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We deliver value-added audit and assurance services to our clients, helping them manage their fiscal responsibilities with prudence and foresight.

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At P&A Grant Thornton, we provide annual and short period financial statement audit services that go beyond the normal expectations of our clients. We believe strongly that our best work comes from combining outstanding technical expertise, knowledge and ability with exceptional client-focused service.
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We help you identify the opportunities and pitfalls that can significantly affect your...

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For clients that want to do business in the Philippines, we assist in determining the appropriate and tax-efficient operating business or investment vehicle and structure to address the objectives of the investor, as well as related incorporation issues.
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Our advocacy work focuses on clarifying the interpretation of laws and regulations, suggesting measures to increasingly ease tax compliance, and protecting taxpayer’s rights.

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We believe there is an optimal solution to every business challenge. Using our Firm's breadth and depth of specialized expertise, we work with you to find...

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We provide solid, first-rate support for your key accounting and administrative activities, such as outsourced accounting, payroll, and accounting-related...

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Accounting services
At P&A Grant Thornton, we handle accounting services for several companies from a wide range of industries. Our approach is highly flexible. You may opt to outsource all your accounting functions, or pass on to us choice activities.
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We offer Staff Augmentation services where our staff, under the direction and supervision of the company’s officers, perform accounting and accounting-related work.
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Payroll processing services are provided by P&A Grant Thornton Outsourcing Inc. More and more companies are beginning to realize the benefits of outsourcing their noncore activities, and the first to be outsourced is usually the payroll function. Payroll is easy to carve out from the rest of the business since it is usually independent of the other activities or functions within the Accounting Department.

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Consumer products

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Energy markets worldwide are undergoing major changes. P&A Grant Thornton can help you understand and navigate ensuing challenges and make sure you have the...

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Optimism is slowly returning to the global economy, but the financial services industry needs to regain the trust of public and private bodies. To truly go...

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Not for profit

Across the globe, not for profit organisations are increasingly expected to deliver more, while at the same time facing cuts in government funding and...

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Outsourcing

The outsourcing industry is one of the fastest growing sectors in the Philippines. Growth in the industry is at an annual average rate of 20%. The industry is...

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Retail industry

With operational cost, price competition, and currency volatility, pressure on profits continues to pile on retailers. Advancements in e-commerce are also...

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Tax Notes

Implementing Rules and Regulations on VAT on Digital Services

10 Feb 20254 min read

Contents

The Bureau of Internal Revenue (BIR) has issued Revenue Regulations (RR) No. 03-2025 to set the implementing rules and regulations (IRR) for Republic Act (RA) No. 12023, otherwise known as value added tax (VAT) on digital services.

Covered Transactions

Transactions covered are:

digital services, which refers to services provided via the internet or other electronic network with the use of information technology and where the supply of the service is essentially automated; and
digital goods, which are intangible goods delivered or transferred in digital form.

Excluded from the coverage are:

educational services such as online courses, online seminars, and online trainings rendered by recognized institutions, rendered by private educational institutions, duly accredited by the Department of Education (DepEd), the Commission on Higher Education (CHED), the Technical Education and Skills Development Authority (TESDA), and those rendered by government educational institutions;
online subscription-based services to DepEd, CHED, TESDA and educational institutions recognized by said government agencies; and
services provided by banks and non-bank financial intermediaries through digital platforms.

DSP refers to an individual or juridical, resident or non-resident supplier of digital services to a buyer who uses the digital services in the Philippines. DSPs with no physical presence in the Philippines are referred to as nonresident DSPs.

Tax Treatment

A 12% VAT shall be imposed on the gross sales derived by DSPs from the supply or delivery of digital services consumed in the Philippines. To ascertain whether a digital service is consumed in the Philippines, data such as payment information (e.g., credit card or bank account details), buyer’s residence information (e.g., home or billing address), access details (e.g., mobile country code or IP address), and other references (e.g., business agreement, predominant place of consumption, language of digital content) may be considered, in order to reliably determine the buyer’s location.

In case the transaction is in foreign currency, DSPs shall convert the amounts into Philippine Pesos using the daily or monthly spot rate based on the Banker’s Association of the Philippines (BAP) published rates. If this is impractical, other available sources such as BSP, Bloomberg, and Reuters exchange rates may be used. The chosen basis of conversion is irrevocable and must be consistently applied in tax reporting for at least one taxable year.

If rates other than those published by BAP are used, DSPs must provide a justification in the VDS Portal. Additionally, DSPs must specify the source of the exchange rates for BIR verification.

Penalty on Non-Compliance

Failure of DSPs to comply with the IRR shall prompt the Commissioner of Internal Revenue or his duly authorized representative to issue an order to close the business operations, block the DSPs’ digital services in the Philippines, and sanction administrative or criminal liabilities under the Run After Tax Evaders (RATE) Program.

Effectivity

The IRR for VAT on digital services is effective February 1, 2025, or 15 days from January 17, 2025, which is the date of publication. DSPs shall register or update their registrations with the BIR by April 1, 2025, or 60 days from the effectivity of the IRR for VAT on digital service. Furthermore, DSPs shall immediately be subject to VAT on digital services on June 1, 2025, or after 120 days from the effectivity of the IRR for VAT on digital services.

Please be guided accordingly.

Source:

P&A Grant Thornton

Certified Public Accountants

P&A Grant Thornton is the Philippine member firm of Grant Thornton International Ltd.

As published in SunStar Cebu, dated 08 February 2025