On October 2, 2023, President Ferdinand Marcos Jr. signed a law that will impose a 12% value-added tax (VAT) on foreign digital services, a move aimed at leveling the playing field between local and international businesses operating in the Philippines. This new regulation, under Republic Act No. 120023, directly targets overseas-based platforms like e-commerce sites, streaming services, and gaming distribution platforms, such as Steam, Codashop, and Garena Top-up Center.
In a ceremonial signing at Malacañang Palace, President Marcos spoke about how the rapidly growing digital economy has created a gap in the country’s tax system. With more Filipinos using online platforms for everything from shopping to gaming, foreign companies have been profiting from Filipino consumers without contributing their fair share of taxes. “If your presence in the Philippine market is as real as your profits, then your tax responsibilities should also be equally tangible,” Marcos stated. He noted that this new law ensures that international digital platforms now operate under the same tax rules as local businesses.
The 12% VAT will apply to a broad range of digital services, including search engines, e-marketplaces, cloud storage, online media, advertising platforms, and digital goods. For Filipino gamers, this means popular services like Codashop, Steam, Razergold, and Garena Top-up Center will now have to pay VAT on every transaction made by Filipino users, even if the companies themselves don’t have a physical presence in the country.
As a result, consumers may see a slight increase in the cost of their in-game purchases or subscriptions. While the government isn’t planning to set price limits, they’re confident that natural market competition will keep prices in check. That said, there’s still some concern that if prices rise too much, gamers might look for cheaper alternatives, potentially leading to a shift in demand.
The gaming community isn’t the only group affected. The law covers a broad spectrum of digital platforms, and with the continued rise of online transactions, the government is hopeful this will bring in much-needed tax revenue. President Marcos also highlighted that this law addresses an imbalance—while local businesses have long been paying taxes, foreign digital platforms were not, despite profiting from the same market.
This move is part of a broader effort to modernize the country’s tax system, ensuring it keeps pace with the ever-evolving digital landscape. With so much of daily life shifting online, from shopping to entertainment, it’s time for the tax system to reflect those changes.
As the law takes effect, Filipino consumers and businesses alike will be watching closely to see how prices and services adjust under the new tax rules.
