RR No. 3-2025: Prescribing policies and guidelines for the implementation of Republic Act No. 12023 entitled “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.

Summary

RR No. 3-2025 prescribes policies and guidelines to implement RA No. 12023, which imposes Value-Added Tax on digital services.

Key points

1. VAT on digital services. VAT of twelve percent (12%) applies to the gross sales of a Digital Service Provider (DSP) from sale or exchange of services in the Philippines, which includes supplying digital services. Services of a nonresident DSP count as rendered in the Philippines if consumed there, meaning the buyer is located in the Philippines.
2. Proving consumption. Payment, residence, access and other information may show where a digital service is used. If the information conflicts, the DSP obtains at least two pieces of non-conflicting evidence.
3. Registration. Resident DSPs register under Section 236 of the Tax Code. Nonresident DSPs register through the VAT on Digital Services (VDS) Portal and need no local representative, but may appoint a resident third-party service provider and must notify the BIR in writing within thirty (30) calendar days from appointment. Nonresident DSPs register or update within sixty (60) days from effectivity of the Regulations and are subject to VAT after 120 days.
4. Filing and payment. In business-to-business transactions, the business buyer, including government, withholds and remits 12% VAT within ten (10) days after the end of the month of withholding. In business-to-consumer transactions, a nonresident VAT-registered DSP files and pays through the pay-only regime in the VDS Portal within twenty-five (25) days after each taxable quarter. An e-marketplace is also liable for VAT on its nonresident sellers’ sales if it controls key aspects of the supply.
5. Input tax and invoices. Nonresident VAT-registered DSPs cannot claim creditable input tax. Their invoices may be electronic and need not be registered with the BIR, and must be in English or include an English translation with the date, reference number, buyer identification, description, and total amount including VAT.
6. Exemptions and enforcement. Exempt digital transactions include educational services by accredited institutions, online subscription services sold to DepEd, CHED, TESDA and recognized institutions, and services of banks and non-bank financial intermediaries, including BSP-registered Virtual Asset Service Providers. The CIR may issue a Closure or Take Down Order, including blocking of digital services through the DICT and NTC, against DSPs that fail to register or comply.

Who is affected

• Resident and nonresident digital service providers
• Business buyers of digital services, including government
• E-marketplaces
• Virtual Asset Service Providers

Deadlines and effectivity

• Registration within sixty (60) days from effectivity of the Regulations
• VAT applies after 120 days from effectivity
• B2B remittance within ten (10) days after the end of the month of withholding
• B2C payment within twenty-five (25) days after each taxable quarter
• Notice of third-party service provider within thirty (30) calendar days from appointment

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.