If Your Business Pays for Canva, Google, or AWS — This Is for You
The way we run businesses has changed. Today, it’s normal for businesses and freelancers in the Philippines to use tools digital services from foreign providers like Canva for design, Zoom for meetings, Google Workspace for email, Meta for Facebook ads, AWS for hosting, etc.
But here’s what’s changing.
Starting June 2, 2025, the Bureau of Internal Revenue (BIR) is officially requiring Philippine businesses to withhold and file 12% VAT on these kinds of digital service purchases from abroad.
This is part of the implementation of Revenue Regulations (RR) No. 3-2025 and the newly released RMC No. 47-2025, which clarifies what businesses in the Philippines need to do.
Why Is the BIR Doing This?
Let’s zoom out.
The Philippine government — like many others — is trying to catch up with the shift to digital. More people are earning income online. More businesses are spending online, especially on global platforms.
But much of this digital activity wasn’t being taxed the same way as local transactions.
That’s why the BIR implemented RR No. 3-2025 (and later clarified it with RMC No. 47-2025):
📌 To capture VAT from foreign providers
📌 To treat local and foreign sellers more fairly
📌 To make PH buyers responsible for remitting VAT when the seller is abroad
This move aligns with global tax trends — even the EU, Australia, and Indonesia now tax digital services from non-resident platforms.
What’s Changing?
The BIR is now requiring non-resident digital service providers (NRDSPs) to register for VAT and charge 12% on sales of digital services consumed in the Philippines.
But here’s the catch: if you’re a business BUYER, you — not the foreign provider — are responsible for remitting the VAT.
This is called the reverse charge mechanism.
What Is Reverse Charge VAT?
It simply means:
- You buy a service from a foreign provider (e.g., Canva, AWS, Google)
- The provider doesn’t charge you VAT
- Instead, you compute and remit the 12% VAT to the BIR
- You do this using BIR Form 1600-VT
- Along with the form, you also need to send an attachment called the Monthly Alphalist of Payees or MAP
- You file this every 10th of the month, covering the previous month
Ok, let’s put in real numbers:
- Let’s say you used to pay P2,500 for Canva Pro.
- With the new ruling on non-resident digital service providers:
- You pay P2,500 to Canva
- Then you pay P300 directly to the BIR (via Form 1600-VT)
- You add up all these amounts and then put them in Form 1600-VT which you remit every month. You don’t remit that amount for each payment.
But I’m a non-VAT taxpayer, do I still need to do this?
According to RMC 47-2025, YES. It doesn’t matter if you, as the buyer, are non-VAT. There is still VAT in this transaction because transactions with these Non-Resident Digital Service Provider (NRDSP) is VATable. Think of it as buying from your favorite fast food place, you ALWAYS pay VAT. It doesn’t matter that you are non-VAT, you have to pay VAT regardless. The only thing different in this analogy is who remits this VAT to the BIR? With NRDSP’s, it’s you, the buyer.
What happens to this VAT Remittance?
If you are a VAT taxpayer, you can deduct the VAT you remitted via Form 1600-VT from your VAT Payable. This is basically input VAT, similar to how VAT with other suppliers are treated.
If you are a non-VAT taxpayer, then you record the SUM of your payment to the NRDSP and the VAT you remitted as the total expense. Going back to our fast food example, if you paid P112 (P100 + P12 VAT) for your business meal, then the total expense in your books would be P112. This would be the same case for payments to NRDSPs. Remember though that you need both the invoice and the 1600-VT form as proof/documentation for this.
What Happens If You Don’t File?
Failing to withhold and remit VAT can result in:
- 25% surcharge on the amount due
- 12% interest per annum
- ₱1,000+ compromise penalties
💡 Even if the BIR doesn’t audit today, they can go back up to 3 years.
Remember that the form 1600-VT is due on the 10th of every month, covering the previous month. And don’t forget the attachment!
How Taxumo Can Help
We know that staying compliant with BIR regulations — especially when it involves foreign vendors — can be confusing.
That’s why Taxumo makes things easier for Philippine-based businesses who subscribe to tools like Canva, AWS, or Google Workspace.
✅ File tax forms online
✅ Track deadlines with automatic reminders
✅ Keep digital records of all your filings in one place
Coming soon: We’re adding support for BIR Form 1600-VT!
You’ll soon be able to compute, file, and pay VAT under the reverse charge mechanism — right inside Taxumo.
🟢 This feature will be made available to Micro and SMB Business Plan holders.