BIR IMPOSES 12% VAT DIGITAL SERVICES

BAGUIO CITY

The Bureau of Internal (BIR) recently issued Revenue Regulations 003-2025 with regards to the policies and
guidelines for the imposition of 12 percent Value-Added Tax (VAT) on foreign digital services providers (DSP’s) to
consumers and businesses. The regulation covers digital platforms and marketplaces. The following digital services under new rules include: Online search engine; Online marketplace or a e-marketplace; Cloud service; Online Media and advertising; Online platform; or Digital goods.

Services that is supplied over the internet or other electronic network with the the use of information technology and where the supply of the service is automated. However, the following supplies are exempted: Educational services, including online courses, online seminars, and online trainings, rendered by private educational institutions duly accredited by Department of Education (DedEd), Commission om Higher Education (CHED), Technical Education And Skills Development Authority (TESDA), and those rendered by government educational institutions.

And Sale of online subscription-based services to DedEd, CHED,TESDA and educational institutions recognized by said government agencies. Furthermore, services of bank, non-bank financial intermediaries performing quasi-banking functions and other non-bank financial intermediaries, including those rendered through different digital platforms. The regulations cover the following: As to person and subject matter Persons (individual or juridical, resident or nonresident) who, in the course of trade and business, supply, or deliver digital services in the Philippines.

As to the transaction involved- (1) Business-to-business (B2B) transactions— Supply or delivery of digital services to natural or juridical persons engaged in business located in the Philippines, and the Government of the Philippines or any of its political subdivisions, Instrumentalities, or agencies, including government owned and controlled corporations (GOCC’s).(2) Business-to-consumer (B2C) transactions— Supply or delivery of digital services to
persons not engaged in business located in the Philippines. And as to tax compliance, Digital service providers (DSP’s) are categorized either as: (1) DSP’s directly delivering  or supplying digital services to a buyer in the Philippines;and/ or; (2) DSP’s acting as an online marketplace or e-marketplace on the transactions of nonresident
sellers or suppliers that go through its platform.

Primo Agatep/ABN

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