Philippines: New Law Imposes 12% VAT on Non-resident Digital Service Providers
The Philippines has taken a significant step toward modernizing its tax system by extending the 12% value-added tax (VAT) to non-resident digital service providers. President Ferdinand Marcos Jr. signed Republic Act 12023 into law on October 2, which imposes VAT on companies that offer digital services to Filipino consumers, even if they have no physical presence in the country. The measure aims to streamline tax collection on digital transactions from popular platforms such as Netflix, Amazon, Shein, and Disney+.
The newly signed law is not considered a new tax but a mechanism to improve the efficiency of tax collection in the growing digital economy. This move aligns the Philippines with other countries that have adopted similar tax measures to capture revenue from global tech giants and digital platforms.
Republic Act 12023 covers a broad range of digital services, including online marketplaces, streaming platforms, cloud services, digital advertising, and the sale of digital goods. The VAT will apply to gross receipts from these services, with providers required to remit 12% of their revenues from the sale or lease of digital products and services.
In response to the law, nonresident digital service providers with gross annual sales exceeding P3 million will now need to register with the Bureau of Internal Revenue (BIR). They will also be required to appoint a local representative to manage their tax obligations in the country. Companies that fail to comply may face temporary suspension of their operations in the Philippines.
However, certain services are exempt from VAT under the law. These exemptions include online courses and training offered by educational institutions accredited by the Department of Education (DepEd), Commission on Higher Education (CHED), and Technical Education and Skills Development Authority (TESDA). Additionally, subscription-based services provided to DepEd, CHED, TESDA, and their recognized institutions are exempt, along with financial services delivered through digital platforms.
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 collections by 2025, assuming a 50% compliance rate. Furthermore, 5% of the revenue generated will be allocated to the country’s creative industry, providing direct benefits to Filipino artists, musicians, and filmmakers.
The government plans to implement the law in stages. The implementing rules and regulations (IRR) will be issued within 90 days, followed by a 120-day transition period for the BIR to set up the necessary infrastructure for enforcement.
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% |