Guide to Philippine VAT Taxability and Rates
Updated 2 months ago
/ /
This article explains how VAT applies to digital services (including SaaS) sold to customers in the Philippines, covering the standard rate, which supplies are taxable, which are exempt, and how B2B vs. B2C treatment works.
Standard VAT Rate
The Philippines applies a 12% VAT on taxable digital services consumed in the country.
How the Rate Applies by Transaction Type
The correct VAT treatment depends on (1) whether the buyer is a VAT-registered business or a consumer, and (2) whether the seller is a resident or non-resident.
Transaction Type | Seller Type | VAT Treatment |
|---|---|---|
B2B SaaS — domestic | Resident seller | Seller charges 12% VAT on invoice |
B2C SaaS — domestic | Resident seller | Seller charges 12% VAT |
B2B SaaS — cross-border (buyer in PH) | Non-resident seller (NRDSP) | Reverse charge applies; Philippine buyer withholds and remits 12% VAT |
B2C SaaS — cross-border (buyer in PH) | Non-resident seller (NRDSP) | NRDSP collects and remits 12% VAT directly |
B2B or B2C exports (seller in PH, buyer outside PH) | Resident seller | Zero-rated (0%) |
Simplified view for non-resident sellers:
B2B sales: The Philippine business customer handles the VAT through the reverse charge mechanism. As the seller, you issue an invoice without VAT.
B2C sales: You, as the NRDSP, must collect and remit the 12% VAT.
Unsure whether a buyer is B2B or B2C? The BIR requires you to default to B2C rules.
How to Determine B2B vs. B2C
A buyer is treated as B2B if they provide a valid Philippine Taxpayer Identification Number (TIN). Without a valid TIN, the transaction is treated as B2C.
What Counts as a Digital Service
Per RA 12023 and BIR Revenue Regulations (RR) 3-2025, "digital services" include but are not limited to:
Online search engines
Online marketplaces and ecommerce platforms
Cloud services, including cloud and IT infrastructure
Online media and advertising
Online platforms (including SaaS products)
Digital goods (intangible goods delivered digitally)
VAT-Exempt Digital Services
The following digital services are not subject to VAT in the Philippines:
Online subscription-based services sold to the Department of Education (DepEd), the Commission on Higher Education (CHED), or the Technical Education and Skills Development Authority (TESDA), and educational institutions recognized by these agencies
Educational services (including online courses, seminars, and trainings) provided by private educational institutions duly accredited by DepEd, CHED, or TESDA, and services rendered by government educational institutions
Note: Exempt supplies do not count toward the PHP 3,000,000 VAT registration threshold.
What Counts Toward the 12% VAT Base
Zero-rated supplies (e.g., exports by a resident seller) are included in threshold calculations but billed at 0%
Exempt supplies are excluded from both the threshold and VAT billing
Quick Rate Reference
Jurisdiction | Base Rate | B2B SaaS | B2C SaaS |
|---|---|---|---|
Philippines (national) | 12% | 0% (reverse charge applies) | 12% |
Note: For resident sellers, B2B SaaS is charged at 12% since they are billing a local customer directly.
Need Help?
For further concerns, we're always here to help. If you can't find the answer you're looking for, just reach out to us using the chat in the bottom right corner of your screen.
Was this article helpful?