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Philippines imposes 12% VAT on tech giants' digital services, aims $1.9 billion in revenue by 2029

This move aims to promote fair competition and generate ₱105 billion ($1.9 billion) in revenue between 2025 and 2029. Educational and public interest services will be exempt from the VAT.

The Philippine government wants to ensure that foreign digital service providers contribute to the country's tax base, especially since their usage has increased significantly since the pandemic.

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In a significant effort to level the playing field with local digital services platforms, the Philippines government has levied a 12% VAT on Netflix, Disney, Amazon and Google. The Value Added Tax (VAT) on digital platforms is the government's way to develop the country's digital economy.

The new law, signed by President Ferdinand Marcos Jr, targets non-resident digital service providers, including streaming services and online search engines. The law mandates that non-resident digital service providers—such as streaming platforms, online marketplaces, and search engines—pay the same VAT currently levied on domestic companies.

According to Bureau of Internal Revenue (BIR) Commissioner Romeo Lumagui, the new tax policy is designed to address the imbalance between global tech companies and domestic businesses. As up until now only the domestic platforms were subject to a 12% VAT while the foreign platforms enjoyed a competitive edge.

“This will promote fair competition amongst businesses that are profiting from consumers here in the Philippines. A level playing field produces better products and services,” Lumagui said in a statement.

The foreign digital platforms affected by the new tax include Amazon, Netflix, Disney, and Alphabet (Google). It will be applied to all these companies whether they have a physical holding in the country or not.

Netflix declined to comment at this moment while Disney and Amazon are unavailable to remark on the new tariff.

The law states that if a digital service is consumed in the Philippines by a Filipino then the tax must be imposed as it is considered generated in the Philippines.

However, with this new taxation, the Filipino government is optimistic about generating ₱105 billion ($1.9 billion) between 2025 and 2029. Apart from this, the tax will also provide relief to the local platforms to compete in a levelled field.

A portion of this revenue—around 5%—is earmarked for projects that will support the country’s growing creative industries, according to a statement from the presidential communications office.

This chunk of tax will be reinvested in the local creative sector, which includes fields like film, music, and digital arts, which is seen as a key growth area in the Philippines. However, certain services will remain exempt from the VAT.

With this new surcharge, the Philippines is not the only southeast country to take charge of its tax regimes for digital services. Since the global pandemic, tech firms have seen a boom in usage across Southeast Asia. However, they are also facing tighter fiscal policies as governments attempt to regulate and capitalize on this growth.

As the digital economy continues to expand, the Philippines’ decision to tax foreign digital services marks a pivotal moment. By ensuring that tech giants pay their fair share, the government hopes to boost its creative industries, protect local businesses, and ensure a more equitable business environment for all.