President Ferdinand R. Marcos Jr. has officially signed into law the Value Added Tax (VAT) on Digital Services bill, formally authorizing the government to impose VAT on digital service providers.
The newly signed law, House Bill No. 4122, aims to tax digital services in the same way that traditional businesses such as restaurants, retail stores, and similar enterprises are taxed.
The VAT will cover services provided by platforms like Netflix, Google, and online marketplaces.
The government is expected to generate significant revenue from the implementation of the law, projected to reach PHP 7.25 billion by 2025, PHP 21.37 billion by 2026, PHP 22.81 billion by 2027, PHP 24.42 billion by 2028, and PHP 26.27 billion by 2029.
This law encompasses various digital services, including online search engines, marketplaces, cloud services, digital media and advertising, online platforms, and digital goods.
Considered a priority measure of the Marcos administration, the law seeks to address revenue losses resulting from ambiguities in the current taxation framework for e-commerce transactions.
It specifically targets foreign companies that are not based in the Philippines but continue to provide services to Filipino consumers.