Understanding VAT on digital services

REPUBLIC Act (RA) 12023, which provides additional requirements for the imposition of value-added tax (VAT) on digital services, has now been signed into law. This means that online purchases from digital marketplaces and platforms that have not been subject to VAT for the longest time are now VAT-able. Streaming services like Netflix and Amazon Prime, as well as purchases from e-commerce sites such as Shopee and Lazada, are covered by this law.

But what exactly are digital services? Under the law, these include any service supplied over the internet or other electronic networks using information technology and where the supply of the service is essentially automated, such as online search engines, online marketplaces, cloud services, online media and advertising, online platforms, or digital goods.