In reference to our Tax Notes article published on Feb. 4, 2025, titled “Implementing Rules and Regulations on VAT on Digital Services”, which discussed the imposition of a 12 percent Value-Added Tax (VAT) on gross sales derived by non-resident digital service providers (NRDSPs) from the supply or delivery of digital services consumed within the Philippines, please be advised of the following tax compliance requirements, pursuant to Revenue Memorandum Circular (RMC) 52-2025:
Entities responsible for filing and payment
* Business-to-Business (B2B) Transactions
For transactions involving buyers engaged in business or the Philippine government, including its agencies, instrumentalities and government-owned or -controlled corporations, the following rules shall apply:
* The NRDSP shall file the Bureau of Internal Revenue (BIR) Form 2550-DS with the BIR.
* The B2B buyer shall withhold the 12 percent VAT from the payment to the NRDSP and remit the VAT withheld using BIR Form 1600-VT.
* Business-to-Consumer (B2C) Transactions
For transactions with individuals in the Philippines who are not engaged in business, the following rules shall apply:
* The NRDSP shall file and pay the 12 percent VAT directly using BIR Form 2550-DS.
* The B2C buyer shall not be required to file or withhold VAT.
Computation of VAT for digital services
* Gross sales for the quarter refer to the total revenue generated by the NRDSPs from the sale of digital services within the Philippines, regardless of whether the transactions are classified as B2B or B2C.
* In B2B transactions, NRDSPs shall claim the VAT withheld by the B2B buyer as VAT credit or a deduction against their VAT payable, as reported in the BIR Form 2550-DS.
* Any excess VAT credits or overpayments shall be carried forward and applied to succeeding VAT filings by the NRDSPs.
Deadline and mode of filing and payment
* The BIR Form 2550-DS shall be filed and paid electronically via the BIR’s VAT on Digital Service (VDS) Portal within 25 days following the close of each taxable quarter.
* The BIR Form 2550-DS shall be filed by the NRDPs for every quarter in which their VAT registration remains active, regardless of whether there are VATable transactions during the period.
Penalties
* A surcharge of 25 percent shall be imposed for failure to file the tax return and/or pay the VAT due within the prescribed period. In cases involving fraudulent returns or willful neglect to file, a surcharge of 50 percent of the tax due or of the deficiency tax shall be imposed.
* An interest charge equivalent to double the legal interest rate for loans or forbearance of money as prescribed by the Bangko Sentral ng Pilipinas shall be imposed. The interest shall accrue from the due date of the VAT payment or remittance until the full amount is settled.
Please be guided accordingly.
Source:
P&A Grant Thornton
Certified Public Accountants