Key tax reforms that shaped 2025

As Heraclitus, the Greek philosopher, aptly observed, “There is nothing permanent except change.”

- MARGRETH P. VASQUEZ

Whether in life or in our professional pursuits, we encounter change almost daily, and we adapt and overcome each one.The year 2025, in particular, witnessed substantial and transformative developments in the field of taxation. As we start 2026, it is timely and fitting to look back on the significant changes implemented in Philippine tax laws over the past year.

VAT ON DIGITAL SERVICES

With the full implementation of VAT on Digital Services under RA No. 12023, which took effect on Oct. 18, 2024, digital service providers (DSPs), including nonresident entities offering digital platforms, goods, and services in the Philippines, are now required to register with the Bureau of Internal Revenue (BIR) and remit VAT on their taxable transactions. This measure reflects the government's broader initiative to modernize the tax landscape by addressing the rapid expansion of the digital economy and reinforcing compliance among both local and foreign service providers. In effect, it promotes a more level playing field between traditional businesses operating in the Philippines and digital enterprises serving the same market. Notably, transactions of nonresident DSPs became subject to VAT beginning June 2, 2025, following the implementation schedule set under the rules.

Accordingly, foreign digital service providers, even those without any physical presence in the Philippines, are now subject to VAT and must comply with the corresponding registration, invoicing, and reporting requirements imposed by the BIR.

THE CREATE MORE ACT

Signed into law in November 2024, Republic Act (RA) No. 12066, or the CREATE MORE Act, became fully operational in 2025. This legislation was introduced to improve the investment climate by enhancing incentives aimed at stimulating economic activity, supporting business growth, generating employment opportunities, and attracting greater foreign investment.