Last April 25, 2025, the Bureau of Internal Revenue (BIR) revised the implementing rules and regulations of the law imposing Value-Added Tax (VAT) on Digital Services through Revenue Regulation (RR) 14-2025. To address certain issues in the implementation, the BIR subsequently issued Revenue Memorandum Circular (RMC) 47-2025 last May 8, 2025. This clarifies provisions involving Non-Resident Digital Service Providers (NRDSPs).
Effectivity and its Implications
All NRDSPs are required to register regardless of the nature of their transactions, whether business-to-business (B2B) and/or business-to-consumer (B2C). Registration should be done on or before June 1, 2025, through the VAT on Digital Services (VDS) Portal. However, prior to the availability of the VDS Portal, registration may be done online through the Online Registration and Update System (ORUS) or manually at the BIR Revenue District Office No. 39 – South Quezon City. A BIR Certificate of Registration (COR) or BIR Form 2303, containing the assigned TIN and other registration details, shall be issued to the NRDSP.
NRDSPs will be subject to/liable for VAT on digital services starting June 2, 2025. They shall use BIR Form 2550-DS in filing and payment. However, for B2B transactions, the domestic business consumer shall use BIR Form No. 1600-VT in the filing and remittance of the 12 percent VAT.
Advanced Payments on Existing Contracts
For transactions with advanced payments and with existing contracts covering Jan. 1 to Dec. 31, 2025, the reckoning date of the VAT liability shall be June 2, 2025. However, since the Philippine buyer has already paid in full, the NRDSP is still liable for the VAT on the portion of the services rendered from June 2 onwards since the buyer no longer has control over the payment.
Erroneous Premise in Filing
In cases where the NRDSP has paid the VAT, understanding that the transaction was B2C, but subsequently discovered that the Philippine consumer is engaged in business (should have been B2B), the NRDSP cannot file for refund of the erroneously paid VAT. However, they may amend the previously filed BIR Form 2550-DS to reflect the overpayment which may be carried over to the following quarters.
Online or E-marketplaces
In cases where and NRDSP generates sales through an e-market place but the payment for the digital services is made directly to the account of the NRDSP, the DSP serving as the e-marketplace is not liable to pay the VAT. However, the service fee charged by the marketplace to the Philippine consumer, if any, will be subject to VAT.
The same is applicable in cases where digital services are used to purchase physical goods through an e-marketplace where a separate fee is charged by the online marketplace for the use of the digital service.
Shared Costs
In cases where the contracting party of the NRDSP is outside the Philippines and the foreign entity shares the costs with its Philippines subsidiary, the shared cost billed to the Philippine subsidiary for the digital service is subject to VAT. Effectively, the Philippine subsidiary is liable to withhold and remit the VAT due thereon as a B2B transaction.
Please be guided accordingly.
Source:
P&A Grant Thornton
Certified Public Accountants
P&A Grant Thornton is the Philippine member firm of Grant Thornton International Ltd.
As published in SunStar Cebu, dated 21 May 2025
