In October 2024, the President signed Senate Bill 2528, which introduces a 12% value-added tax (VAT) on non-resident digital service providers (DSPs) in the Philippines, effective by June 2025. The Bureau of Internal Revenue (BIR) stated that non-resident DSPs will not need local tax representatives for VAT compliance but can appoint a local third-party service provider for administrative tasks. The phased implementation will start on July 1, 2025, with collections beginning later that year. Taxable services include online search engines, cloud services, and streaming media.
Philippines Implements 12% VAT on Non-Resident Digital Service Providers Starting June 2025
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Author: Ivana Picajkić
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Fiscal subject related
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Content accuracy validation date:
02.12.2024
Content accuracy validation time:
08:08h
In October 2024, the President enacted Senate Bill 2528, which imposes a 12% value-added tax (VAT) on non-resident digital service providers (DSPs) in the Philippines, set to take effect by June 2025. The Bureau of Internal Revenue (BIR) has announced that these non-resident DSPs will not need to appoint local tax representatives for VAT compliance. However, they can designate a local third-party service provider—such as a law or accounting firm—to handle notices, record-keeping, and tax return filings.
The phased implementation of this tax will begin on July 1, 2025, with collections starting later that year. The timeline for the rollout includes developing and publishing regulations from November 2024 to January 2025, transitioning from February to May 2025, and launching on June 1, 2025 (subject to confirmation). Non-resident providers will be responsible for assessing, collecting, and remitting the VAT on their services. Additionally, online marketplaces must remit VAT for transactions involving non-resident sellers under specific conditions.
Taxable digital services encompass a range of offerings such as online search engines, cloud services, streaming media, and online advertising. A recent 1% withholding tax on platforms has also been introduced. The Department of Finance anticipates this measure will generate approximately ₱102 billion (approximately 1,727,910,600.00 USD) in revenue from 2025 to 2029, aiming to create a more equitable environment for local providers already subject to the VAT.
The law establishes a VAT registration threshold of ₱3 million (around €51,400 or $59,500) and mandates the BIR to implement a simplified registration system for non-resident DSPs. However, these providers will not be able to claim input tax credits.
Digital services are defined as those delivered over the Internet or electronic networks that rely on information technology. This includes various services such as software licensing, e-learning (with exceptions), mobile applications, and online gaming.
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