- On October 2, 2024, the Philippine Congress passed Republic Act No. 12023, extending VAT obligations to foreign digital service providers for both B2B and B2C transactions, with the VAT rate set at 12% and certain exemptions for educational and financial services.
- Foreign digital service providers must comply with VAT if their services are automated, consumed in the Philippines, and their gross sales exceed 3 million Philippine pesos (EUR 47,900) over the last 12 months or are expected to exceed this threshold in the next 12 months. B2B transactions use a reverse charge mechanism, while B2C transactions require the non-resident provider to remit VAT.
- Affected businesses must register for VAT, issue invoices, and comply with the new law starting 120 days after the implementing regulations are released. Non-compliance could result in suspension of operations in the Philippines, highlighting the government’s effort to ensure fair taxation in the digital economy.
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