Tax Alert No. 33 [Revenue Memorandum Circular (RMC) No. 059-2026 dated 2 June 2026]

The Bureau of Internal Revenue (BIR), on 2 June 2026, issued Revenue Memorandum Circular (RMC) No. 059‑2026 to further clarify RR No. 3-2025 and address certain issues pertaining to the implementation of the Value-Added Tax (VAT) on Digital Service.

Set out below is a summary of RMC’s key clarifications:

BIR Registration Requirement for Nonresident Digital Service Provider (NRDSP).

• NRDSP that supplies digital services to Philippine consumers is still required to register with the BIR and file VAT returns, even if their services are VAT-exempt. If their sales are VAT-exempt, these shall be indicated as such in the VAT Returns.

VAT Registration, Filing, and Payment in Cross-border Cost-Sharing Arrangements.

• In a cross-border cost-sharing arrangements involving (i) foreign digital service provider, (ii) a foreign affiliate contracts for and/or pays for such digital services under the cost-sharing arrangement, and (iii) a Philippine subsidiary that ultimately consumes the digital service, such transaction is subject to VAT under RR No 3-2025 even if the payment is through a cost-sharing arrangement. The Philippine subsidiary will be responsible for withholding and remitting the VAT as a Business-to-Business (B2B) transaction.
• The foreign supplier is generally considered the NRDSP. However, if it contracts only with a foreign affiliate and has no direct transactions with the Philippine subsidiary, it is not required to register with the BIR, unless it also supplies VATable digital services to other Philippine consumers. In such cases, the foreign affiliate may be deemed the NRDSP and required to register with the BIR if it controls key aspects of the digital service supply, such as:
  • Sets, directly or indirectly, any of the terms and conditions under which the supply of digital services is made (i.e. price, payment terms, delivery conditions); or
  • Is involved, directly or indirectly, in the ordering or delivery of digital services, that is, having influence over the conditions of delivery, transmission of approval to supplier, and provision of order fulfillment services.
• The Philippine subsidiary, under the reverse charge mechanism, shall be liable for filing the required VAT return and withholding and remitting the 12% VAT due on the cost of digital service charged to it, as may be evidenced by the billing or invoice issued by the foreign affiliate.

12% VAT on Fees paid to NRDSPs.

• Subscription, commission, or service fees paid for digital services supplied by an NRDSP are subject to VAT. Accordingly, the Philippine entity subscribing to the NRDSP platform must withhold and remit the VAT to the BIR under the reverse charge mechanism for B2B transactions, using BIR Form 1600-VT within ten (10) days after the end of the month of withholding.
• The NRDSP online booking platforms are liable for 12% VAT only on digital services, specifically subscription and commission/service fees from listings and bookings, not on the full amount received. These fees qualify as digital services under RR No. 3-2025, as they are earned through the use of the internet for facilitating the bookings, which are essentially automated.

Liability to withhold and remit VAT if the invoice issued for subscription did not include the 12% VAT.

• The buyer of digital service is liable to withhold the VAT and shall remit the same to BIR under the reverse charge mechanism. As the VAT on Digital Service Provider (DSP) became effective only on 2 June 2025, the 12% VAT on the remaining months of subscription period should be computed and remitted in accordance with Section 6 (B) of RR No. 3-2025.

12% VAT on Digital Service Regardless of Service Provider and Audience Location.

• The digital service is subject to 12% VAT in the Philippines. Under Republic Act No 12023 and RR No. 3-2025, the 12% VAT applies to digital services supplied to a consumer located in the Philippines, regardless of whether the service provider is a resident or nonresident. If the user, procurer and payor of the online advertisement is a Philippine-based entity, the same is subject to VAT regardless of the location of the audience.
• Under the reverse charge mechanism, the entity engaged in business in the Philippines, is required to withhold and remit the 12% VAT to the BIR as a B2B transaction.
• The service fee earned by a Philippine-based entity and consumed by clients located abroad is subject to VAT at zero rate, provided that the same are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP).

12% VAT on Real-Time Transfer Service Fees of Nonresident Facilitators

• The nonresident corporation is subject to 12% VAT imposed on digital service if it collects service fees to a client located in the Philippines for the use of its services. The 12% VAT shall be based on the amount of service fee collected.

E-Marketplace VAT Compliance on Pre-Collected B2C Transactions

• The e-marketplace may still be considered a digital service provider for VAT compliance in the Philippines under RA No. 12023 and RR No. 3-2025, even if it does not directly receive payments, as it collects VAT in advance. In such cases, it is required to file BIR Form 2550-DS and remit the 12% VAT on covered B2C transactions.

VAT Applicability on NRDSP Digital Services Despite Certificate of Entitlement to Treaty Benefits (COE) under Double Taxation Agreement (DTA).

• Notwithstanding a COE under DTA, NDRSP is still subject to VAT on digital services. Tax benefits, either preferential tax rate or tax exemption, under a tax treaty cover only Income Tax. However, the digital service may qualify for VAT zero-rating or exemption under Sections 108, 109, and 295 of the National Internal Revenue Code of 1997, as amended.

You may access the full version of RMC No. 059-2026 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: www.pwc.com/ph/en/about-us/contact-us.html