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Philippines VAT on digital services non-resident providers

Draft Bill to impose VAT on nonresident digital or electronic service providers and marketplace platforms

The Philippines’ House has approved a bill (House Bill 7425 (HB 7425)) to implement VAT on “digital or electronic” supplies sold by foreign provider via the an online platform. However, it is still not clear when this will be implemented due to COVID-19 related delays. This would likely include a VAT annual sales registration threshold of PHP 3million (approx. €51,400 or $59,500).

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COVID-19 drives taking e-services

The Philippines is anxious to raise funds with a worsening budget deficit following the COVID-19 medical and economic crisis. A 12% VAT on digital services could raise P 10 billion per annum. The bill does not give an implementation date, but does indicate a six-month implementation period once the legislation passes. The proposed House Bill not only focuses on digital services but also on the sale of goods through marketplaces. Marketplaces are suggested as the collectors of VAT on behalf of sellers.

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
  • 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 $75,000
Azerbaijan 12% Jan 2017
Armenia 20% Jan 2022 AMD 115million
Bangladesh 5% - 15% Jul 2019 B2B and B2C
Bhutan 7% Jul 2021 Nu 5million
Cambodia 10% Mar 2022 KHR 250m
China 6%-13% N/a Nil Withholding VAT; B2B and B2C
Fiji 9% TBC FJD 300,000
India 18% Jul 2017 -
Indonesia 11% Aug 2020 IDR600m or 12k customers
Japan 10% Oct 2015 JPY 10 million
Kazakhstan 12% Jan 2022 Nil
Kyrgyzstan 12% Jan 2022 Nil
Laos 7% Feb 2022 LAK 400m
Malaysia 6% Jan 2020 RM500,000
New Zealand 15% Oct 2016 NZD 60,000
Pakistan 2% Sep 2021 Nil Marketplace Withholding VAT
Philippines 12% TBC P 3million
Singapore 7% Jan 2020 S$ 100,000
South Korea 10% Jul 2015 Nil
Taiwan 5% May 2017 NTD 480,000
Tajikistan 18% Jan 2021
Thailand 7% Sep 2021 1.8m Baht
Uzbekistan 15% Jan 2020 Nil
Vietnam 10% Dec 2020

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