Preparing for 2025: Key changes that will impact game developers

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Preparing for 2025: Key changes that will impact game developers

December 26, 2024

Navigating the complexities of tax compliance can be a daunting task for game developers. As tax laws and rates continue to change, staying informed is essential to ensure compliance and avoid unexpected costs. Whether you’re selling digital goods locally or internationally, understanding these changes can make all the difference in managing your revenue streams effectively. In our last article, we explored the basics of taxation on digital goods and services and provided a comprehensive overview of global tax rates. As your Merchant of Record, Xsolla takes the stress out of tax compliance by calculating, collecting, remitting, and filing taxes on your behalf in every market where you sell your game. And with the new year on the horizon, it's time to gear up for new tax changes that could impact your revenue and pricing strategy. To help you stay ahead, we’re continuing our series of tax updates with a look at the most significant changes coming in 2025. From VAT rate adjustments in Europe and Southeast Asia to new tax structures in Africa, here’s what you need to know to keep your operations running smoothly.

2025 tax updates: region by region

Let’s explore major tax updates region by region and uncover what they mean for your game sales in the coming year.

United States

VIRGINIA This year, a proposed bill seeking to tax digital goods, including electronically delivered products like software, music, and reading materials, failed to become law. As of the beginning of 2025, digital products remain exempt from Virginia sales and use tax, and there is no ongoing discussion about future implementation. Developers targeting the Virginia market can operate without concern for additional taxation on digital goods for the foreseeable future. LOUISIANA Effective January 1, 2025, Louisiana will raise its state sales tax rate from 4.45% to 5% and expand taxation to cover digital products and services including games, applications, audiovisual works, books, and other digital content. The change reflects a growing trend in the U.S. of adapting tax structures to the digital economy.

Latin America (LatAm)

PERU An 18% VAT on digital goods and services took effect on December 1, 2024. This timeline follows a delay from October 2024. However, a potential repeal of this tax is still under discussion, so developers should stay updated on its status. ECUADOR Ecuador has decided to maintain its increased VAT rate of 15% for 2025, reversing earlier discussions about reducing it to 13%. Developers selling digital products in the region should account for this rate in their pricing and compliance strategies.

Europe

SLOVAKIA Starting January 1, 2025, Slovakia will increase its standard VAT rate from 20% to 23%. This adjustment reflects the government’s fiscal strategy, and developers selling digital products in Slovakia should align their pricing strategies accordingly.

Africa

KENYA Kenya is making substantial changes to its digital tax framework. Effective January 1, 2025, the country will replace its Digital Service Tax (DST) of 1.5% with a new Significant Economic Presence (SEP) tax that has an effective rate of 3%. This shift underscores Kenya’s move toward a more comprehensive tax policy for digital services.

Southeast Asia (SEA)

INDONESIA Indonesia will increase its VAT rate from 11% to 12%, effective January 1, 2025. With its large and growing digital consumer base, developers targeting Indonesia must ensure compliance with the updated VAT rate. THE PHILIPPINES The Philippines will introduce a 12% VAT on digital services. Although the law was enacted in October 2024, procedural requirements are still being finalized, with enforcement expected by mid-2025. Developers should monitor developments to prepare for VAT withholding requirements.

Preparing for 2025

Understanding and adapting to each region’s tax changes is critical for ensuring seamless access to global audiences, optimizing pricing strategies, and building trust with your players. With the constant changes in compliance and regulations worldwide, having the right partner by your side can make all the difference. As your Merchant of Record, Xsolla goes beyond tax compliance — we streamline your sales processes, safeguard your operations, and help you expand into new markets with confidence. Additionally, our Xsolla Tax Management is designed to handle the nuances of tax compliance, ensuring your sales processes are streamlined and secure. Want to dive deeper into how Xsolla can help you stay ahead of tax changes? Set up a Publisher Account or schedule a meeting with our team of experts to prepare your business for 2025.