Digital services by foreign tech companies to see 12% value-added tax in the Philippines – report

The Philippines will levy a 12% value-added tax, or VAT on digital services provided by companies such as Alphabet (GOOG) (GOOGL), Netflix (NFLX), Amazon (AMZN) and Disney (DIS) in an attempt to bridge the gap with local brick and mortar players, Reuters reported citing, the Asian country’s internal revenue agency.

On Wednesday, President Ferdinand Marcos Jr. inked into law the levy of VAT on non-resident companies providing digital service such as streaming and online search engines, the report added.

“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,” said Romeo Lumagui, Bureau of Internal Revenue Commissioner.

Only local digital service providers are now subject to paying 12% VAT, the agency noted.

The Philippines’ government intends to generate 105B pesos ($1.9B) from the VAT between 2025 and 2029. It intends to allocate 5% of this revenue to finance projects for Philippine creative industries, according to the presidential communications office.

Educational and public interest services would not be taxed under VAT, the report added, citing the presidential communications office.

The Digital services provided by foreign companies are considered rendered in the Philippines if the digital services are consumed in the country, the report noted.