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NINETEENTH CONGRESS OF THE 
)
REPUBLIC OF THE PHILIPPINES 
)
Second Regular Session 
)
SENATE
S. No. 2528
24 JAN 30 P2:40
RliCtI V LO BV.
(In substitution of Senate Bill No. 250, taking into consideration House Bill No. 4122)
Prepared by the Committee on Ways and Means with Senators 
Pia Cayetano and Gatchalian as authors
AN ACT
AMENDING SECTIONS 105, 108, 109, 110, 113, 114, 115, AND 236 AND 
ADDING NEW SECTIONS 108-A AND 108-B OF THE NATIONAL INTERNAL 
REVENUE CODE OF 1997, AS AMENDED
Be it enacted by the Senate and the House of Representatives of the Philippines in 
Congress assembled:
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Section 1. Section 105 of the National Internal Revenue Code of 1997, as
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amended, is hereby further amended to read as follows:
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"SEC. 105. Persons Liable. - Any person who, in the course of
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trade or business, sells, barters, exchanges, leases goods or
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properties, renders services, INCLUDING DIGITAL
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SERVICES, and any person who imports goods shall be subject
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to the value-added tax (VAT) imposed in Sections 106 to 108 of
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this Code.
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"The value-added tax is an indirect tax and the amount of tax
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may be shifted or passed on to the buyer, transferee or lessee of
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the goods, properties or services. This rule shall likewise apply to
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existing contracts of sale or lease of goods, properties, or services
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at the time of the effectivity of Republic Act No. 7716.
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"The phrase 'in the course of trade or business 'means the regular
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conduct or pursuit of a commercial or an economic activity,
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including transactions incidental thereto, by any person
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regardless of whether or not the person engaged therein is a
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nonstock, nonprofit private organization (irrespective of the
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disposition of its net income and whether or not it sells exclusively
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to members or their guests), or government entity.
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"The rule of regularity, to the contrary notwithstanding, services
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as defined in this Code rendered in the Philippines by nonresident
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foreign persons shall be considered as being rendered in the
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course of trade or business: PROVIDED, THAT DIGITAL
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SERVICES DELIVERED BY NONRESIDENT DIGITAL
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SERVICE PROVIDERS ARE CONSIDERED PERFORMED OR
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RENDERED IN THE PHILIPPINES IF THE DIGITAL
17 
SERVICES ARE CONSUMED IN THE PHILIPPINES.''
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Sec. 2. Section 108 of the National Internal Revenue Code of 1997, as
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amended, is hereby further amended to read as follows:
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"SEC. 108. Value-added Tax on Sale of Services, INCLUDING
21 
DIGITAL SERVICES, and THE Use or Lease of Properties. -
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"(A) Rate and Base of Tax. - There shall be levied, assessed and
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collected, a value-added tax equivalent to twelve percent (12%)
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of gross receipts derived from the sale or exchange of services,
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including DIGITAL SERVICES, AND the use or lease of
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properties.
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"The phrase 'sale or exchange of services' means the
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performance of all kinds of services in the Philippines for others
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for a fee, remuneration or consideration, including those
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performed or rendered by construction and service contractors;
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stock, real estate, commercial, customs and immigration brokers;
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lessors of property, whether personal or real; warehousing 
services; lessors or distributors of cinematographic films; persons 
engaged in milling, processing, manufacturing or repacking 
goods for others; proprietors, operators or keepers of hotels, 
motels, rest houses, pension houses, inns, resorts; proprietors or 
operators of restaurants, refreshment parlors, cafes and other 
eating places, including clubs and caterers; dealers in securities; 
lending investors; transportation contractors on their transport of 
goods or cargoes, including persons who transport goods or 
cargoes for hire and other domestic common carriers by land 
relative to their transport of goods or cargoes; common carriers 
by air and sea relative to their transport of passengers, goods or 
cargoes from one place in the Philippines to another place in the 
Philippines; sales of electricity by generation companies, 
transmission by any entity, and distribution companies, including 
electric cooperatives; services of franchise grantees of electric 
utilities, telephone and telegraph, radio and television 
broadcasting and all other franchise grantees except those under 
Section 119 of this Code, and non-life insurance companies 
(except their crop insurances), including surety, fidelity, 
indemnity and bonding companies; DIGITAL SERVICE 
PROVIDERS; and similar services regardless of whether or not 
the performance thereof calls for the exercise or use of the 
physical or mental faculties. The phrase 'sale or exchange of 
services' shall likewise include:
"(1) X x x;
"(2) X X x;
"(3) X X x;
"(4) X X x;
"(5) X X x;
"(6) X X x;


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"(7) THE SUPPLY OF DIGITAL SERVICES;
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''([7]8) The lease of motion picture films, films, tapes and
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discs; and
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"([8]9) The lease or the use of or the right to use radio,
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television, satellite transmission and cable television time.
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"Lease of properties shall be subject to the tax herein imposed
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irrespective of the place where the contract of lease or licensing
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agreement was executed if the property is leased or used in the
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Philippines.
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"The term 'gross receipts'the total amount of money or
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its equivalent representing the contract price, compensation,
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service fee, rental or royalty, including the amount charged for
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materials supplied with the services and deposits and advanced
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payments actually or constructively received during the taxable
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quarter forthe services performed or to be performed for another
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person, excluding value-added tax.
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"X X X."
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Sec. 3. A new section designated as Section 108-A under Chapter I, Title IV, of
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the National Internal Revenue Code of 1997, as amended, is hereby inserted to read
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as follows:
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"SEC. 108-A. PERSONS LIABLE IN THE PROVISION OF
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DIGITAL SERVICES. - THE DIGITAL SERVICE PROVIDER,
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WHETHER RESIDENT OR NONRESIDENT, SHALL BE
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LIABLE FOR ASSESSING, COLLECTING, AND REMITTING
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THE VALUE-ADDED TAX ON THE DIGITAL SERVICES
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CONSUMED IN 
THE PHILIPPINES, SUBJECT TO THE
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PROVISION ON WITHHOLDING OF VALUE-ADDED TAX
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ON DIGITAL TRANSACTIONS UNDER SECTION 114(D).
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"WHEN USED IN THIS TITLE:
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"(A) THE TERM 'DIGITAL SERVICE'SHALL REFER TO ANY
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SERVICE THAT IS SUPPLIED OVER THE INTERNET OR


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OTHER ELECTRONIC NETWORK WITH THE USE OF
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INFORMATION TECHNOLOGY AND WHERE THE SUPPLY
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OF THE SERVICE IS ESSENTIALLY AUTOMATED. DIGITAL
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SERVICES SHALL INCLUDE, BUT NOT LIMITED TO:
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"(1) ONLINE SEARCH ENGINE;
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"(2) ONLINE MARKETPLACE OR E-MARKETPLACE;
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"(3) CLOUD SERVICE;
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"(4) ONLINE MEDIA AND ADVERTISING;
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"(5) ONLINE PLATFORM; OR
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"(6) DIGITAL GOODS.
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"(B) TH E TERM 'DIGITAL SERVICEPROVIDER'RE¥ERS TO
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A RESIDENT OR NONRESIDENT SUPPLIER OF DIGITAL
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SERVICES TO A CONSUMER WHO CONSUMES DIGITAL
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SERVICES SUBJECT TO VALUE-ADDED TAX IN THE
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PHILIPPINES.
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"(C) THE TERM NONRESIDENT DIGITAL SERVICE
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PROVIDER'm.M\S A DIGITAL SERVICE PROVIDER THAT
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HAS NO PHYSICAL PRESENCE IN THE PHILIPPINES."
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Sec. 4. A new section designated as Section 108-B under Chapter 1, Title IV,
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of the National Internal Revenue Code of 1997, as amended, is hereby inserted to
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read as follows:
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"SEC. 108-B. LIABILITY OF A NONRESIDENT DIGITAL
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SERVICE PROVIDER. - A NONRESIDENT DIGITAL
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SERVICE PROVIDER REQUIRED TO BE REGISTERED FOR
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VAT UNDER SECTION 236(G) OF THIS CODE SHALL BE
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LIABLE FOR TH E REMITTANCE OF VALUE-ADDED TAX ON
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THE DIGITAL SERVICES THAT ARE CONSUMED IN THE
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PHILIPPINES IF THE CONSUMERS ARE NON-VAT
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REGISTERED: PROVIDED, THAT IF THE CONSUMERS ARE
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VAT-REGISTERED, THE PROVISION OF SECTION 114(D)
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SHALL APPLY.


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"IF A VAT-REGISTERED NONRESIDENT DIGITAL
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SERVICE PROVIDER IS CLASSIFIED AS AN ONLINE
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MARKETPLACE OR E-MARKETPLACE, IT SHALL ALSO BE
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LIABLE TO REMIT THE VALUE-ADDED TAX ON THE
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TRANSACTIONS OF NONRESIDENT SELLERS THAT GO
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THROUGH ITS PLATFORM: PROVIDED, THAT IT
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CONTROLS KEY ASPECTS OF THE SUPPLY, AND
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PERFORMS ANY OF TH E FOLLOWING:
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"A. IT SETS, EITHER DIRECTLY OR INDIRECTLY,
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ANY OF THE TERMS AND CONDITIONS UNDER
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WHICH THE SUPPLY OF GOODS IS MADE; OR
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"B. IT IS INVOLVED IN THE ORDERING OR
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DELIVERY OF THE GOODS, WHETHER DIRECTLY OR
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INDIRECTLY."
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Sec. 5. Section 109 of the National Internal Revenue Code, as amended, is
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further amended to read as follows:
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"SEC. 109. Exempt Transactions. -
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"(1) Subject to the provisions of Subsection (2) hereof, the
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following transactions shall be exempt from the value-added tax:
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"(A) XXX
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"(B) XXX
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"(C) XXX
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"(D) XXX
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"(E) XXX
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"(F) XXX
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"(G) XXX
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"(H) Educational services INCLUDING ONLINE COURSES,
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ONLINE SEMINARS, AND ONLINE TRAININGS rendered
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by private educational institutions, duly accredited by the
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Department of Education ([©e^E9]DEPED), the Commission on
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Higher Education (CHED), the Technical Education and Skills
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Development Authority (TESDA), and those rendered by
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government educational institutions; AND SALE OF ONLINE
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SUBSCRIPTION-BASED SERVICES TO DEPEDf CHEDf
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TESDA, AND EDUCATIONAL INSTITUTIONS
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RECOGNIZED BY SAID GOVERNMENT AGENCIES;
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"(I) XXX
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"(J) XXX
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"(K) XXX
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"(L) XXX
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"(M)xxx
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"(N)xxx
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"(O)xxx
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"(P)xxx
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"(Q) XXX
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"(R)xxx
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"(S) XXX
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"(T) XXX
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"(U)xxx
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"(V) Services of bank, non-bank financial intermediaries
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performing quasi-banking functions, and other non-bank
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financial intermediaries, INCLUDING THOSE RENDERED
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THROUGH THE DIFFERENT DIGITAL PLATFORMS;
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"x X X."
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Sec. 6. Section 110 of the National Internal Revenue Code, as amended, is
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further amended to read as follows:
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"SEC. no. Tax Credits.-
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"A. Creditable Input Tax. -
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"(l)xxx
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"(2) The input tax on domestic purchase or importation of goods
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or properties by a VAT-registered person shall be creditable:


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"(a) To the purchaser upon consummation of sale and on
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importation of goods or properties; and
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"(b) To the importer upon payment of the value-added
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tax prior to the release of the goods from the custody of
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the Bureau of Customs.
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"Provided, That the input tax on goods purchased or imported
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in a calendar month for use in trade or business for which
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deduction for depreciation is allowed under this Code shall be
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spread evenly over the month of acquisition and the fifty-nine
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(59) succeeding months if the aggregate acquisition cost for
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such goods, excluding the VAT component thereof, exceeds One
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million pesos (P1,000,000): Provided, however. That if the
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estimated useful life of the capital good is less than five (5)
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years, as used for depreciation purposes, then the input VAT
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shall be spread over such a shorter period: Provided, further,
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That the amortization of the input VAT shall only be allowed until
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December 31, 2021 after which taxpayers with unutilized input
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VAT on capital goods purchased or imported shall be allowed to
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apply the same as scheduled until fully utilized: Provided, finaiiy,
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That in the case of purchase of services, lease or use of
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properties, the input tax shall be creditable to the purchaser,
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lessee or licensee upon payment of the compensation, rental,
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royalty or fee.
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"NOTWITHSTANDING THE FOREGOING, NONRESIDENT
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DIGITAL SERVICE PROVIDERS SHALL NOT BE ALLOWED
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TO CLAIM CREDITABLE INPUT TAX.
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"XXX."
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Sec. 7. Section 113 of the National Internal Revenue Code of 1997, as
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amended, is further amended to read as follows:
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"SEC. 113. Invoicing and Accounting Requirements for VAT-
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Registered Persons. -
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"(A) Invoicing Requirements. - A VAT-registered person shall 
issue:
"(1) XXX 
"(2) XXX
"(3) A DIGITAL SALES OR COMMERCIAL INVOICE 
FOR EVERY SALE, BARTER, OR EXCHANGE OF 
DIGITAL SERVICES MADE BY A VAT-REGISTERED 
NONRESIDENT DIGITAL SERVICE PROVIDER.
"(B) Information Contained in the VAT Invoice or VAT Officiai 
Receipt - x x x 
"(1) X x x 
"(2) XXX
"(3) XXX 
"(4) XXX
"(5) THE DIGITAL SALES OR COMMERCIAL 
INVOICE ISSUED BY A VAT-REGISTERED 
NONRESIDENT DIGITAL SERVICE PROVIDER 
SHALL INDICATE THE FOLLOWING INFORMATION 
IN LIEU OF THE REQUIREMENTS UNDER SECTION 
113 SUBSECTION (B) PARAGRAPHS 1 TO 4:
(A) DATE OF THE TRANSACTION;
(B) TRANSACTION REFERENCE NUMBER;
(C) IDENTIFICATION OF THE CONSUMER;
(D) 
BRIEF DESCRIPTION OF THE 
TRANSACTION;
(E) 
THE TOTAL AMOUNT WITH THE 
INDICATION THAT SUCH AMOUNT 
INCLUDES THE VALUE-ADDED TAX; AND
(F) IF THE SALE OF DIGITAL SERVICES 
INCLUDE SOME SERVICES WHICH ARE 
SUBJECT TO VAT, AND SOME THAT ARE VAT


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ZERO-RATED OR VAT EXEMPT, THE INVOICE
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OR RECEIPT SHALL CLEARLY INDICATE THE
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BREAK-DOWN OF THE SALE PRICE BETWEEN
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ITS TAXABLE, EXEMPT, ZERO-RATED, AND
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COMPONENTS SUBJECT TO VALUE-ADDED
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TAX: PROVIDED, THAT THE CALCULATION
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OF THE VALUE-ADDED TAX ON EACH
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PORTION OFTHE SALE SHALL BE SHOWN ON
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THE INVOICE.
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"(C) Accounting Requirements. - Notwithstanding the provisions
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of Section 233, all persons subject to the value-added tax under
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Sections 106 and 108 shall, in addition to the regular accounting
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records required, maintain a subsidiary sales journal and
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subsidiary purchase journal on which the daily sales and
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purchases are recorded. The subsidiary journals shall contain
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such information as may be required by the Secretary of Finance:
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PROVIDED, THAT THIS SUBSECTION SHALL NOT APPLY
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TO VAT-REGISTERED NONRESIDENT DIGITAL SERVICE
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PROVIDERS.
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"(D) XXX
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"(E) XXX."
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Sec. 8. Section 114 of the National Internal Revenue Code of 1997, as
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amended, is further amended to read as follows:
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"SEC. 114. Return and Payment of Value-Added Tax. -
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"(A) In General. - x x x
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"(B) Where to File the Return and Pay the Tax. - x x x
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"(C) Withholding of Creditable Value-Added Tax. - The
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Government or any of its political subdivisions, instrumentalities
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or agencies, including government-owned or -controlled
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corporations (GOCCs) shall, before making payment on account
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of each purchase of goods and services which are subject to the
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value-added tax imposed in Sections 106 and 108 of this Code, 
deduct and withhold the value-added tax imposed in Sections 106 
and 108 of this Code, deduct and withhold a final value-added 
tax at the rate of five percent (5%) of the gross payment thereof: 
Provided, That beginning January 1, 2021, the VAT withholding 
system under this subsection shall shift from final to a creditable 
system: Provided, further. That the payment for lease or use of 
properties or property rights to nonresident owners AND 
PAYMENTS FORSERVICES TO NONRESIDENT SUPPLIERS 
WHO ARE NOT REGISTERED UNDER SECTION 236, shall 
be subject to twelve percent (12%) withholding tax at the time 
of payment: Provided, finally. That payments for purchases of 
goods and services arising from projects funded by Official 
Development Assistance (ODA) as defined under Republic Act No. 
8182, otherwise known as the 'Official Development Assistance 
Act of 1996' as amended, shall not be subject to the final 
withholding tax system as imposed in this Subsection. For 
purposes of this Section, the payor or person in control of the 
payment shall be considered as the withholding agent.
"The value-added tax withheld under this Section shall be 
remitted within ten (10) days following the end of the month the 
withholding was made.
"(D) REVERSE CHARGE MECHANISM IN DIGITAL 
SERVICES. - A VAT-REGISTERED TAXPAYER SHALL BE 
LIABLE TO WITHHOLD AND REMIT TO THE BUREAU OF 
INTERNAL REVENUE, WITHIN TEN (10) DAYS 
FOLLOWING THE END OF THE MONTH THE 
WITHHOLDING WAS MADE, THE VALUE-ADDED TAX DUE 
ON ITS PURCHASES OF DIGITAL SERVICES CONSUMED 
IN THE PHILIPPINES FROM NONRESIDENT DIGITAL 
SERVICE PROVIDERS."
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Sec. 9. Section 115 of the National Internal Revenue Code (NIRC) of 1997, as
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amended, is hereby further amended to read as follows:
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"SEC. 115. Power of the Commissioner to Suspend the Business
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Operations of a Taxpayer. - x x x
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"(a) XXX
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"(b) XXX
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"The temporary closure of the establishment shall be for the
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duration of not less than five (5) days and shall be lifted only
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upon compliance with whatever requirements prescribed by the
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Commissioner in the closure order.
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"THE POWER OF THE COMMISSIONER TO SUSPEND
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SHALL INCLUDE THE BLOCKING OF DIGITAL SERVICES
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PROVIDED TO THE PHILIPPINES BY A DIGITAL SERVICE
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PROVIDER. THIS SHALL BE IMPLEMENTED BY THE
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DEPARTMENT 
OF 
INFORMATION 
AND
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COMMUNICATIONS TECHNOLOGY (DICT)f THROUGH
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THE NATIONAL TELECOMMUNICATIONS COMMISSION
18 
(NTC)."
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Sec. 10. Section 236 of the National Internal Revenue Code (NIRC) of 1997, as
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amended, is hereby further amended to read as follows:
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"SEC. 236. Registration Requirements. -
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"(A) XXX
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"(B) XXX
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"(C) XXX
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"(D) XXX
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"(E) XXX
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"(F) XXX
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"(G) Persons Required to Register for Value-Added Tax. -
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"(1) Any person who, in the course of trade or business,
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sells, barters, exchanges, LEASES goods or properties,
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INCLUDING THOSE DIGITAL IN NATURE, ANY
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PERSON WHO RENDERS SERVICES, INCLUDING
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DIGITAL SERVICES, or engages in the sale or exchange
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of services, shall be liable to register for value-added tax
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if:
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"(a) His gross sales or receipts for the past twelve (12)
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months, other than those that are exempt under Section
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109(A) to ([BB]CC), have exceeded Three million pesos
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(P3,000,000); or
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"(b) There are reasonable grounds to believe that his gross
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sales or receipts for the next twelve (12) months, other
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than those that are exempt under Section 109(A) to
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([BB]CC), will exceed Three million pesos (P3,000,000).
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"PROVIDED, THAT THE BIR SHALL ESTABLISH A
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SIMPLIFIED AUTOMATED REGISTRATION SYSTEM
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FOR NONRESIDENT DIGITAL SERVICE
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PROVIDERS, WHICH SHALL BE PRESCRIBED BY
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THE SECRETARY OF FINANCE, UPON THE
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RECOMMENDATION OF THE COMMISSIONER OF
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INTERNAL REVENUE.
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"X X X"
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Sec. 11. Mode of Correspondence. - Any communication, notice, or summons
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to a nonresident digital service provider can be made via electronic mail messaging.
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Sec. 12. Transitory Clause. - Nonresident digital service providers shall
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immediately be subject to value-added tax under this Act after one hundred twenty
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(120) days from the effectivity of the implementing rules and regulations.
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Sec. 13. Implementing Rules and Regulations. - The Department of Finance
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(DOF), upon the recommendation of the BIR, and in coordination with the DICT and
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the NTC, and upon consultation with the stakeholders, shall issue rules and regulations
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for the effective implementation of this Act not later than ninety (90) days from the
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effectivity of this Act.
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Sec. 14. Separability Clause. - Should any provision of this Act or any part
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thereof be declared invalid, the other provisions, so far as they are separable from the
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invalid ones, shall remain in force and effect.
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Sec. 15. Repeating Clause. - All laws, decrees, orders, and issuances, or
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portions thereof, which are inconsistent with the provisions of this Act, are hereby
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repealed, amended, or modified accordingly.
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Sec. 16. Effectivity. - This Act shall take effect fifteen (15) days after its
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publication in the Official Gazette or in a newspaper of general circulation.
Approved,
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