US-based tech giants are worried that the 12-percent value-added tax (VAT) to be collected from digital services providers (DSPs), plus more stringent rules on internet transactions under two new Philippine laws, could make it harder for global firms to operate here.

"While this law imposing VAT on DSPs does not discriminate between US non-resident DSPs (or other foreign DSPs) and local DSPs, industry is concerned that (its) implementing rules and regulations, which are currently being developed, could impose unworkable requirements on foreign DSPs similar to what has happened for [non-resident] income-tax payers," the Washington, DC-based Computer and Communications Industry Association (CCIA) told the Office of the United States Trade Representative (USTR) in an Oct. 17 submission for its 2025 National Trade Estimate (NTE) Report on Foreign Trade Barriers, which also covers digital trade.

CCIA is referring to Republic Act (RA) No. 12023 enacted into law by President Ferdinand R. Marcos Jr. last October, whose implementing guidelines are due before this year ends in order to collect VAT next year.

CCIA's member-companies include Amazon, Apple, Cloudflare, Coupang, eBay, Google, Intel, Meta, Opera, Pinterest, Rakuten, TSMC, Uber and X (formerly Twitter), among other global tech firms.

Arlington, Virginia-based Consumer Technology Association (CTA) also flagged RA 12023 as a barrier to US electronic commerce in its USTR submission, citing that this new Philippine law encompasses not only digital goods and marketplaces but also cloud services as well as online advertising, media and search engines.

Back in 2021, the Washington-based multilateral lender International Monetary Fund (IMF) warned that slapping digital services taxes (DSTs) may "open the door to retaliatory trade measures" from the US, as it did with India's DST. 

CCIA pointed out to the USTR that implementation of the Income Tax Convention of 1976, in which both the Philippines and the US are parties, has been "challenging" due to "complex and burdensome documentation procedures" or so-called request for confirmation (RFC) required by the Bureau of Internal Revenue (BIR) from income taxpayers.

"The BIR has not established standard processing timelines, and businesses are subsequently required to wait indefinitely without any commitment toward a resolution of the filing. These requests are required of all US non-resident service providers operating in the Philippines and, therefore, this policy is not limited to digital services and impacts members of all industries seeking to provide their services and goods to the Philippine market," CCIA noted.

CCIA added that the BIR revenue memorandum circular (RMC) issued in January of this year "added further confusion to income-tax obligations of non-resident suppliers of cross-border services."

Referring to RMC No. 5-2024, CCIA said it "appears to depart from established principles of income taxation of cross-border services (using the place where the services are performed to determine if the transaction is income-taxable) and treats the place of receipt of the services as being crucial in determining the taxability of the transaction."

As such, CCIA called upon the Philippine government and the BIR, in particular, to hold comprehensive industry consultations, "including with US non-resident service providers, to clarify the income-tax position under Philippine law in line with well-recognized and established international practices."

Like CCIA, the also Washington-based National Foreign Trade Council (NFTC) bewailed in its comment to the USTR that "there is significant ambiguity on how long the BIR will take to review the RFC and there is no guarantee of a positive outcome."

"Such requests have to be made by each and every income payor (customers) of US non-resident service providers selling to the Philippines," NFTC lamented.

Also, CCIA expressed concern about the Internet Transactions Act signed by President Marcos Jr. last year.

"Industry is concerned that the [Internet Transactions Law] would introduce obstructive requirements on electronic commerce platforms to have regulatory oversight such as mandatory collection of valid business certificates of merchants and subsequent submission to the government authority," CCIA explained

As this law "establishes obligations for e-commerce transactions and requires digital platforms to verify the identity of persons involved in transactions and provide consumers with transparency and opportunities for redress," CCIA warned that these requirements "could impinge on consumer privacy and increase compliance costs and burdens on suppliers in the market."

For its part, NFTC cited that "industry stakeholders have expressed concerns related to the imposition of onerous obligations on electronic commerce platforms to have regulatory oversight, [such as] collection of valid business certificates of merchants, and submission thereof to the government authority on a regular basis" under the Internet Transactions Law.

The similarly Washington-based United States Council for International Business (USCIB) agreed with CCIA and NFTC in flagging the Philippines' Internet Transactions Act of 2023, citing in its submission to the USTR that "a key feature is its takedown enforcement mechanism and subsidiary liability for e-marketplaces and digital platforms."