Philippines – President Ferdinand R. Marcos Jr. signed a new law on Wednesday that imposes a value-added tax (VAT) on foreign digital services providers (DSPs), marking a significant step in regulating the digital economy and ensuring that global companies contribute to the Philippine market.
Republic Act (RA) 12023, a priority for the administration, establishes a 12% VAT on foreign DSPs like Netflix, Disney, and HBO, aimed at generating crucial additional revenue for the government.
President Marcos believes that the new law will create a more equitable environment for local service providers.
“If you are reaping the rewards of a fruitful digital economy here, it is only right that you also contribute to its growth. After all, whether you are a small tech startup or a global tech giant based halfway around the world, if you are making money here in the Philippines, you’re a part of our community, and with that comes a shared responsibility,” Marcos said in his message.
According to the President, RA 12023 is projected to generate approximately PHP 105b in revenue over the next five years. This funding could be used to construct 42,000 classrooms, establish over 6,000 rural health units, and develop 7,000 kilometres of farm-to-market roads.
Moreover, % of the revenue generated by this law will be dedicated to supporting the local creative industry.
“This means our artists, filmmakers, and musicians—the very people who fill our platforms with storage and the content—will directly benefit. It ensures that our creative talents are not just surviving in a competitive digital market but will be allowed by fairness and progress,” Marcos added.
Meanwhile, Senator Sherwin Gatchalian noted that the new law is anticipated to mitigate revenue losses by clarifying the tax obligations of non-resident digital service providers and resolving ambiguities present in the previous legislation.
In a statement, Gatchalian said, “We believe in the importance of creating an environment where our digital services providers, whether they are nonresident or local, operate under fair and square tax policies.”
Gatchalian further clarified that the new measure does not mean a new tax imposition.
“We are not imposing new taxes. We will only collect the tax that we should be collecting from foreign digital service providers,” he explained.
