Bill to impose 12% VAT on nonresident digital service B2C providers & platforms
The Philippines Senate accepted on 6 February 2024 for review Bill No. 2528 imposing VAT on foreign providers of digital services to consumers. The Bill is now pending a second reading and could be passed within the next months.
A similar Bill was passed by the House of Representatives in November 2022. A Philippines 1% Withholding Tax on platforms has recently been implemented.
The Department of Finance believes it could raise P83.8 billion in revenue from 2024 to 2028 in taxes for the government. It will level the playing field for local providers who are subject to the existing 12% standard VAT rate.
VAT would be levied on online advertisement services, digital services and the supply of other electronic services. B2B transactions will not be liable to VAT; instead the reverse charge mechanism should be applied.
This would likely include a VAT annual sales registration threshold of PHP 3million (approx. €51,400 or $59,500).
VAT Calc’s global VAT and GST on digital services tracker to see which other countries have introduced indirect taxes on electronic services to consumers.
What digital services liable to Philippines VAT?
The House bill defines digital services as “any service delivered or subscribed over the internet or other electronic network which cannot be obtained without the use of information technology.” The law goes further:
- The supply of advertising space and other services for the purpose of online advertisement
- The supply of digital services in exchange of a regular subscription fee
- The supply of electronic or online services that can be delivered through an IT infrastructure such as the internet
This would likely include income from
- Software licensing
- Database services
- Online telecoms services
- E-learning (except from public educators as exempted)
- Streaming and download media
- Mobile apps
- E-books and newspapers
- SaaS and cloud-based software
- Hosting and other internet services
- Online advertising
- Membership to dating memberships
- Online gaming
- Search engine services
Marketplace liabilities
It would not just be the responsibility of the provider, but potentially also any intermediary or marketplace selling the service of an underlying supplier – termed a network orchestrator.
Asia Pacific VAT on digital services
| Comments (click for details) | Rate | Date | Threshold | Comments |
| Australia | 10% | Jul 2017 | AUD $75,000 | |
| Azerbaijan | 12% | Jan 2017 | – | |
| Armenia | 20% | Jan 2022 | AMD 115million | |
| Bangladesh | 5% - 15% | Jul 2019 | – | B2B and B2C |
| Bhutan | 7% | Jul 2021 | Nu 5million | |
| Cambodia | 10% | Mar 2022 | KHR 250m | |
| China | 6%-13% | N/a | Nil | Withholding VAT; B2B and B2C |
| Fiji | 9% | TBC | FJD 300,000 | |
| India | 18% | Jul 2017 | - | |
| Indonesia | 11% | Aug 2020 | IDR600m or 12k customers | |
| Japan | 10% | Oct 2015 | JPY 10 million | |
| Kazakhstan | 12% | Jan 2022 | Nil | |
| Kyrgyzstan | 12% | Jan 2022 | Nil | |
| Laos | 10% | Feb 2022 | LAK 400m | |
| Malaysia | 8% | Jan 2020 | RM500,000 | |
| Nepal | 13% | Jul 2022 | Rupees 2m | Also 2% DST |
| New Zealand | 15% | Oct 2016 | NZD 60,000 | |
| Pakistan | 2% | Sep 2021 | Nil | Marketplace Withholding VAT |
| Palau | 10% | Jan 2023 | $300,000 | |
| Philippines | 12% | 2024 ? | P 3million | |
| Singapore | 9% | Jan 2020 | S$ 100,000 | |
| South Korea | 10% | Jul 2015 | Nil | |
| Sri Lanka | 18% | 2025? | LKR 60m | Proposals only |
| Taiwan | 5% | May 2017 | NTD 480,000 | |
| Tajikistan | 14% | Jan 2021 | ||
| Thailand | 7% | Sep 2021 | 1.8m Baht | |
| Uzbekistan | 12% | Jan 2020 | Nil | |
| Vietnam | 10% | Dec 2020 | – |
