IF FIGURES corresponding actual tax collections are any indication, the Bureau of Internal Revenue (BIR) may soon rid the agency of its stinking stigma embarking of corruption.
Just for the first six months of the current year, the BIR made history — breaking its “losing streak” by recording P17.5 billion value-added tax collections from from non-resident digital service providers (DSP) alone. The figure represents 75 percent of the agency’s P23.1 billion target VAT collection for the entire year.
Internal Revenue Commissioner Charlito Martin Mendoza attributed the positive 12 percent VAT collection from DPS to compliance to the Digital Service Portal launched in August last year as provided under Republic Act No. 12023 mandating nonresident DSPs to remit the 12% VAT on services consumed in the Philippines.
Mendoza likewise cited the dedicated Digital Service Portal created by the BIR in August 2025.
Just last February, the Commissioner said he expected to collect P21 billion in revenues from VAT on foreign digital services like online streaming platforms.
In 2025, the BIR collected P3.105 trillion in taxes, narrowly missing its P3.2-trillion target. But with this added source of revenue, the bureau is confident of hitting its goal for 2026.
The VAT on online streaming platforms covers Meta (nee Facebook), Google Asia, Netflix, Disney, Canva, Spotify, LinkedIn, Microsoft, OpenAI, and Valve, while substantial, Mendoza noted that the expansion in tax haul was an anticipated development “as compliance improves and more digital transactions are properly captured.”
The 12 percent VAT on nonresident digital service providers (NRDSP) was launched in June of last year.
But Mendoza said the BIR was only able to start collecting tax in August, with the creation of the VAT on Digital Services Portal, a dedicated online platform that allows NRDSPs to register, update their information, file VAT returns, and pay taxes from anywhere in the world.
“This year, mare-realize na rin natin yung full-year expected revenues from VAT on digital services. Di ba last year kasi August lang nagsimula. We collected around P8 billion. This year, we expect to generate P21 billion,” said Mendoza during the kickoff of the 2026 National Tax Campaign.
The Commissioner told the Manila Bulletin that revenues it had collected from non-resident DSPs have seen “encouraging” growth on the back of robust compliance.
Collections from foreign DSPs surged more than threefold during the first semester compared to the P6.6 billion logged in the initial six months of VAT on digital services programs.
The government began collecting the 12-percent consumption levy on DSPs in June 2025, covering both business-to-business (B2B) and business-to-consumer (B2C) transactions.
Worth noting is that the first six months’ collection already accounts for three-fourths of the national government’s full-year target of P23.1 billion.
Mendoza said the overwhelming expansion in collections from this segment is an “encouraging sign that implementation is gaining traction.”
Between B2B and B2C, the latter emerged as the “slightly bigger” contributor, though B2B transactions still made a substantial showing.
“This means the growth is broad-based and reflects increasing digital activity from both individual consumers and businesses,” Mendoza averred.
For the BIR, this trend implies that the digital VAT law is proving effective.
“It is helping level the playing field between local and foreign digital service providers, improving tax compliance, and ensuring that the growing digital economy contributes its fair share to government revenues and, ultimately, to public services for our people,” Mendoza said.
Still, he believes that it is still “too early” to make a definitive projection for the full year, when asked if the medium-term program necessitates upward revisions due to the robust first-half haul.
He would not even venture to project a doubling of this VAT tax on digital services to reach roughly P35 billion by the end of 2026.
He explained that fourth-quarter collections are due in January 2027, deferring the complete tally of the current fiscal year’s returns.
Of the government’s tax reform measures, only the VAT on digital services brought in additional revenues.
The Capital Markets Efficiency Promotion Act (CMEPA) and the CREATE MORE Act reduced revenues by P2.3 billion and P342 million, respectively.
Revenue losses from CMEPA are expected to more than double to P4.9 billion in 2026, before dropping by 5.5 percent to P4.6 billion in 2027. Incurred losses from lowering corporate income taxes (CIT) under the CREATE MORE Act are projected to nearly triple to P981 million this year and swell further by 68.2 percent to P1.7 billion next year.
VAT collections from digital services form part of the BIR’s overall tax collection, which stood at P1.63 trillion, boosted by higher returns from corporate income tax, personal income tax, VAT, other percentage taxes, and miscellaneous taxes.
In 2025, the Philippine government began implementing Republic Act No. 12023, known as the Value-Added Tax (VAT) on Digital Services Act. This law imposes a 12% VAT on digital services and goods consumed in the Philippines and is particularly relevant for U.S. companies offering streaming, cloud computing, SaaS, online advertising, e-commerce platforms, and other digital services to Philippine users, the briefer said.