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Philippines VAT on digital services update

Senate backs Bill to impose 12% VAT on nonresident digital service B2C providers & platforms

The Philippines Senate voted on 15 May 2024 in favour in a second reading of Bill No. 2528 imposing VAT on foreign providers of digital services to consumers.

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

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