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Marcos Signs New Law Imposing VAT On Digital Services - What It Means For Online Consumers And Providers
Photo credit: PCO
In a move that could change how we pay for our favorite digital services, President Ferdinand R. Marcos Jr. signed the Value Added Tax (VAT) on Digital Services Law on October 2, 2024. The ceremonial signing took place at the Malacañang Palace’s Ceremonial Hall, marking another significant step in the government’s push for equitable tax policies in the digital economy.
So, what’s the big deal? Officially known as Republic Act (R.A.) No. 12023, this new law imposes a 12 percent VAT on non-resident digital service providers (DSPs). What this means is that foreign digital companies like streaming platforms, online marketplaces, and even cloud services, will now be required to add VAT to the price of their services for Filipino consumers.
The law aims to level the playing field for local providers who have been subject to VAT, while some foreign companies have enjoyed an advantage due to unclear regulations. Services that fall under this VAT coverage include everything from online search engines, media and advertising platforms, to digital goods like e-books and apps.
“This law will generate additional revenue for the government while ensuring that foreign and local service providers operate under the same tax framework,” said President Marcos during the ceremony. He emphasized that it’s all about fairness, both for businesses and for the government’s coffers.
But wait, what’s the impact on you as a consumer? You might see a slight increase in your subscription fees for some services. For example, if you’re subscribed to an international streaming platform or using a foreign online marketplace, expect an additional 12 percent added to your monthly bill.
For the government, this law addresses the revenue losses that resulted from previous ambiguities in existing e-commerce tax regulations. It’s part of the Marcos Administration’s broader initiative to modernize tax policies and keep pace with the rapid growth of the digital economy.
For now, it’s a wait-and-see situation as businesses adjust and consumers become familiar with the new pricing scheme. One thing’s for sure: this move is set to change the dynamics of how Filipinos interact with the digital world.
So, what’s the big deal? Officially known as Republic Act (R.A.) No. 12023, this new law imposes a 12 percent VAT on non-resident digital service providers (DSPs). What this means is that foreign digital companies like streaming platforms, online marketplaces, and even cloud services, will now be required to add VAT to the price of their services for Filipino consumers.
The law aims to level the playing field for local providers who have been subject to VAT, while some foreign companies have enjoyed an advantage due to unclear regulations. Services that fall under this VAT coverage include everything from online search engines, media and advertising platforms, to digital goods like e-books and apps.
“This law will generate additional revenue for the government while ensuring that foreign and local service providers operate under the same tax framework,” said President Marcos during the ceremony. He emphasized that it’s all about fairness, both for businesses and for the government’s coffers.
But wait, what’s the impact on you as a consumer? You might see a slight increase in your subscription fees for some services. For example, if you’re subscribed to an international streaming platform or using a foreign online marketplace, expect an additional 12 percent added to your monthly bill.
For the government, this law addresses the revenue losses that resulted from previous ambiguities in existing e-commerce tax regulations. It’s part of the Marcos Administration’s broader initiative to modernize tax policies and keep pace with the rapid growth of the digital economy.
For now, it’s a wait-and-see situation as businesses adjust and consumers become familiar with the new pricing scheme. One thing’s for sure: this move is set to change the dynamics of how Filipinos interact with the digital world.
Oct 2, 2024
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