AN ACT AMENDING SECTIONS 105, 108, 109, 110, 113, 114, 115, 128, 236, AND 288 AND ADDING NEW SECTIONS 108-A AND 108-B OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED

[ REPUBLIC ACT NO. 12023, October 02, 2024 ]

AN ACT AMENDING SECTIONS 105, 108, 109, 110, 113, 114, 115, 128, 236, AND 288 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 House of Representatives of the Philippines in Congress assembled:

Section 1. Section 105 of the National Internal Revenue Code of 1997, as amended, is hereby amended to read as follows:

"Section 105. Persons Liable. - Any person, who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, including digital services, and any person who imports goods shall be subject to the value-added tax imposed in Sections 106 to 108 of this Code.

"The value-added tax is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services. This rule shall likewise apply to existing contracts of sale or lease of goods, properties or services at the time of the effectivity of Republic Act No. 7716.

"The phrase 'in the course of trade or business' means the regular conduct or pursuit of a commercial or an economic activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a nonstock, nonprofit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their gusets), or government entity.

"The rule of regularity, to the contrary notwithstanding, services as defined in this Code rendered in the Philippines by nonresident foreign persons shall be considered as being rendered in the course of trade or business: Provided, That digital services delivered by nonresident digital service providers shall be considered performed or rendered in the Philippines if the digital services are consumed in the Philippines."

Section 2. Section 108 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 108. Value-added Tax on the Sale of Services, Including Digital Services, and the Use of Lease of Properties. -

"(A) rate and Base of Tax. - There shall be levied, assessed and collected, a value-added tax equivalent to twelve percent (12%) of the gross sales derived from the sale or exchange of services, including digital services, and the use or lease of properties.

"The phrase 'sale or exchange of services' means the performance of all kinds of services in the Philippines for others for a fee, remuneration, or consideration, including those performed or rendered by coonstruction and service contractors; stock, real estate, commercial, customs and immigration brokers; lessors ofproperty, whether personal or real; warehousing services; lessors or distributors of cinematographic films, persons engaged in milling, processing, manufactuyring or repacking goods for others; proprietors, operators or keepers of hotels, motels, rest houses, pension houses, inss, 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 and cargoes; common carriers by air and sea relative to their transport of passengers, goods or cargoes from one place in the Philippine to another place in the Philippines; sales of electricity by generation companies, transmission by any entity, and distribution companies, including 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 insurance), including surety, fidelity, indemnity and bonding companies; digital service providers; and similar services regardless 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:

"Lease of properties shall be subject to the tax herein imposed irrespective of the place where the contract of lease or licensing agreement was executed if the property is leased or used in the Philippines.

"x x x."

Section 3. A new section designated as Section 108-A under Chapter I, Title IV, of the National Internal Revenue Code of 1997, as amended, is hereby inserted to read as follows:

"Section 108-A. Liability of Persons Providing Digital Services. - The digital service provider, whether resident or nonresident, shall be liable for assessing, collecting, and remitting the value-added tax on the digital services consumed in the Philippines, subject to the provision on withholding of value-added tax on digital services under Section 114(D).

"When used in this title:

Section 4. A new section designated as Section 108-B under Chapter 1, Title IV, of the National Internal Revenue Code of 1997, as amended, is hereby inserted to read as follows:

Section 5. Section 109 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

Section 6. Section 110 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

"Section 110. Tax Credits. -

"x x x."

Section 7. Section 113 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

"Section 113. Invoicing and Accounting Requirements for VAT-Registered Persons. -

Section 8. Section 114 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

"Section 114. Return and payment of Value-Added Tax. -

Section 9. Section 115 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

"Section 115. Power of the Commissioner to Suspend the Business Operations of a Taxpayer. - x x x

"The temporary closure of the establishment shall be for the duration of not less than five (5) days and shall be lifted only upon compliance with whatever requirements prescribed by the Commissioner in the closure order.

"The power of the Commissioner to suspend shall include the blocking of digital services performed or rendered in the Philippines by a digital service provider. This shall be implemented by the Department of Information and Communications Technology (DICT), through the National Telecommunications Commission (NTC)."

Section 10. Section 128 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

"Section 128. Returns and Payment of Percentage Taxes. -

Section 11. Section 236 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

"Section 236. Registration Requirements. -

Section 12. Section 288 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows:

"Section 288. Disposition of Incremental Revenues. -

"(H) Incremental Revenues from Value-added Tax on Digital Service Providers. - Five percent (5%) of the incremental revenue from the value-added tax on digital service providers under Section 108 shall be alloted to and used exclusively for the development of crative industries, as defined under Republic Act No. 11904, otherwise known as the "Philippine Creative Industries Development Act," for five (5) years from the effectivity of this Act.

"Upon the lapse of five(5)-year period, all such incremental revenues shall accrue to the General Fund."

Section 13. Mode of Correspondence. - Any communication, notice, or summons to a nonresident digital service provider can be made via electronic mail messaging.

Section 14. Transitory Clause. - Nonresident digital service providers shall immediately be subject to value-added tax under this Act after one hundred twenty (120) days from the effectivity of the implementing rules and regulations.

Section 15. Implementing Rules and Regulations. The Department of Finance (DOF), upon the recommendation of the BOR, and in coordination with the DICT and the NTC, and upon consultation with the stakeholders, shall issue rules and regulations for the effective implementation of this Act not later than ninety (90) days from the effectivity of this Act.

Section 16. Separability Clause. - Should any provision of this Act or any part thereof be declared invalid, the other provisions, so far as they are separable from the invalid ones, shall remain in force and effect.

Section 17. Repealing Clause. - All laws, decrees, orders, and issuances, or portions thereof, which are inconsistent with the provisions of this Act, are hereby repealed, amended, or modified accordingly.

Section 18. Effectivity. - This Act shall take effect fifteen (15) days after its publication in the Official Gazette or in a newspaper of general circulation without the need for the issuance of implementing rules and regulations.

Approved,

This Act, which is a consolidation of House Bill No. 4122 and Senate Bill No. 2528, was passed by the House of Representatives and the Senate of the Philippines on July 30, 2024 and July 29, 2024, respectively.

Approved: OCT 02 2024

(SGD.) FERDINAND ROMUALDEZ MARCOS JR.
President of the Philippines