The Philippines House of Representatives approved a bill imposing VAT on nonresident digital services companies. Philippines’ new digital services VAT will be set at 12%.
The new VAT applies to streaming services, as well as other transactions that take place via digital platforms.
The Philippines is a major market for social media and other digital services. The government hopes to raise 29 billion pesos in revenue, which will help with the economic recovery in the wake of Covid.
Who must pay digital services VAT in the Philippines
As laid down in the final version of the bill, VAT applies to nonresident companies that provide digital services to customers in the Philippines if their gross sales exceed PHP 3 million.
Note that the definition of a digital service is fairly broad and includes streaming, online auctions, and social media services. Companies that provides electronic services to customers in the Philippines should therefore consult a VAT expert for full clarity on their obligations.
Digital services VAT in Asia
The Philippines’ plan to introduce digital services VAT follows the lead of other countries in the region. For example, Indonesia and Thailand recently implemented VAT on electronic services. Moreover, an IMF report found that Asian companies can generate significant revenue by implementing digital services VAT on nonresident suppliers.
Moreover, digital services VAT is increasingly common globally. The OECD reports that 70 countries have already implemented, or are taking steps towards implementing, the OECD’s standards and guidance for digital VAT. In addition, 40 more countries are planning to implement the standard.
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