Digital VAT collection nears PHP 7 billion — BIR

The Philippine government has collected almost PHP 7 billion from a 12% value-added tax (VAT) on digital services, the Department of Finance said, providing a lift to revenue intake at a time when slower growth and a corruption probe are weighing on collections.

The Bureau of Internal Revenue (BIR) has raised PHP 6.57 billion since the digital VAT took effect in June, based on a document obtained by BusinessWorld.

Of the total, the BIR collected PHP 2.78 billion from nonresident digital service providers as of Oct. 23. 

Meanwhile, final withholding VAT from business-to-business transactions reached PHP 3.79 billion as of Sept. 25 — almost entirely from foreign platforms — with PHP 3.77 billion remitted by private withholding agents and PHP 5.85 million by government agencies,

Under the law, a 12% VAT is now imposed on nonresident digital platforms such as Netflix, Spotify, Amazon and Lazada.

“It likely reflects higher digital consumption in e-commerce, streaming, and online services, improved compliance from platforms now formally registered with the BIR, and tighter monitoring of cross-border service providers,” John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, said in a Viber message.

Mr. Rivera noted the tax haul shows the digital economy is becoming a meaningful source of government revenue and is now being treated on par with traditional industries.

“The shift toward cashless payments and online transactions also made digital activity more traceable,” he said.

Former BIR Commissioner Romeo D. Lumagui, Jr. earlier projected the agency will collect PHP 10 billion in VAT from digital services this year, well above the initial PHP 3.62‑billion target.

For 2026, the Marcos administration seeks to collect a PHP 21.37-billion revenue from digital VAT. It is targeting PHP 22.81 billion in digital VAT collection in 2027 and PHP 23.41 billion in 2028.

Analysts said the BIR is on track to reach PHP 10‑billion digital VAT target this year, buoyed by rising technology spending and increasing compliance by nonresident platforms.

Eleanor L. Roque, a tax principal of P&A Grant Thornton, said the BIR has already collected PHP 6.57 billion in the early stages, making the PHP 10-billion target “easily achievable.”

“I think there are still nonresident digital service providers who are still going through the compliance process. There are companies that are still waiting for some clarification on whether they are covered,” she said in a Viber message to BusinessWorld on Thursday.   

Ms. Roque noted that initial “birth pains” such as VAT portal delays were quickly addressed by the agency.

“The digital economy may post slower income growth as a result of taxes they paid for the government. However, the industry is still poised for large growth due to higher activity and spending on technology,” Reinielle Matt M. Erece of Oikonomia Advisory and Research, Inc. said in a Viber message.

Mr. Rivera also added that hitting the PHP 10‑billion goal is “still possible.”

“Strong holiday e-commerce activity could lift collections, but hitting the target will depend on sustained platform compliance and continued digital spending despite recent economic headwinds,” he said. — Aubrey Rose A. Inosante, Reporter