RMC No. 47-2025 — Clarifying the provisions of RR No. 3-2025, implementing RA No. 12023 titled "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 on Digital Services

Bringing In Revenues for Nation-Building BUREAU OF INTERNAL REVENUE REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE National Office Building Quezon City PILIPINAS BAGOnG

MAY g 7 2025

REVENUE MEMORANDUM CIRCULAR NO.0 4 7- 2025

SUBJECT Implementing Republic Act No. 12023 entitled "An Act Amending Clarifying the Provisions of Revenue Regulations No. 3-2025, Sections 105, 108, 109, 110, 113, 114, 115, 128, 236 and 288 and on Digital Services Adding New Sections 108-A and 108-B of the National Internal Revenue Code of 1997, as Amended," Imposing the Value-Added Tax

TO All Internal Revenue Officials, Employees and Others Concerned

This Revenue Memorandum Circular is issued to clarify the provisions of Revenue Regulations (RR) No. 3-2025, implementing the National Internal Revenue Code of 1997 (Tax Code), as amended by Republic Act (RA) No. 12023, and to address certain issues pertaining to the implementation of the Value-Added Tax (VAT) on Digital Services.

Q1: Non-Resident Digital Service Providers (NRDSPs) are required to register with

NRDSPs whose sales from the Philippines only constitute Business-to-Business the Bureau of Internal Revenue (BIR) pursuant to Section 5 of RR No. 3-2025. Are

(B2B) still required to register with the BIR for VAT purposes?

A1: Yes. All NRDSPs are required to register or update their registration with the BIR under

Section 5 of RR No. 3-2025. This requirement applies regardless of the nature of their transactions, whether B2B, Business-to-Consumer (B2C), or both.

Q2: If required to register, are NRDSPs with purely B2B transactions still required to

file tax returns with the BIR?

A2: Yes. The NRDSPs are still required to file tax returns with the BIR to report their B2B

YwbMiRU 3 E MAY 08 2025 E REASS RFANATERMANT IR National Office Bldg., Senator Miriam Defensor-Santiago Avenue, Diliman, Quezon City transactions in the Philippines by NRDSPs which are needed for accurate monitoring transactions. This will enable the BIR to collect information on the total digital services and analysis of the digital economy, ensuring compliance with tax regulations, and facilitating effective policy-making and revenue collection. Trunkline: 8981-7000 ; 8929-7676 Website: www.bir.gov.ph

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Q3: How will NRDSPs register with the BIR?

A3: The 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

(ORUS), service providers shall register through the Online Registration and Update System whichis available in the BIR official website (https://www.bir.gov.ph/eServices).

Q4: UntiI when shall NRDSPs register with the BIR?

A4: 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.

Q5: What are the information required for the registration of NRDSPs?

A5: The following information shall be provided by the NRDSP during registration via

ORUS:

1. Name of business entity, including trade name; 2. Name of the authorized representative, and Taxpayer Identification Number

(TIN) in case of local authorized representative, responsible for tax administration, if any: 3. Registered foreign address; and 4. Contact information of the NRDSP (e.g., Contact number, email address)

Q6: What are the documentary requirements for the registration of NRDSPs?

A6: Any official registration document issued by an authorized government regulatory body

(e.g., Securities and Exchange Commission, tax authority) in the country where 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.

Q7: Do NRDSPs need to have a local representative in the Philippines to register with

the BIR?

A7: No. NRDSPs do not need a local representative in the Philippines to register with the individual or entity, such as a law firm or accounting firm) for purposes of registration, BIR. However, an NRDSP may appoint a resident third-party service provider (an

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filing of tax return and payment of taxes, receiving notices, record keeping, and other reporting obligations.

Q8. In case of NRDSPs with local representative that opt to manually register with the

BIR, where do they register?

A8. NRDSPs with local representative may manually register with BIR Revenue District Office No. 39 -- South Quezon City.

Q9: Will the appointment of a resident third-party service provider classify the

NRDSP as a resident foreign corporation doing business in the Philippines?

A9: No. For VAT purposes, the appointment of a resident third-party service provider shall

Philippines. not classify the NRDSP as a resident foreign corporation doing business in the

O10: What document shall be issued to an NRDSP as proof of its registration with the

BIR?

A10: A BIR Certificate of Registration (COR)/BIR Form No. 2303 containing the assigned

the filing of VAT returns, and remittance of VAT, if any, to the BIR. TIN and other registration details shall be issued to the NRDSP, which shall be used in

Q11:What tax type will the NRDSPs be registered and Iiable for?

A11. NRDSPs will be registered and liable for payment of the 12% VAT on their gross sales

During registration, the NRDSP shall select VAT as its tax type. from the supply and delivery of digital services consumed or used in the Philippines.

Q12:Will there be any penalty imposed in case an NRDSP fails to register with the BIR for VAT?

A12: Yes. 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.

Q13:What is the VAT treatment for cross-border B2B transactions?

A13: In B2B transactions where the NRDSPs provide digital services to Philippine subdivisions, instrumentalities or agencies, including GOCCs, the Philippine consumer/buyer will account for the VAT using the reverse charge mechanism. consumer/buyer engaged in business, including the Government or any of its political

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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, as shown below:

Illustration: B2B transaction

Outside Philippines VAT Registered Non-resident DSP (1) Supply of Digital Services with contract price of $112 (2) Payment of $100 Philippines Registered Business

Withholding VAT Payment of 12% using BIR Fom {3} Filing and

1600-V1

(4} Fiting of Quarterly 12% VAT Form 2550-DS through the VDS Portal BIR

Q14: What is the VAT treatment for cross-border B2C transactions?

A14: 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.

Illustration: B2C transaction

Outside Philippines VAT Registered Non-resident DSP (1) Suppfy of Digitat Service with contract price of $12 inclusive of VAT (2) Payment ot $112 Philippines Individua! customer

(3) Filing and Payrnent of 12% Quarterly VAT Form 2550-DS through the VDS Portai BIR

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Q15: What is the VAT treatment for digital services that go through an online marketplace or e-marketplace?

A15: 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.

Ilustration 1: DSP acting as Non-resident online marketplace or e-marketplace for a B2B transaction

Non-Resident Resident BI

Supplier

erty VAT Form 2550-DS

(1} Supply of (4) Filing and

Quarte Digitat Remittance of 12% Withholding Tax

throuah the VDS Porta

Services

{5} Fiting ol 12%

using the 8{R Fom 1600-V

e-marketplace Non-Resident contract price of $112 inclusive of VAT (2) Supply of Digitat Services with {3) Payment of S100 Registered Business

Illustration 2: DSP acting as Non-resident online marketplace or e-marketplace

for a B2C transaction

Non-Resident Resident Supplier BIR

ment of 12% Quarlerly VAT Form

Digital Services (1} Supply of 2550-DS through the VDS Portai

{4} Filing and Payr

ADMIN HE MAY 0 8 2025 es THEA TAINTEBMA PEN e-marketplace Non-Resident contract price of S112 inclusive of VAT {2} Supply of Digital Services wit} (3) Payment of $112 consumer/buyer Individual

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Illustration 3: DSP acting as Resident online marketplace or e-marketplace for

B2B and B2C transactions

Outside Philippines Philippines

Non-Resident Supplier Digital Services {t} Supply of DSP acting as e-marketplace {4) Filing and Payment of 12% Quarerty VAT BIR

ptice of 5112 inclusive Services with contrac. {2} Supply of Digital Of VAT (3) Payment of 5112

Consumer/ Buyer

Q16:What is the invoicing requirement for NRDSPs?

A16: 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:

(1) Date of the transaction; () Transaction Reference Number; (3) Identification of the consumer (including the TIN for B2B): (4) Brief description of the transaction; and ( The total amount with the indication that such amount includes the VAT.

Sample illustration of an Invoice:

Non-Resident DSP Corporation VAT Reg TIN 123-456-789-00000

invoice

Date: xx-xx-202x Date of Transaction

Invoice No. ABC12345 Transaction Reference Number

TN: SOLD TO: ADDRESS: QUEZON CITY, PHILIPPINES ABC CORPORATION 987-654-321-00000 Identification ot the Consumer MAY 0 8 2025 L C RA FMeENO Online Advertising Descr $ 100.00 Amount Brief Description of the transaction

w3. a S Total Amount Due: VAT: $ 112.00 12.00 Total Amot

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, as shown in the illustration below:

VAT Reg TIN 123-456-789-00000 Non-Resident DSP Corporation

Invoice

Date: xx-xx-202x Date of Transaction

Invoice No. ABC12345 Reference Number Transaction

SOLD TO: TIN ADdrESS: XYZ LOCAL CORPORATION QUEZON CItY, PHILIPPINES 987-654-321-00000 Identification of the Consumer

EDITING SOFTWARE Description E Amount $ 100.00 Briaf Description of the transaction

Total Amount Due: $ 100.00 Total Amount

NOTE: 12% VAT on the involce amount Is payable and shalt be remitted by the business consumer/buyer to the BIR FootnotelAnnotation that tho Phlllppino business 12% VAT consumer buyer shall be responstble to remit the

Q17:When wilI the NRDSPs be subject to VAT under RA No. 12023?

A17:The NRDSP shall be immediately subject to VAT after one hundred twenty (120) days

from the effectivity of the RR No. 3-2025, or starting June 2, 2025

Q18:What BIR Form shall the NRDSP and its B2B consumer/buyer use in filing and payment/remittance of the VAT?

A18:For B2B and B2C transactions, the NRDSP shall use BIR Form No. 2550-DS in filing due thereon (for B2C transactions), which shall be available and generated in the VDS the VAT return (for B2B and B2C transactions) and/or payment/remittance of the VAT Portal. )ROS MANAGEMENT DIVISION YeF F INTERNAL REVENUE

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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.

Q19:Can NRDSPs claim input tax?

A19: No. As provided under Section 7 (B) of RR No. 3-2025, non-resident VAT-registered

DSPs shall not be allowed to claim creditable input tax.

Q20: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 aIready paid to the BIR by the latter, can the NRDSP appIy for refund of erroneously paid VAT?

A20: No. The NRDSP cannot file for refund of the erroneously paid VAT. 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.

Q21: 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, is the e- marketplace liable for the VAT?

A21: No. The e-marketplace is not liable to pay the VAT because the payment for the digital

service is made directly to the account of the NRDSP and thus, not within the control

consumer/buyer located in the Philippines, if any, shall be subject to VAT. of the e-marketplace. However, the service fee charged by the marketplace to the

Q22: When digital services are utilized for the purchase of physical goods through an for the use or availment of the digital service, should VAT be imposed on the online marketplace and a separate service fee is charged by the online marketplace Separate fee for the digital service?

A22:Yes. 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 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. Bureau of Customs - the separate service fee for using or availing of the online

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Q23:Does RA No. 12023 apply to services other than digital services?

A23: 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:

(1) Online search engine; (4) Online media and advertising; (5) Online platform; or (6) Digital goods. (2) Online marketplace or e-marketplace: (3) Cloud service: ( BY: 104 MAY 08 2025 ADMiN UNIT-E AU DF DNU MaNagemeNt DIVISIOn Terna IME: EAT REVENUE 3; 00

Q24: Company ABC is a resident VAT-registered company which operates a

teleconsultation platform where appointments are booked through a website, applications, or e-marketplace. 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. Are the services being rendered by Company ABC subject to VAT?

A24: Yes. This falls within the definition of Digital Services under Section 3 (A) under RR No. 3-2025 particularly under "online consultations through a digital platform (i.e., booked, completed and/or delivered without the use of information technology. website, applications, e-marketplace)" since the medical consultation cannot be

As an online platform, it shall be subject to VAT provided that the conditions under Q15 and A15 above are complied with.

O25: Is there a need to secure a Certificate of Tax Exemption from the BIR to support

the claim for VAT-Exemption on 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)?

A25: No. For the sale of online subscription-based services to educational institutions, 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.

Q26: Are digital services rendered by NRDSPs to Registered Business Enterprises

(RBEs) with Certification issued by Investment Promotion Agencies (IPAs) or to the export oriented enterprises (EOEs) covered under Sections 106 and 108 of the Tax Code, where such digital services provided are directly attributable to the

registered activity or project of the RBEs or to the export activities of the EOEs under RA No. 12066, subject to 12% VAT under RA No. 12023?

A26: No. 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 EOE, they are eligible for VAT exemption

Q27:How can an NRDSP verify whether or not a buyer is engaged in business for VAT purposes under RA No. 12023 and RR No. 3-2025?

A27: An NRDSP can verify if a buyer is engaged in business 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.

Q28: How can VAT-registered Philippine business customers substantiate their input

taxes for digital services purchased from NRDSPs?

A28: 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.

Q29:The reckoning point of the VAT liability of the NRDSPs will start on June 2, 2025.

There are existing contracts covering January 1 to December 31, 2025. The Philippine buyer already paid in advance the total price for the full year contract, that is, from January to December, 2025, without the 12% VAT. Would the NRDSP stilI be liabIe for the payment of VAT for the period June 2 to December 31.20253

A29: The VAT liability for NRDSPs begins on June 2, 2025. This means that any digital

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 with the NRDSP since the buyer no longer has control over the payment. services provided from June 2, 2025 onwards are subject to the 12% VAT. If the from June 2 onwards. The liability to pay and remit the VAT in this scenario shall lie

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Q30: In cases where the contracting party of the NRDSP is outside the Philippines (e.g., in the US) and the US entity shares costs with different markets (including

subsidiaries in the Philippines), is the shared cost charged against the Philippine subsidiary subject to VAT under RR No. 3-2025?

A30: RA No. 12023 imposes a 12% VAT on digital services consumed in the Philippines,

that VAT is applicable to digital services, regardless of the provider's physical presence. whether provided by resident or non-resident digital service providers. The law clarifies 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.

give this Circular as wide a publicity as possible. All revenue officers and employees are hereby enjoined to be guided accordingly and

This Circular takes effect immediately.

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