Philippines 1 Jun 2025 12% VAT digital services

1 June 2025 VAT on non-resident digital service B2C providers & platforms

The Bureau of Internal Revenue (BIR) on 16 January 2025 has executed implementing regulations (Revenue Regulations 003-2025) for the imposition of 12% VAT on foreign digital services providers (DSPs) to consumers and businesses. This includes digital platforms and marketplaces. This follows the October signing of Senate Bill 2528 .The introduction will be as follows:

• 16 Jan 2025 publish the implementing rules and regulations from the Bureau of Internal Revenue (BIR);
• 1 Feb BIR to open registration portal
• 2 April must be registered with BIR; then
• 1 Jun VAT obligations comes into effect; all eligible non-residents should be VAT registered with BIR’s portal.

What are digital services under the Philippines new rules

Any service that is supplied over the internet or other electronic network with the use of information technology and where the supply of the service is essentially automated. It shall include:

• Online search engine;
• Online marketplace or e-marketplace;
• Cloud service;
• Online media and advertising;
• Online platform; or
• Digital goods.

However, the following supplies are exempted:

• Educational services, including online courses, online seminars, and online trainings, rendered by
  private educational institutions duly accredited by the Department of Education (DepEd), Commission on Higher Education (CHED), Technical Education And Skills Development Authority (TESDA), and those rendered by government educational institutions.
• Sale of online subscription-based services to DepEd, CHED, TESDA and educational institutions recognized by said government agencies.
• Services of bank, non-bank financial intermediaries performing quasi-banking functions and other non-bank financial intermediaries, including those rendered through different digital platforms.

B2B reverse charge sales

Where eligible services are supplied to VAT-registered Philippine resident businesses, then the reverse charge should be applied. The business customer withholds the VAT and reports it instead to BIR.

VAT Compliance obligations

BIR is to provide a simplified VAT registration portal for DSP’s. They will not require a fiscal representative. However, they may appoint a resident third-party service provider (an individual or entity, e.g., law firm, accounting firm, consultancy firm) for purposes of receiving notices, record keeping, filing of tax returns, and other reporting obligations. Daft regulations also outline the BIR’s power to issue closure or takedown orders against DSPs that fail to register or comply with the tax rules.

A digital sales or commercial invoice shall be issued for every sale, barter, or exchange of digital services made by a VAT-registered nonresident digital service provider. The following information should be in invoices:

• date of transaction, transaction reference number,
• identification of the consumer,
• brief description of the transaction; and
• total amount with the indication that such amount includes VAT.

The Act includes a VAT annual sales registration threshold of PHP 3million (approx. €51,400 or $59,500). The Act mandates the Bureau of Internal Revenue (BIR) to establish a simplified automated registration system. But nonresident digital service providers will not be allowed to claim creditable input tax.

Foreign providers are liable for assessing, collecting, and remitting the value added tax. Online marketplaces or e-market platforms are also liable to remit the value added tax on the transactions of non resident sellers that go through their platforms under certain conditions.

A Philippines 1% Withholding Tax on platforms has recently been implemented.

The Department of Finance believes it will raise P102 billion in revenue from 2025 to 2029 in taxes for the government. It will level the playing field for local providers who are already subject to the existing 12% standard VAT rate.

VAT Calc’s global VAT and GST on digital services tracker to see which other countries have introduced indirect taxes on electronic services to consumers.

Asia Pacific VAT on digital services