Philippines: Philippines Imposes Value-Added Tax (VAT) on Digital Services

As enacted by Republic Act. No. 12023, the Bureau of Internal Revenue (BIR) issued Revenue Regulation No. 003-2025 dated January 17, 2025 detailing provisions on the application of value- added tax (VAT) on digital services when used or consumed in the Philippines.

Digital Services” refers to any services 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, but not limited to: online search engine; online marketplace or e-marketplace; cloud service; online media and advertising; online platform; or digital goods. Digital Services also include cloud and IT infrastructure.

Also outlined in the regulation are the obligations on the digital providers (DSPs) with regard to registration, filing of tax returns and payment and remittance of VAT and invoicing requirements. A non-resident DSP is required to register for VAT in the Philippines if its gross sales for the year exceeds Php3million) or if its gross sales are expected to exceeds the threshold in the next 12 months.

The Commissioner of Internal Revenue (CIT) and his duly authorized representative, upon verification that any DSP fails to (a) register it business with BIR; and (b) failure to comply with the provision of the regulations, has the authority to issue a Closure or Take Down Order to close the business operation of such covered persons engage in business in accordance with applicable rules and regulation.

Reference/ Citation‍

Official Gazette of the Republic of the Philippines

https://www.officialgazette.gov.ph/2024/10/02/republic-act-no-12023/

Bureau of Internal Revenue

https://bir-cdn.bir.gov.ph/BIR/pdf/RR%20No.%203-2025.pdf 

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