New law imposing 12% VAT on foreign digital services includes digital distribution services for gaming
The Philippines has officially implemented a 12% value-added tax (VAT) on foreign digital services, including digital distribution platforms for gaming, following the signing of Republic Act 120023 by President Ferdinand Marcos Jr. on October 2, 2024. This new law aims to address the growing gap in the country's tax system created by the digital economy, ensuring that foreign-based companies providing services to Filipino consumers contribute their fair share in taxes.
This means that, regardless of whether they have a physical presence in the Philippines or not, digital distribution platforms and gaming top-up services like Codashop, Steam, Razergold, Garena Top-up Center, and others will be covered as well and will now have to pay VAT on the services they offer to customers there.
This move is expected to increase the cost of gaming top-up services and digital product purchases for consumers, as the tax will likely be passed on to customers. While the government will not impose price caps, they expect market forces to regulate pricing.
President Marcos emphasized that the law creates a level playing field between local businesses and international digital platforms, ensuring that both operate under the same tax rules.
