[Ask The Tax Whiz] Clarification on the implementation of VAT on Digital Services

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The Philippine Tax Whiz elaborated the recently issued Revenue Memorandum Circular 047-2025, which clarifies the provisions of RR 3-2025 and addresses certain issues on the implementation of VAT on Digital Services

1. I am a non-resident digital service provider (NRDSP) classified as an e-marketplace, am I still required to register with the BIR? If yes, what are the requirements and registration process? 

Yes. All non-resident digital service providers or NRDSPs are required to register with the Bureau of Internal Revenue (BIR) through the VAT on Digital Services (VDS) Portal on or before June 1, 2025. While the portal is not yet available, NRDSPs may register through the Online Registration and Updated System (ORUS) or manually at BIR Revenue District Office (RDO) 39 – South Quezon City. A BIR Certificate of Registration (COR)/BIR Form 2303 will be issued upon successful registration, reflecting the NRDSP’s Taxpayer Identification Number (TIN) and other registration details.

During registration, NRDSPs must select Value-Added Tax (VAT) as their tax type and will be liable for 12% VAT on their gross sales derived from the supply and delivery of digital services consumed or used in the Philippines. 

Information Required for Registration via ORUS:

1. Business name, including trade name
2. Name and TIN (if applicable) of the authorized representative, if any
3. Registered foreign address
4. Contact details (e.g., phone number, email)

In addition, they must submit any official registration document issued by a government regulatory body in the country of incorporation (e.g., Articles of Incorporation or Certificate of Tax Residency) that shows the NRDSP’s name.

Failure to register for VAT will result in penalties under Section 13 of Revenue Regulations 3-2025 and may lead to the suspension of business operations under Section 12, if warranted.

2. I am a non-resident digital service provider with both B2B and B2C transactions, what BIR forms do I need to file? Will the filing process be different if I am an NRDSP acting as an e-marketplace?

For Business-to-Business (B2B) transactions, NRDSPs are required to file using Quarterly VAT Return (2550-DS) through the VDS Portal and the Philippine consumer/buyer shall be liable for withholding and remitting the 12% VAT due on its purchase using BIR Form 1600-VT. This is also applicable for NRDSPs acting as e-marketplace with B2B transactions.

For business-to-consumer (B2C) transactions, NRDSPs are mandated to file the Quarterly VAT Return (Form 2550-DS) and remit the applicable VAT through the VDS Portal, based on their gross sales from digital services consumed or used within the Philippines, while the individual customer shall pay the amount inclusive of VAT. This is also applicable for NRDSPs acting as e-marketplace with B2C transactions.

For DSPs acting as resident e-marketplace, the DSP is required to file and pay the 12% quarterly VAT to the BIR.

3. Are non-resident digital service providers entitled to claiming input VAT and/or claiming refund in case of erroneously paid VAT? 

No, non-resident digital service providers (NRDSPs) are not permitted to claim input tax credits or apply for a refund of VAT that was erroneously paid. However, if VAT was erroneously paid, the NRDSP may amend the previously filed BIR Form 2550-DS to reflect the excess payment, which can then be carried over to the succeeding quarter(s). – Rappler.com