Updated Guidance on VAT for Digital Services

NRDSP VAT Filing Requirement:
Non-resident digital service providers (NRDSPs) must file VAT returns even if their transactions are exclusively B2B. All NRDSPs must report transactions via VAT Form 2550-DS, regardless of whether the Philippine buyer withholds VAT.

E-Marketplace Transactions:
Non-resident e-marketplaces follow general VAT rules. B2B transactions require Philippine entities to withhold VAT, while B2C transactions don’t. The e-marketplace is liable for VAT only if it controls payment; otherwise, the VAT falls on the digital service provider.

Invoicing Standards for NRDSPs:
There’s no standard format for NRDSP invoices, but mandatory details like TIN, transaction date, amount, and VAT indication must appear. If VAT isn’t broken out, a footnote must indicate buyer’s responsibility to account for and remit VAT.

No VAT Refunds for Reclassified Transactions:
If a B2C transaction is later found to be B2B and VAT was paid twice, the NRDSP cannot claim a refund. However, the excess VAT may be carried over to future quarters through an amended VAT return.

Verifying Buyer Status:
NRDSPs must verify whether a transaction is B2B or B2C by collecting buyer’s TIN, using website questionnaires or tick boxes, or requesting business registration documents like the BIR Certificate of Registration (COR) for classification accuracy.

Cost-Sharing Arrangements:
Digital services received under multinational cost-sharing arrangements are VAT-liable. If the Philippine entity consumes the service, it must withhold VAT as a B2B transaction—even if payment goes through a foreign affiliate. Clarification is needed on the liable NRDSP.

Advance Payments and Peso Bank Requirement:
VAT applies to services rendered from 02 June 2025 onward, even if pre-paid. NRDSPs must remit VAT on post-June services. Since payments must be in PHP, clarification is needed on whether NRDSPs can open peso bank accounts locally.