fair digital terrain.
Emphasizing the importance of equity between local and foreign businesses, President Marcos said:
Local business and international digital platforms now compete on equal terms. We no longer will be playing by different sets of rules. If you are reaping the rewards of a fruitful digital economy here, it is only right that you contribute also to its growth.
Digital educational services offered by private companies and subscription services to government-approved educational groups are free from VAT, nonetheless.
Within ninety days of the law’s passage, the Department of Finance (DOF) is expected to publish implementing rules and regulations; the Bureau of Internal Revenue (BIR) will have another 120-day period to build up enforcement systems.
Companies providing digital services in the Philippines will have to negotiate this new legislative climate as consumers get ready for possible subscription price rises in 2025.
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