The Era of E-commerce Taxation is Officially Beginning

According to comprehensive reports from Philippine media on July 10, Philippine legislators have recently passed a bill to impose Value-Added Tax (VAT) on foreign digital service providers. This bill requires all non-resident digital service providers to register with the Philippine Bureau of Internal Revenue (BIR) and to levy a 12% VAT on all digital transactions with their customers in the Philippines. This move aims to create a level playing field between online service providers and local service providers.

The bill covers digital services including search engines, online marketplaces, cloud services, and affects international e-commerce companies such as Amazon and Shein, as well as well-known streaming platforms like Netflix, HBO, and Disney.

According to Tax Revenue Memorandum No. 55-2024 (RMC) issued by BIR on April 15 this year, related companies are granted an additional 90-day compliance extension, with the deadline set for July 14, 2024. E-commerce sellers need to complete BIR registration and ensure tax compliance to avoid service suspension. Philippine Congressman Joey Salceda stated that this measure could bring in as much as 18 billion pesos (307 million USD) in its first year. The Philippine Department of Finance estimates that this measure could increase government revenue by approximately 84 billion pesos between 2024 and 2028.

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