NON-RESIDENT digital service providers (DSPs) will not be required to appoint a local representative when registering under the newly enacted value-added tax law, according to draft regulations issued by the Bureau of Internal Revenue (BIR).
“In registering with the BIR, a Non-resident DSP need not have a local representative in the Philippines,” according to the draft dated Nov. 8 released for public consultation.
“However, it may appoint a resident third-party service provider (an individual or entity, e.g., law firm, accounting firm, consultancy firm) for purposes of receiving notices, record keeping, filing of tax returns, and other reporting obligations,” it added.
President Ferdinand R. Marcos, Jr. recently signed Republic Act (RA) No. 12023. It imposes a 12% VAT on foreign digital service providers.
The BIR previously signaled that foreign DSPs will be required to open a representative office or appoint an agent in the Philippines.
The 10-page draft regulations also outline the BIR’s power to issue closure or takedown orders against DSPs that fail to register or comply with the tax rules.
Such measures “include the blocking of Digital Services performed or rendered in the Philippines by a DSP, which shall be implemented by the Department of Information and Communications Technology, through the National Telecommunications Commission.”
Non-resident DSPs are required to register or update with the BIR within 60 days “from the effectivity of these regulations through the VDS portal and shall immediately be subject to VAT after 120 days from the effectivity of these regulations.”
RA 12023 authorizes the temporary closure of non-compliant establishments with a duration of not less than five days.
It will only be lifted upon compliance with requirements prescribed by the Commissioner in the closure order, it said.
The law requires a non-resident DSP to register for VAT if its gross sales for the past 12 months exceed P3 million.
The Philippines joins neighbors like Indonesia, Malaysia, Thailand, Singapore and Japan, in imposing a consumption tax on digital services. — Aubrey Rose A. Inosante