VAT Registration Woes (Again) for NRDSPs

In this day and age, we are all consuming digital content—from the music we listen to, the movies and television shows we watch, and the e-books and other reading materials we pore over.

- ARIK AARON ABU

However, over the past few months, we have received notices from our favorite streaming platforms and digital services providers that they will be increasing their fees to apply the 12 percent value-added tax (VAT) on the digital services that they provide. Indeed, we are now feeling the effects of Republic Act 12023, which amended Section 108 of our Tax Code so that the phrase "sale of services" shall expressly include the supply or delivery of digital services by DSPs in the Philippines.

As a quick refresher, the law and implementing regulations define 'digital services' as any service that is supplied over the internet or other electronic network with the use of information technology and where the supply of the services is essentially automated. Digital services include online search engines, online marketplaces or e-marketplaces, cloud services, online media and advertising, online platforms, or digital goods. Moreover, the VAT on such digital services shall be imposed regardless of whether the corresponding digital service provider is a resident or a nonresident supplier as long as the digital services will be consumed in the Philippines.