Digital VAT collection nears P7 billion — BIR

By Aubrey Rose A. Inosante, Reporter

THE PHILIPPINE government has collected almost P7 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 P6.57 billion since the digital VAT took effect in June, based on a document obtained by BusinessWorld.

Of the total, the BIR collected P2.78 billion from nonresident digital service providers as of Oct. 23.

Meanwhile, final withholding VAT from business-to-business transactions reached P3.79 billion as of Sept. 25 — almost entirely from foreign platforms — with P3.77 billion remitted by private withholding agents and P5.85 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 P10 billion in VAT from digital services this year, well above the initial P3.62‑billion target.

For 2026, the Marcos administration seeks to collect a P21.37-billion revenue from digital VAT. It is targeting P22.81 billion in digital VAT collection in 2027 and P23.41 billion in 2028.

Analysts said the BIR is on track to reach P10‑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 P6.57 billion in the early stages, making the P10-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 P10‑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.