News Release

VAT on digital services to promote more equitable tax compliance



The VAT on Digital Services Law will result into a more equitable tax compliance among local and foreign businesses in the Philippines.

This was the assurance of the Bureau of Internal Revenue (BIR) on Wednesday, shortly after the ceremonial signing of the law.

In a Palace briefing, BIR Commissioner Romeo Lumagui Jr. said this will level the playing field in terms of tax collections among digital service providers, both local and foreign.

Lumagui noted that in the previous tax system, only those who purchased digital services locally were subject to a 12 percent value-added tax while those provided by foreign business remotely were not imposed with the same.

“This is not a new tax, just to clarify, but a crucial step in ensuring fairness on competition in our rapidly evolving digital economy. For too long, local digital service providers have carried on and carried the tax burden of VAT while foreign DSPs or digital services providers, though profiting from our consumers, have not,” he said.

“This new law corrects that imbalance by subjecting all digital service providers, both local and foreign, to the same 12 percent value added tax.”

According to Lumagui, the newly-signed law strengthens the BIR’s authority to collect VAT on digital transactions and clarifies how the DSPs can comply with the VAT requirement imposed under the National Internal Revenue Code (NIRC).

Lumagui further pointed out that the VAT on Digital Services Law is a welcome support for BIR’s efforts to collect due taxes.

“This law promotes for competition and trade that both local and foreign DSPs compete on equal footing and in doing so we create a more competitive marketplace, where consumers will ultimately benefit from improved services and fairer pricing,” he said.

Also known as the Republic Act (R.A.) No. 12023, the new law is expected to generate an additional PhP105 billion of revenue in the first five years of implementation. | PND