The Philippines Bureau of Internal Revenue(BIR) issued a Circular on June 2, 2026, to strengthen the enforcement of the VAT rules designated for providers of digital services. The Circular further serves as a guideline for already registered providers of digital services, as well as the overseas providers that are going to register for VAT.
Based on the queries that BIR has received in the previous period from different stakeholders, different tax scenarios have been reviewed, to shed light on the challenging tax scenarios, in which the difficulty in understanding to whom the tax accountability belongs has been witnessed.
The BIR reviewed different business models of overseas digital providers, domestic business recipients, and types of platforms that facilitate alongside the principal service(provided by the underlying vendor), the tax treatment of the accompanying services, and related fees that the platform operator claims for the third-party service providers.
Important guidelines from the Circular
Tax benefits that rise form bilateral tax treaties apply exclusively to income taxes, meaning that provision of cross-border digital services remains under the VAT on digital services regime. Foreign digital service providers cannot benefit from such treaties.
Tax benefits remain within the scope of income taxes.
BIR explained that there are digital services that could benefit from being zero-rated or tax-exempt; this does not mean that overseas providers of digital services shouldn’t fulfill their VAT administrative obligations.
If a non-resident digital service provider makes B2C supplies of digital services that are VAT-exempt, it should still register with BIR for VAT and file VAT returns. This report should state that supplies are VAT-exempt.
Non-resident platform operators that operate an online booking marketplace are required to account for VAT on their booking fees, and not on the gross booking value. VAT applies to that portion of the payment, not to the entire sum paid by the user.
Digital advertising services are under the Philippines VAT regime, no matter where the target audience is, if the recipient of the service is a local customer. If the local entity pays for online advertisement, the transaction is subject to VAT, no matter where the audience is located.
The digital advertising service could be zero-rated if the services are used by customers residing abroad, and if the service is paid for with acceptable foreign currency.
When it comes to the VAT collection accountability for the payments received before the VAT on Digital Services regime came into effect(June 2025), overseas providers are obliged to collect 12% VAT and are mandated to collect and remit VAT from this month, even if the subscriptions have been paid in advance before the new regime came into force.