Philippines: New Law Imposes 12% VAT on Non-resident Digital Service Providers
The Philippines has officially expanded its 12% Value-Added Tax (VAT) to cover non-resident digital service providers, marking a significant step in modernizing its tax system. President Ferdinand Marcos Jr. signed Republic Act (RA) 12023 into law on October 2, 2024, requiring foreign digital companies to collect and remit VAT on services provided to Filipino consumers—even if they have no physical presence in the country.
Why the Philippines is Taxing Foreign Digital Services
With the rapid growth of the digital economy, the Philippine government aims to ensure fair taxation by applying VAT to digital transactions, just as it does for local businesses. This move aligns the country with global tax practices, following the lead of nations such as Australia, the EU, Canada, and Singapore, which have implemented similar digital tax measures.
The new law is expected to generate P105 billion in revenue over the next five years, with the Department of Finance estimating P7.25 billion in VAT collections by 2025—assuming a 50% compliance rate.
Who is Affected by the New Digital VAT Law?
RA 12023 applies to non-resident digital service providers offering various online services to Filipino consumers. Affected platforms include Netflix, Amazon, Shein, and Disney+, among others. The law covers a wide range of digital services, including:
- Streaming platforms (movies, TV shows, music, and gaming)
- Online marketplaces (e-commerce platforms selling digital and physical goods)
- Cloud computing and storage services
- Digital advertising services
- Software and app purchases
- E-books, online subscriptions, and digital content sales
VAT Compliance for Foreign Digital Service Providers
Under the new regulation, non-resident companies earning more than P3 million annually from Philippine consumers must:
- Register with the Bureau of Internal Revenue (BIR)
- Appoint a local representative to handle tax obligations
- Remit 12% VAT on gross receipts from digital transactions
Failure to comply could result in temporary suspension of operations in the Philippines.
Exemptions: Which Digital Services Are Not Taxed?
Certain services remain exempt from VAT under the law. These include:
Educational services provided by institutions accredited by:
- Department of Education (DepEd)
- Commission on Higher Education (CHED)
- Technical Education and Skills Development Authority (TESDA)
Subscription-based services offered to DepEd, CHED, and TESDA institutions
Digital financial services, such as online banking and e-payment platforms
How Will the Philippines Enforce the Digital VAT?
To ensure a smooth transition, the government will implement the law in phases:
- Within 90 days – The Bureau of Internal Revenue (BIR) will issue the Implementing Rules and Regulations (IRR).
- 120-day transition period – The BIR will set up the necessary tax infrastructure to enforce the law.
Additionally, 5% of the tax revenue collected under RA 12023 will be allocated to support the local creative industry, benefiting Filipino artists, musicians, and filmmakers.
The 12% VAT on foreign digital services is a crucial step in leveling the playing field for local businesses and ensuring the Philippines captures tax revenue from the booming digital sector. Non-resident digital service providers should prepare for compliance by registering with the BIR and understanding their obligations under the new law.
With similar regulations already in place worldwide, this move reinforces the global shift toward taxing digital platforms and ensuring fair contributions to national economies.
Updated 12/03/2025
Source: gov.ph
VAT/GST rates 2024 in Asia
| Country | Standard VAT/GST Rate | Reduced Rates |
| Armenia | The standard VAT rate is 20%. | |
| Azerbaijan | The standard VAT rate is 18%. | |
| Bahrain | From January 1, 2022, the standard VAT rate is 10%. | |
| Bangladesh | The standard VAT rate is 15%. | 10%, 7.5%, 5%, 2,4%, 2% |
| Brunei | There is no VAT in Brunei. | |
| China | The standard VAT rate is 13%, 9%, 6% | Reduced rates of 5%, 2%, 3%, 1.5% and 0.5%. |
| UAE | VAT is charged at 5% in the United Arab Emirates (UAE) | |
| Georgia | The standard VAT rate is 18% | |
| Hong Kong | There is no VAT or sales tax in Hong Kong. | |
| India | The primary rates of Indian GST are 0.25%, 1.5%, 3%, 5%, 12%, 18% and 28% | |
| Indonesia | The standard VAT rate is 11% | |
| Iraq | There is no VAT in Iraq. (The standard sales tax ranges from 10% to 300% on alcohol & tobacco) | |
| Israel | The standard VAT rate is 17% | |
| Japan | The standard (Consumption Tax) rate is 10% | 8% |
| Kazakhstan | The standard rate of VAT is 12% | |
| South Korea | The standard VAT rate is 10% | |
| Kuwait | There is no VAT in Kuwait | |
| Laos | The standard VAT rate is 10% | |
| Lebanon | The standard VAT rate is 11% | |
| Malaysia | On September 1, 2018, the Government of Malaysia replaced the Goods and Services Tax (GST) with a 10% Sales Tax (The standard rate of service tax is 8%) | 5% (Sales Tax), 6% |
| Oman | the standard VAT rate in Oman is 5% | |
| Pakistan | Pakistan does not have VAT. The standard sales tax rate is 18% | Pakistan has a large number of reduced sales tax rates, including 1%, 2%, 5%, 10% and 12% (among others). |
| Philippines | The standard VAT rate is 12% | |
| Qatar | There is no VAT in Qatar | |
| Russia | The standard VAT rate is 20% | 10% |
| Saudi Arabia | VAT is charged at 15% | |
| Singapore | The standard Goods and Services Tax (GST) rate is 9% | |
| Sri Lanka | The standard VAT rate is 18% | |
| Taiwan | The standard VAT rate is 5% | |
| Tajikistan | The standard VAT rate is 14% | 10%, 7%, 5% |
| Thailand | The standard VAT rate is 7% (Reduced from the standard 10% until 30 September 2024) | |
| Turkey | The standard VAT rate is 20% | 10%, 1% |
| Uzbekistan | The standard VAT rate is 12% | |
| Vietnam | The standard VAT rate is 8% | Reduced VAT rate is 5% |