Philippines Imposes 12% VAT on Foreign Digital Service Providers
- VAT Liability for Nonresident DSPs: Effective June 1, 2025, Republic Act No. 12023 amends the Philippine Tax Code to impose a 12% VAT on digital services provided by nonresident digital service providers (DSPs) consumed in the Philippines.
- Broad Definition of Digital Services: The law defines digital services broadly, encompassing any service supplied over the internet or electronic networks, including online search engines, marketplaces, cloud services, online media and advertising, platforms, and digital goods that utilize information technology and are essentially automated.
- Implementation Guidelines: The Philippine Bureau of Internal Revenue has issued implementation provisions regarding the new VAT requirements for nonresident DSPs, which can be accessed for further details.
A copy of the implementation provisions from the Philippine Bureau of Internal Revenue can be found here.
Source Sovos
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- New VAT Regulations: Starting June 2025, nonresident digital service providers in the Philippines must register for VAT, charging 12% on B2C transactions, while B2B transactions will follow a reverse charge mechanism.
- Definition and Scope: Digital services covered under the new regulations include online advertising, cloud services, streaming, and digital content sales, while other services are exempt. Online marketplaces are considered suppliers responsible for VAT on B2C sales.
- Compliance Requirements: Providers must ensure compliance with registration, invoicing, and reporting standards to avoid penalties, including potential suspension of operations. Businesses are advised to prepare early for these changes to maintain market access and mitigate risks.
Source Fonoa
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Other sources
Philippines Issues VAT Guidelines for Cross-Border Digital Services
- The Philippines’ BIR issued guidance requiring nonresident digital service providers (NRDSPs) to register for VAT by June 1, 2025, through the new VDS Portal or interim ORUS system.
- VAT rules apply to teleconsultation platforms, covering online appointments and virtual consultations that provide real-time medical services, such as diagnosis, treatment, and support via video or audio calls.
- NRDSPs selling via e-marketplaces are not subject to VAT if payments go directly to their accounts; marketplace operators are not liable if they don’t control payment flows.
- For B2B services, Philippine customers must withhold and remit the 12% VAT; NRDSPs must still register and file returns, even if serving exclusively business clients.
Source: regfollower.com
