What an AI project really costs in the Philippines once you add the 12% VAT on digital services and any withholding tax — and how usage-based pricing and BYOK help.

dgm is an independent osFoundry implementation partner — not affiliated with osFoundry’s developer (the company OS LLC), and it has not yet completed any client integrations.

The true cost of AI software in the Philippines is more than the sticker price — it includes the 12% VAT on foreign digital services and, in some cases, withholding tax.

What the scheme actually gives

  • 12% VAT on digital services from non-resident providers under RA 12023 (collection from 2 June 2025), withheld by the buyer on B2B purchases.
  • A possible 25% final withholding tax where a payment to a non-resident is a software royalty (treaty-reducible to ~10–15% with documentation).
  • How to manage it — usage-based pricing and BYOK keep spend tied to actual use, and self-hosting open-weight models can reduce reliance on metered foreign services.

Does it fund buying AI software?

Foreign AI/SaaS carries real added tax in the Philippines; the honest way to manage cost is usage-based pricing, BYOK and, where it fits, self-hosting — not a non-existent purchase grant. A platform such as osFoundry lowers the cost structurally through usage-based pricing and the BYOK principle — which helps more than waiting for support that does not cover software.

Important note

This article is general information and is not legal, tax or grant advice. Tax incentives, grants, rules and rates change, and only the relevant authorities (among them the National Privacy Commission, the Bureau of Internal Revenue, PEZA, the Board of Investments, the Bangko Sentral ng Pilipinas and the SEC) decide eligibility and awards. dgm is not a registered business enterprise, accredited incentive provider or intermediary. Always confirm the current terms with the official source or a qualified tax or legal adviser.

How dgm helps

dgm is an independent implementation partner that helps businesses in the Philippines adopt osFoundry — from identifying the first practical use case, through building it, to connecting AI to the systems you already use. dgm works independently of osFoundry’s developer (the company OS LLC) and has not yet completed any client integrations; everything above is therefore a description of the service offered, not a delivered result. If you would like to look at a sensible first step, dgm is happy to think it through with you. Arrange a no-obligation conversation with dgm.