[Ask the Tax Whiz] The expansion of VAT obligations to foreign digital service providers (opens original article in a new tab)

The Bureau of Internal Revenue clarifies that foreign digital service providers are subject to Philippine VAT on services consumed locally, with specific registration and tax remittance requirements for different transaction types and no exemption through tax treaties.

• The BIR clarifies that non-resident digital service providers (NRDSPs) are generally subject to 12% VAT on services consumed in the Philippines
• NRDSPs must register with the BIR and file VAT returns even if their services are VAT-exempt
• Tax treaties cannot be used to exempt NRDSPs from VAT obligations as VAT is a consumption tax separate from income tax treaties
• Local businesses must remit VAT on digital services from NRDSPs under B2B transactions through withholding/reverse charge mechanism
• The VAT on digital services law aims to create a level playing field between local and foreign providers