Sun Oct 06 16:10:00 UTC 2024: ## Philippines Enacts New Law Taxing Digital Services, Including Netflix and Shopee

**MANILA, PHILIPPINES** – The Philippines has officially implemented **Republic Act (RA) 12023**, introducing Value-Added Tax (VAT) on digital services. This landmark legislation expands the tax base to include online purchases from platforms like Netflix, Amazon Prime, Shopee, and Lazada, previously exempt.

The new law defines “digital services” broadly, encompassing online search engines, marketplaces, cloud services, media, advertising, and digital goods delivered via the internet or electronic networks.

The tax collection mechanism differs for resident and non-resident digital service providers (NDSPs). Resident providers continue to remit the 12% output VAT as usual, while NDSPs will be taxed based on the consumer’s VAT registration status.

For non-VAT registered consumers, NDSPs will remit the VAT to the Bureau of Internal Revenue (BIR). However, for VAT-registered consumers, the law introduces a **reverse charge mechanism**, placing the burden of VAT remittance on the consumer ten days after the end of the month. This signifies a shift in responsibility from the seller to the buyer.

The law also mandates the registration of digital service providers, including a simplified automated registration system for NDSPs. Failure to register could result in the blocking of digital services in the Philippines.

The law is projected to generate P80 billion in revenue, with 5% allocated to developing the creative industries. However, concerns remain regarding the Philippines’ digital infrastructure and the ability to effectively monitor compliance, particularly with NDSPs lacking physical presence.

Tax and legal experts urge clear guidance for taxpayers, especially regarding the reverse charge mechanism and potential changes in digital service pricing.

**This new law marks a significant step in the Philippines’ tax modernization effort, aligning its digital economy with the global trend of taxing digital services.**

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