Philippines Jun 2025 12% VAT on digital services update

Jun 2025 BIR not to require fiscal rep for non-resident digital service B2C providers & platforms

In October 2024, the President, Ferdinand Marcos Jr., signed into law Senate Bill 2528 a measure imposing the 12% value-added tax (VAT) on nonresident digital service providers. The earliest launch date will be June 2025.

The Philippines Bureau of Internal Revenue (BIR) has confirmed that it will not require non-resident providers of digital services or digital platforms to apportion local tax agents for VAT representation. However, they may appoint a resident third-party service provider (an individual or entity, e.g., law firm, accounting firm, consultancy firm) for purposes of receiving notices, record keeping, filing of tax returns, and other reporting obligations. Daft regulations also outline the BIR’s power to issue closure or takedown orders against DSPs that fail to register or comply with the tax rules.

1st July 2025 earliest practice start of phased implementation

Collections will commence in 2025 – more details to follow. The introduction will be as follows:

• Nov 24 to Jan 25 to develop and publish the implementing rules and regulations from the Bureau of Internal Revenue (BIR);
• Feb to May 2025 transition for BIR to implant the rules and regulations; then
• 1st June 2025 (TBC) launch.

Foreign providers are liable for assessing, collecting, and remitting the value added tax. Online marketplaces or e-market platforms are also liable to remit the value added tax on the transactions of non resident sellers that go through their platforms under certain conditions.

Taxable services include: online search engine; online market place or e-market place; cloud services; online streaming and download media; and advertising.

A Philippines 1% Withholding Tax on platforms has recently been implemented.

The Department of Finance believes it will raise P102 billion in revenue from 2025 to 2029 in taxes for the government. It will level the playing field for local providers who are already subject to the existing 12% standard VAT rate.

VAT is now levied on online advertisement services, digital services and the supply of other electronic services. B2B transactions are not be liable to VAT; instead the reverse charge mechanism should be applied.

The Act includes a VAT annual sales registration threshold of PHP 3million (approx. €51,400 or $59,500). The Act mandates the Bureau of Internal Revenue (BIR) to establish a simplified automated registration system. But nonresident digital service providers will not be allowed to claim creditable input tax.

VAT Calc’s global VAT and GST on digital services tracker to see which other countries have introduced indirect taxes on electronic services to consumers.

What digital services liable to Philippines VAT?

The Act defines digital services as “any service delivered or subscribed over the internet or other electronic network which cannot be obtained without the use of information technology.” The law goes further:

• The supply of advertising space and other services for the purpose of online advertisement
• The supply of digital services in exchange of a regular subscription fee
• The supply of electronic or online services that can be delivered through an IT infrastructure such as the internet

This would likely include income from

• Software licensing
• Database services
• Online telecoms services
• E-learning (except from public educators as exempted)
• Streaming and download media
• Mobile apps
• E-books and newspapers
• SaaS and cloud-based software
• Hosting and other internet services
• Online advertising
• Membership to dating memberships
• Online gaming
• Search engine services

Asia Pacific VAT on digital services