Digital VAT draft regulations to allow 3rd party local reps

THE Bureau of Internal Revenue (BIR) will allow non-resident digital service providers (DSPs) to appoint a local third-party representative to handle administrative matters for them with regard to the value-added tax (VAT) law.

“In registering with the BIR, a nonresident DSP need not have a local representative in the Philippines,” the BIR said in a version of the implementing rules and regulations (IRR) dated Jan. 17.

The 10-page draft IRR previously required an in-country representative upon registering for Republic Act 12023 or the VAT on digital services law.

“However, it may appoint a resident third-party service provider (an individual or entity, such as a law firm, accounting firm, or consultancy firm) for purposes of receiving notices, record keeping, filing of tax returns, and other reporting obligations,” it added.

The nonresident DSP is required to notify the BIR in writing of the designated representative within 30 calendar days from the date of appointment.

For VAT purposes, the appointment of a third-party service provider does not classify the nonresident DSP as a nonresident foreign corporation doing business in the Philippines, according to the draft.

Unregistered non-resident DSPs face suspension of business operations in the Philippines and other penalties, the BIR said.

The Department of Finance (DoF) has said it expects to collect P7.25 billion in 2025 from VAT on DSPs and P21.37 billion in the next year.

The VAT on digital media and advertising is projected to bring the government P102.12 billion in revenue by 2029, a DoF official said.

The VAT scheme is scheduled to go live on March 31. — Aubrey Rose A. Inosante