REVENUE MEMORANDUM CIRCULAR NO. 47-2025 issued on May 8, 2025 clarifies the provisions of Revenue Regulations (RR) No. 3-2025, implementing Republic Act (RA) No. 12023 (An Act Amending Sections 105, 108, 109, 110, 113, 114, 115, 128, 236 and 288 and Adding New Sections 108-A and 108-B of the National Internal Revenue Code of 1997, as Amended) imposing the Value-Added Tax (VAT) on Digital Services.

All Non-Resident Digital Service Providers (NRDSPs) are required to register or update their registration with the BIR pursuant to Section 5 of RR No. 3-2025. This requirement applies regardless of the nature of their transactions, whether Business-to-Business (B2B), Business-to-Consumer (B2C), or both.

NRDSPs with purely B2B transactions are still required to file tax returns with the BIR. This will enable the BIR to collect information on the total digital services transactions in the Philippines by NRDSPs which are needed for accurate monitoring and analysis of the digital economy, ensuring compliance with tax regulations, and facilitating effective policy-making and revenue collection.

NRDSPs shall register with the BIR through the VAT on Digital Services (VDS) Portal once it is available. Prior to the VDS Portal roll-out, the NRDSPs or their appointed resident third-party service providers shall register through the Online Registration and Update System (ORUS) available in the BIR official website (https://www.bir.gov.ph/eServices).

The NRDSPs shall register with the BIR within one hundred twenty (120) days from the effectivity of RR No. 3-2025, or on or before June 1, 2025. The following information shall be provided by the NRDSP during registration via ORUS:

a. Name of business entity, including trade name;
b. Name of the authorized representative, and Taxpayer Identification Number (TIN) in case of local authorized representative, responsible for tax administration, if any;
c. Registered foreign address; and
d. Contact information of the NRDSP (e.g., contact number, email address).

Any official registration document issued by an authorized government regulatory body (e.g., Securities and Exchange Commission, tax authority) in the country where the NRDSP was incorporated or organized (e.g., Articles of Incorporation, Certificate of Tax Residency) that includes the name of the NRDSP shall be sufficient for the registration.

NRDSPs do not need a local representative in the Philippines to register with the BIR. However, an NRDSP may appoint a resident third-party service provider (an individual or entity, such as a law firm or accounting firm) for purposes of registration, filing of tax return and payment of taxes, receiving notices, record keeping, and other reporting obligations. For VAT purposes, the appointment of a resident third-party service provider shall not classify the NRDSP as a resident foreign corporation doing business in the Philippines.

NRDSPs with local representative may manually register with BIR Revenue District Office No. 39 – South Quezon City.

A BIR Certificate of Registration (COR)/BIR Form No. 2303 containing the assigned TIN and other registration details shall be issued to the NRDSP as proof of its registration with the BIR. It shall be used in the filing of VAT returns, and remittance of VAT, if any, to the BIR.

NRDSPs will be registered and liable for payment of the 12% VAT on their gross sales from the supply and delivery of digital services consumed or used in the Philippines. During registration, the NRDSP shall select VAT as its tax type.

An NRDSP which fails to register for VAT shall be imposed with applicable penalties under Section 13 of RR No. 3-2025, and suspension of its business operations under Section 12 of the same Regulations, if warranted.

In B2B transactions where the NRDSPs provide digital services to Philippine consumer/buyer engaged in business, including the Government or any of its political subdivisions, instrumentalities or agencies, including GOCCs, the Philippine consumer/buyer will account for the VAT using the reverse charge mechanism.

As such, the Philippine consumer/buyer shall be liable for: (i) electronically filing the required remittance return; and (ii) withholding and remitting the twelve percent (12%) VAT due on its purchase.

In a B2C transaction where the consumer/buyer is not engaged in business, the NRDSP shall be directly liable for: (i) electronically filing the VAT return; and (ii) paying the VAT due thereon through the simplified pay-only regime in the VDS Portal based on its gross sales relating to the sale of Digital Services consumed/used in the Philippines.

For a DSP acting as an online marketplace or e-marketplace on the transactions of resident and non-resident sellers or suppliers that go through its platform, the following mechanisms shall be observed, provided that it controls the key aspects of the supply and performs any of the following:
• it sets directly or indirectly any of the terms and conditions under which the supply of digital services is made; or
• it is involved in the ordering or delivery of digital services whether directly or indirectly.

There is no prescribed form of an invoice for NRDSPs as long as the mandatory information under the law is present, which are as follows:
• Date of the transaction;
• Transaction Reference Number;
• Identification of the consumer (including the TIN for B2B);
• Brief description of the transaction; and
• The total amount with the indication that such amount includes the VAT.

For B2B supply of digital services made by a VAT-registered NRDSP, the obligation for assessing and remitting the 12% VAT shall be the responsibility of the Philippine business consumer/buyer. The VAT amount must be clearly stated on the invoice. However, if the NRDSP is unable to include the VAT amount on the invoice, it must include a footnote/annotation on the invoice indicating that the Philippine business consumer/buyer is responsible for accounting and remitting the 12% VAT due on the transaction to the BIR.

The NRDSP shall be immediately subject to VAT after one hundred twenty (120) days from the effectivity of RR No. 3-2025, or starting June 2, 2025.

For B2B and B2C transactions, the NRDSP shall use BIR Form No. 2550-DS in filing the VAT return (for B2B and B2C transactions) and/or payment/remittance of the VAT due thereon (for B2C transactions), which shall be available and generated in the VDS Portal. In B2B transactions, the business consumer/buyer, whether VAT or non-VAT registered, shall use BIR Form No. 1600-VT in filing and remittance of the withheld VAT from the NRDSP.

Non-resident VAT-registered DSPs shall not be allowed to claim creditable input tax as provided under Section 7 (B) of RR No. 3-2025.

The NRDSP cannot file for refund of the erroneously paid VAT if after the payment of VAT, the NRDSP later discovered that its Philippine consumer/buyer is engaged in business and the corresponding withholding VAT was already paid to the BIR by the latter. However, the NRDSP may amend the previously filed BIR Form No. 2550-DS to reflect the overpayment which may be carried-over to the succeeding quarter/s.

The e-marketplace is not liable to pay the VAT when an NRDSP generates sales through an e-marketplace but the payment for the digital service is made directly to the account of the NRDSP because the payment for the digital service is made directly to the account of the NRDSP and thus, not within the control of the emarketplace. However, the service fee charged by the marketplace to the consumer/buyer located in the Philippines, if any, shall be subject to VAT.

Although RR No. 3-2025 excludes the sale, supply or delivery of physical goods – since these are already subject to customs, duties, taxes, and other charges by the Bureau of Customs– the separate service fee for using or availing of the online platform/marketplace, which is classified as digital service under RA No. 12023, remains subject to VAT when said service fee has been charged to a consumer/buyer located in the Philippines.

Only digital services, as defined under RA No. 12023, shall be subject to VAT under the said law. Under RA No. 12023, digital services refer to any service that is supplied over the internet or other electronic network with the use of information technology and where the supply of the service is essentially automated. It shall include, but not limited to:
• Online search engine;
• Online marketplace or e-marketplace;
• Cloud service;
• Online media and advertising;
• Online platform; or
• Digital goods.

If a resident VAT-registered company operates as a teleconsultation platform where appointments are booked through a website, applications, or e-marketplace, and virtual meetings via video or call conferences allow doctors and patients to engage in real-time discussions, providing and receiving essential medical assessments, diagnoses, treatments, and ongoing support, the services being rendered by Company ABC is subject to VAT.

Online medical consultations through a digital platform (i.e., website, applications, e-marketplace)” is subject to VAT since it falls within the definition of Digital Services under Section 3 (A) under RR No. 3-2025. Said medical consultations cannot be booked, completed and/or delivered without the use of information technology. As an online platform, it shall be subject to VAT provided that the conditions under Q15 and A15 of the Circular are complied with.

For the sale of online subscription-based services to educational institutions accredited by the Department of Education (DepEd), Commission on Higher Education (CHED), and Technical Education and Skills Development Authority (TESDA), there is no need to secure a Certificate of Tax Exemption from the BIR to support the claim for VAT-Exemption. It shall only present to the DSP the accreditation/recognition from DepEd, CHED and TESDA, as the case may be, in order to avail of the VAT exemption.

If the digital services rendered by NRDSPs are directly attributable (1) to the registered business activity/project of the IPA-registered entity, classified as registered export enterprise, high-value domestic market enterprise or domestic market enterprise under transitory provision of RA No. 12066 or (2) to the export activity of the Export Oriented Enterprises (EOE), they are eligible for VAT exemption.

An NRDSP can verify if a buyer is engaged in business for VAT purposes under RA No. 12023 and RR No. 3-2025 by obtaining the buyer’s TIN and by providing a questionnaire or a tick box in their websites/platforms for customers to confirm that they are engaged in business in the Philippines. The NRDSP may also request other business registration documents, such as the BIR COR, if the NRDSP’s system is capable of obtaining/receiving this document. This helps ensure that the correct VAT treatment is applied, reducing the risk of non-compliance.

VAT-registered Philippine business customers/buyers shall use the filed withholding VAT return/BIR Form No. 1600-VT as proof to support their claim for input VAT on purchases of digital services from NRDSPs in accordance with Section 7(C) of RR No. 3-2025.

The VAT liability for NRDSPs begins on June 2, 2025. Any digital services provided from June 2, 2025 onwards are subject to the 12% VAT. If the Philippine buyer already paid for the full-year contract in advance without including the 12% VAT, the NRDSP is still liable for the VAT on the portion of services provided from June 2 onwards. The liability to pay and remit the VAT in this scenario shall lie with the NRDSP since the buyer no longer has control over the payment.

RA No. 12023 imposes a 12% VAT on digital services consumed in the Philippines, whether provided by resident or non-resident digital service providers. The law clarifies that VAT is applicable to digital services, regardless of the provider’s physical presence, as long as it is consumed in the Philippines. Therefore, if the shared cost is for digital services consumed by the Philippine subsidiary, it would be subject to VAT. In this case, the Philippine subsidiary shall be responsible in withholding and remitting the VAT due thereon to the BIR as a B2B transaction.