By Karen Ocampo, Partner, Ocampo & Suralvo Law Offices
Published in Asia Business Law Journal, September/October 2024 issue, “Tax update” (posted online November 2024).
Republic Act No. 12023, signed on 2 October 2024 and effective on 18 October 2024, makes clear that the 12% value-added tax (VAT) applies to digital services supplied by non-resident providers when those services are consumed in the Philippines. The article explains the key definitions, including “digital service” and “non-resident digital service provider”.
The new law sets out who pays. Non-resident providers remit VAT on sales to consumers who are not VAT-registered. VAT-registered business customers account for the tax through a reverse charge, and certain online marketplaces may be liable for VAT on sales made through their platforms. It also provides for a simplified registration system, applies the existing PHP 3 million registration threshold, keeps certain educational and financial services exempt, and gives the tax authority strong enforcement powers, including the blocking of non-compliant services.
Implementing rules were due within 90 days of the law taking effect, with VAT on non-resident providers applying 120 days after those rules take effect. The author flags points that still need guidance, such as how providers should determine a customer’s location and VAT status, and how privacy law fits in. She urges businesses to follow the rules closely as they are finalised.
This article was first published in Asia Business Law Journal, September/October 2024 issue, “Tax update” (posted online November 2024).