President Ferdinand Marcos Jr. has signed into law the proposed taxes on foreign digital services that will include overseas-based e-commerce corporations firm and big streaming platform firms like HBO, Netflix and Disney.

Republic Act 112023 or the VAT on Digital Services Law imposes 12% value-added tax (VAT) on digital services extended by resident and non-resident digital service providers.

Services that are extended by corporations not based or physically present in the country are covered by the VAT imposition.

“While resident content producers were subject to VAT and income taxes, foreign providers were not,” said Albay Rep. Joey Salceda, chair of the House committee on ways and means that sponsored the prooposal in the Lower House.

The new law ends this privilege granted to them.

RA 112023will result into a more equitable tax compliance among local and foreign businesses in the Philippines, the Bureau of Internal Revenue said.

In a Palace briefing, BIR Commissioner Romeo Lumagui Jr. said this will level the playing field in terms of tax collections among digital service providers, both local and foreign.

Lumagui noted that in the previous tax system, only those who purchased digital services locally were subject to a 12 percent value-added tax while those provided by foreign business remotely were not imposed with the same.

“This is not a new tax, just to clarify, but a crucial step in ensuring fairness on competition in our rapidly evolving digital economy. For too long, local digital service providers have carried on and carried the tax burden of VAT while foreign DSPs or digital