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REVENUE MEMORANDUM CIRCULAR (RMC) NO. 59-2026
This provides clarifications on key issues in the implementation of VAT on digital services under RA No. 12023 and RR No. 3-2025, specifically on the registration and reporting obligations of digital service providers and consumers.
| No. | Question | Answer |
| 1 | If a Nonresident Digital Service Provider (NRDSP) supplies or delivers digital services to Philippine consumers and such digital services qualify for VAT-exemption, is the NRDSP still required to register with the BIR? | Yes. NRDSPs providing VAT-exempt digital services to Philippine consumers must register with the BIR, file VAT returns, and report such sales as VAT-exempt. |
| 2 | 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 agreement. The Philippine subsidiary will be responsible for withholding and remitting the VAT as a Business-to-Business (B2B) transaction. a. Who between the foreign digital service provider or the foreign affiliate shall register as NRDSP? b. How will the parties comply with the filing and payment of VAT, as well as the invoicing thereof? | The foreign supplier is generally the NRDSP, but if it deals only with a foreign affiliate and not directly with the Philippine subsidiary, it need not register with the BIR unless it also supplies taxable digital services to other Philippine consumers. The foreign affiliate is deemed the NRDSP and must register if it controls key aspects of the digital service supply, such as setting terms and conditions or participating in ordering or delivery. Under B2B transaction, the Philippine subsidiary must file the WVAT return and withhold and remit the 12% VAT on the digital service cost under the reverse charge mechanism, based on the billing or invoice issued by the foreign affiliate. |
| 3 | RGA Corporation, a Philippine VAT-registered property management company, offers end-to-end short-term rental solutions for property owners across the Philippines. RGA Corporation subscribes to various NRDSP online booking platforms to facilitate reservations. These NRDSP platforms charge RGA Corporation a fixed listing or subscription fee for access and visibility, and additional commission fee/service fee for each successful booking. a. Is RGA Corporation liable to withhold 12% VAT on the subscription fees and commission fees/service fees paid to the NRDSP online booking platforms and remit the VAT to the BIR? b. Will the VAT liability of the NRDSP online booking platforms be attributed to the full amount of sales received? | RGA Corporation must withhold and remit 12% VAT on the subscription and commission/service fees paid to the NRDSP under the reverse charge mechanism using BIR Form No. 1600-VT. Please note, however, that the NRDSP is liable only for 12% VAT only on the subscription and commission/service fees earned, not on the full booking amount. |
| No. | Question | Answer |
4 | In December 2024, RBB Company paid for a one-year cloud subscription for the period covering December 2024 to November 2025. The invoice issued for the subscription did not include the twelve percent (12%) VAT. Is RBB Company still liable to withhold and remit the VAT despite the non-indication of VAT in the issued invoice? | Since the VAT on DSPs took effect on June 2, 2025, RBB Company must withhold and remit 12% VAT under the reverse charge mechanism only for June to November 2025. |
| 5 | MRA SG, a corporation organized and existing under the laws of Singapore, billed and issued an invoice to Multi-Media Agency, Inc., a Philippine-based corporation, for the online advertisements. Subsequently, Multi-Media Agency, Inc. charged and issued an invoice, without any mark-up, to a Malaysia-based client that is not registered in the Philippines. The target audience of the online advertisements is in Malaysia. a. Whether the digital services provided by MRA SG to Multi-Media Agency, Inc. are subject to 12% VAT? b. Who is liable to file and pay for the 12% VAT? c. Is the service fee earned by a Philippine-based multi-media company, for planning, buying, and managing advertising campaigns for the Malaysia-based client subject to the 12% VAT under RR No. 3-2025? | The digital service provided by MRA SG is subject to 12% VAT because it is supplied to a Philippine-based consumer, regardless of where the advertisement is viewed. Accordingly, Multi-Media Agency, Inc. must withhold and remit the 12% VAT to the BIR under the reverse charge mechanism. Please note that service fees earned by a Philippine-based company from a Malaysia-based client may be subject to 0% VAT if the services are consumed abroad and payment is made in acceptable foreign currency, in line with Bangko Sentral ng Pilipinas (BSP) regulations. |
| 6 | Is a nonresident corporation that facilitates real-time fund transfers between parties to a digital transaction, but does not operate an e-commerce platform, subject to 12% VAT on its service fees? | Yes. A nonresident corporation facilitating real-time fund transfers is subject to 12% VAT on digital service fees collected from Philippine clients. |
| 7 | Is an e-marketplace that pre-collects VAT on behalf of online sellers considered a digital service provider or e-marketplace for VAT purposes, and must it file BIR Form No. 2550-DS and remit 12% VAT on all B2C transactions facilitated through its digital interface even if it does not receive the payments directly? | Yes. An e-marketplace that pre-collects VAT is considered a digital service provider/e-marketplace for VAT purposes and must file BIR Form No. 2550-DS and remit 12% VAT on B2C transactions, even if it does not receive the actual payments directly. |
| No. | Question | Answer |
| 8 | Is the digital service supplied by ABC Corporation, a Singapore-based NRDSP with a Certificate of Entitlement to Treaty Benefits (COE), subject to VAT? | Yes. A COE under a tax treaty may apply only for income tax purposes and does not exempt ABC Corporation from VAT on digital services. However, its digital services may qualify for 0% VAT or VAT exemption under the Tax Code, as amended, not under the tax treaty. |
For any assistance needed with compliance of VAT on Digital Services, feel free to email us at VAT NRDSP Inquiry [email protected].