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RA No. 12023 introduces a 12% VAT on digital services, expanding the Tax Code of 1997 and aligning the Philippines with regional practices for fair and comprehensive taxation.
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BIR’s RR No. 3-2025 outlines compliance procedures for DSPs, aiming to create equal tax obligations for both local and foreign providers offering digital services in the country.
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The VAT affects services like streaming platforms, app stores, online marketplaces, advertising platforms, gaming, and online learning, increasing costs for both individual users and businesses.
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The tax aims to modernize the tax system and generate significant revenue for infrastructure, education, healthcare, and other public services, improving national development and quality of life.
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However, concerns persist about potential negative impacts, including higher costs for consumers, decreased digital service usage, and challenges for small businesses relying on digital tools.
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Consumers face rising prices, with digital subscriptions and essential services for work and education becoming more expensive, potentially widening the digital divide for low-income households.
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To adapt, consumers can prioritize essential services, explore bundled offers, and seek discounts to mitigate rising digital service costs, adjusting to the evolving digital tax landscape.
Source: Grant Thornton
