Tax Alert No. 12 [Revenue Memorandum Circular No. 047-2025]

Revenue Memorandum Circular No. 047-2025: Clarifying the Provisions of Revenue Regulations No. 3-2025, Implementing 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 

Please be informed that Revenue Memorandum Circular (RMC) No. 047-2025 has been issued to clarify the provisions of RR No. 3-2025, implementing the National Internal Revenue Code of 1997 (Tax Code), as amended by RA No. 12023, to address certain issues pertaining to the implementation of the Value-Added Tax (VAT) on Digital Services. We provide below the salient points: 

Registration Requirements: 

• All Non-Resident Digital Services (NRDSPs) are required to register or update their registration with the BIR regardless of the nature of their transactions, whether Business to Business (B2B), Business-to-Customer (B2C), or both. 
• NRDSPs are still required to file tax returns with the BIR to report their B2B transactions. 
• NRDSPs must register with the BIR through the VAT on Digital Services (VDS) Portal once available. Until the Portal is rolled out, NRDSPs or their appointed resident third-party service providers should register via the Online Registration and Update System (ORUS). Registration must be completed within 120 days of the effectivity of RR No. 3-2025, or by 1 June 2025. 
• NDRSPs can register with the BIR without a local representative but may appoint a resident third-party service provider for purposes of registration, filing of tax return and payment of taxes, receiving notices and other reporting obligations. Those with a local representative can register manually at BIR Revenue District Office No. 39 – South Quezon City. 
• For VAT purposes, the appointment of a resident third-party service provider shall not classify the NRDSP as a foreign corporation doing business in the Philippines. 
• NRDSPs must register for and pay a 12% VAT on their gross sales from the supply and delivery of digital services consumed or used in the Philippines, selecting VAT as their tax type. Failure to register will result in penalties under Section 13 of RR No. 3-2025 and potential business suspension under Section 12. 

B2B VAT Responsibility for Digital Services: 

•  For B2B supply of digital services made by a VAT-registered NRDSP, the Philippine business buyer/consumer is responsible for assessing and remitting the 12% VAT to the BIR.  The VAT amount must be clearly stated on the invoice. If the NRDSP cannot include the VAT amount, the invoice must contain a footnote/annotation indicating that the Philippine Business consumer/buyer is responsible for accounting and remitting the 12% VAT.  

Claim for refund: 

• Non-resident VAT-registered DSPs shall not be allowed to claim creditable input tax. 
• If an NRDSP discovers, after paying VAT, that the Philippine consumer/buyer is engaged in business and has already paid the withholding VAT to the BIR, the NRDSPs cannot file for refund of the erroneously paid VAT. However, the NRDSPs may amend the previously filed BIR Form No. 2550-DS to reflect the overpayment, which may be carried-over to the succeeding quarter/s. 

VAT liability and exemption: 

• When an NRDSP generates sales through an e-marketplace and receives payment directly, the e-market place is not liable to pay the VAT on the digital service.  However, any service fee the e-marketplace charges to consumers/buyers in the Philippines is subject to VAT. 
• Digital services provided by NRDSPs are tax-exempt if directly linked to the registered business activity or export activity of an IPA-registered entity, classified under RA No. 12066 as a registered export enterprise, high-value domestic market enterprise, or domestic market enterprise under transitory provisions.  
• Starting 02 June 2025, NRDSPs any digital services provided are subject to 12% VAT. If a full-year contract was paid in advance without VAT, the NRDSP is still liable for collecting and remitting VAT on the portion of services provided from 02 June 2025, onward.  
• If digital services are consumed by a Philippine subsidiary, VAT applies, and the subsidiary must withhold and remit the VAT to the BIR for B2B transactions.

You may access the full version of this Regulation through the BIR website.

For any inquiry or request for assistance, please feel free to contact anyone from our Tax Services group. You may also reach us through this link