Philippines applies 12% VAT to digital services, including those supplied by non-resident providers (RA 12023)

What changed in detail

Republic Act No. 12023 amends the National Internal Revenue Code (NIRC) of 1997 to bring digital services expressly into VAT. The signed enrolled copy shows it was approved on 2 October 2024.

• Section 105 now names persons who render digital services among those liable to VAT. Digital services delivered by non-resident digital service providers (NRDSPs) are considered performed in the Philippines if they are consumed there.
• Section 108(A) levies 12% VAT on gross sales from the sale or exchange of services, “including digital services”.
• NRDSPs must register for VAT and remit it on their sales to consumers. Under new Section 108-B, a VAT-registered NRDSP that is an online marketplace remits the VAT on non-resident sellers’ sales through its platform. Resident online marketplaces withhold and remit the VAT under Revenue Regulations No. 3-2025, section 6(A), not under the Act itself.
• Under Section 14, NRDSPs become subject to VAT 120 days after the implementing regulations take effect.
• Under Section 18, the Act takes effect 15 days after publication. Publication in the Official Gazette on 3 October 2024 is reported, which gives 18 October 2024. Neither date is printed in the enrolled text.

What it means

The law is in force, and the VAT has been collected since 2025. Revenue Regulations No. 3-2025 set the clock: NRDSPs had to register through the VAT on Digital Services portal within 60 days of the regulations’ effectivity, and became liable after 120 days, reported as 1 June 2025.

The BIR has since clarified the scope. In June 2026, RMC No. 59-2026 said non-resident providers must register and file even where their supplies are VAT-exempt. It also said that in cross-border cost-sharing arrangements, the Philippine user withholds the VAT under the reverse charge.