BIR clarifies VAT payment of non-resident digital service providers...
The Bureau of Internal Revenue (BIR) has put forth clarifications to address certain issues regarding the imposition of the value-added tax (VAT) on digital services. Among others, the agency says all non-resident digital service providers (NRDSPs) are required to register on or before June 1 regardless of the type of transaction.
Revenue Memorandum Circular (RMC) No. 47-2025 expounds on the provisions of Revenue Regulations (RR) No. 3-2025, which prescribes the policies and guidelines for the implementation of the VAT on digital services.
RMC 47-2025 provides clarifications and further information on the provisions of the RR related to registration, reportorial requirements and payment/remittance, specific tax treatments, and invoicing requirements and input taxes.
A non-resident digital service provider refers to an entity with no physical presence in the Philippines that supplies digital services to a buyer who uses digital services subject to VAT in the country.
Issued on May 7, 2025, RMC 47-2025 states that all NRDSPs are required to register with the BIR for VAT payment regardless of the nature of their transactions, whether these be business-to-business (B2B) or business-to-consumer (B2C) transactions, or both.
Registration should be done on or before June 1, 2025 through the VAT on Digital Services (VDS) Portal. Until the VDS Portal becomes available, registration may be done through the Online Registration and Update System (ORUS) at www.bir.gov.ph/eServices. Manual registration may likewise be done with BIR Revenue District Office No. 39–South Quezon City.
The following are required for the registration of NRDSPs:
• For registration via ORUS, the name of business entity, including trade name; name of authorized representative and tax identification number or TIN of local authorized representative; registered foreign address; and contact information of the NRDSP
• Any official registration document issued by an authorized government regulatory body in the country where the NRDSP was incorporated or organized that includes the name of the NRDSP
A BIR Certificate of Registration (COR)/BIR Form No. 2303 containing the TIN and other registration details shall be issued to the NRDSP, to be used in filing the VAT returns, and remittance of VAT, if any, to the BIR.
NRDSPs will be registered and liable for payment of the 12% VAT on their gross sales from the supply and delivery of digital services consumed or used in the Philippines. During registration, the NRDSP should select VAT as its tax type.
An NRDSP may or may not appoint a resident third-party service provider as its local representative. Appointment of a resident third-party service provider will not classify the NRDSP as a resident foreign corporation doing business in the Philippines.
Failure to register may subject the NRDSP to criminal, civil, and administrative liabilities, and suspension of business operations, warns the BIR.
On reportorial requirements and payment/remittance, meanwhile, RMC 47-2025 states that NRDSPs are still required to file tax returns.
In B2B transactions, the Philippine consumer or buyer will be liable for electronically filing the required tax return and withholding and remitting the 12% VAT (reverse charge mechanism).
In B2C transactions, the NRDSPs will electronically file the VAT return and pay the 12% VAT through the VDS Portal.
However, the online/e-marketplace operator will not be liable to pay the VAT if the payment for the digital service is made directly to the account of the NRDSP. This is because the payment is not within the control of the online/e-marketplace operator.
The memorandum circular also tackles taxpayer concerns about specific tax treatments. The accreditation/recognition from the Department of Education, Commission on Higher Education, or Technical Education and Skills Authority is required to avail of VAT exemption for the sale of online subscription-based services to educational institutions.
Digital services rendered by NRDSPs to registered business entities are eligible for VAT exemption if the services are directly attributable to the registered business activity/project of the investment promotion agency-registered entity, classified as registered export enterprise, high-value domestic market enterprise, or domestic market enterprise; or to the export activity of the export-oriented enterprise.
Moreover, when the online/e-marketplace operator charges a service fee to the Philippine consumer or buyer, the service fee shall be subject to VAT.
As for invoicing requirements and input taxes, there is no prescribed form for the invoice of NRDSP as long as the following mandatory pieces of information are present: date of the transaction, transaction reference number, identification of the consumer (including TIN for B2B), brief description of the transaction, and total amount with the indication that such amount includes VAT.
If the NRDSP is unable to include the VAT amount in the invoice, it must include a footnote/annotation that the Philippine consumer or buyer is responsible for accounting and remitting the 12% VAT.
NRDSPs will not be allowed to claim creditable input tax. On the other hand, VAT-registered Philippine business consumers or buyers should use the filed withholding VAT return/BIR Form No. 1600-VT as proof of claimed input tax.
Finally, all digital services will be subject to VAT starting June 2, 2025. In case of advance payments of the contract price, the liability to pay and remit the VAT will be with the NRDSP since the buyer no longer has control over the payment.
Comments
Post a Comment