Clarifications on VAT on digital services

Οn May 8, the BIR issued Revenue Memorandum Circular (RMC) No. 47-2025 clarifying some issues regarding the value-added tax (VAT) on digital services imposed by Republic Act No. 12023. Earlier, the BIR issued Revenue Regulations No. 03-2025, which left taxpayers with a lot of questions on how the new tax will be imposed, collected, reported, and paid. Thankfully, the BIR issued the RMC to answer some questions raised by the taxpayers. Here are some clarifications made by the RMC.

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Under the law, for B2B transactions with non-resident digital services providers (NRDSPs), the Philippine business entity is required to withhold and remit the tax to the BIR. It gave the impression that if the NRDSP had purely B2B transactions, it had no reporting requirement.

The RMC, however, clarified that even if the NRDSP transaction is purely B2B, the NRDSP is still required to file tax returns and report their B2B transactions to the BIR. Hence, all NRDSPs, regardless of the type of transaction, are required to file the VAT return.

The RMC did not specifically state the frequency and deadline for filing the return. However, in the illustrations, the RMC indicated that NRDSP are to file the Quarterly VAT Form 2550-DS through the VDS Portal. This suggests that the general deadline for filing the quarterly VAT return applies, which is not later than the 25^th day following the close of each taxable quarter.

TRANSACTIONS WITH NON-RESIDENT E-MARKETPLACE

The RMC clarified that transactions with nonresident e-marketplaces will follow the general rule. Hence, B2B transactions are also subject to withholding VAT. The Philippine registered business will remit the withheld VAT using BIR Form 1600-VT on the 10^th day of the following month.

For B2C transactions, no withholding is required. The non-resident e-marketplace will receive the contract price with the 12% VAT. The VAT will be reported and remitted to the BIR using VAT Form 2550-DS through the VDS Portal.