Regulatory updates - Philippines

On February 10, 2025, the Philippine Bureau of Customs issued Customs Administrative Order (CAO) 001-2025, providing guidelines to Administrative Order No. 23-2024. The order introduces two new procedures relating to customs processing, as the Pre-border Technical Verification (PTV) and the Cross-border E-Invoicing (CEI) system are implemented. Both procedures aim to streamline import flows to the Philippines.

Cross-border E-invoicing (CEI)

The CEI system is an electronic platform for e-invoice issuance operated by the Philippine government. Through the order, e-invoicing via the CEI system is mandated for transactions relating to all goods imported by sea or air.

To fulfill the obligations and issue invoices via the system, foreign exporters will be required to apply for registration annually to the CEI system, upon which they will receive a digital certificate required for signing the electronic invoices.

The obligation to implement the CEI will be rolled out in three stages:

• Mandatory registration of foreign exporters: 30 days after the publication of the customs administrative order providing the specific procedures for the CEI system;
• Mandatory use of the CEI system for all imports covered by the BOC Bulk and Break-Bulk Cargo Clearance Enhancement Program: 60 days after the publication of the customs administrative order referred to above;
• Mandatory use of the CEI system for all other imports: 90 days after the publication of the customs administrative order referred to above.

Pre-border Technical Verification (PTV)

The Pre-border Technical Verification verifies certain goods’ characteristics and ensures imports comply with regulatory requirements before reaching the Philippine border. As part of the PTV, the foreign exporter must engage with a PTV Accredited Testing, Inspection, and Certification Company (ATICC) in their country of origin and submit documents and provide for inspection of any goods in the scope. The ATICC will, in turn, issue a Certificate of Conformity to the foreign exporter, enabling advanced customs clearance upon arrival in the Philippines.

The obligation to implement the PTV will be phased depending on the characteristics of the goods:

• Phase 1 - Agricultural goods: 30 days after the publication of the CAO providing for the specific procedures for the PTV;
• Phase 2 - Non-agricultural products with health and safety issues: 60 days after the publication of the CAO mentioned above;
• Phase 3 - Other goods susceptible to misdeclaration to avoid duties and taxes: 90 days after the publication of the CAO mentioned above.

Penalties

Non-compliance with the CEI or PTV requirements may result in various penalties, including fines, revocation of importer accreditation, and slower customs processing.

Timeline

According to the regulation, the full implementation of the PTV and CEI systems will enter into force within two years of the effective date for Administrative Order No. 23/2024.

As previously reported by Pagero, the progress of the Philippine e-invoicing mandate has been suffering setbacks. With the announcement of Revenue Regulations 11-2025, the Philippine Bureau of Internal Revenue (BIR) now revitalizes establishing a mandate by announcing revised issuance and reporting requirements.

Obligation to generate electronic invoices

The revenue regulations clarify that e-invoices must be created using an invoicing system accredited by the BIR and generated in a structured format, such as JSON or XML, or any other format prescribed by the BIR. Creating structured invoices is a prerequisite for reporting the invoices to the bureau readily.

Any digital or electronic format, such as a PDF via e-mail, is allowed for the exchange between seller and buyer. However, the invoice must originate from a system-generated structured data format. Furthermore, the regulations underline that a photo or scanned copy of a paper invoice does not qualify as an electronic invoice.

Extended scope and defined timeline for issuance obligation

The updated regulation establishes a timeline for when the taxpayers in scope must issue e-invoices. This obligation will enter into force in March 2026, and the scope of taxpayers has been widened to encompass the following groups:

• Taxpayers engaged in electronic commerce (e-commerce) or internet transactions, which include a range of online transactions such as selling goods, services, digital content, and more;
• Taxpayers under the jurisdiction of the Large Taxpayers Service (LTS);
• Taxpayers classified as Large Taxpayers;
• Taxpayers using Computerized Accounting Systems (CAS), Computerized Books of Accounts (CBA) with Accounting Records (including electronic invoicing), and other invoicing software.

Reporting obligation upon establishment of the BIR system 

Following the establishment of a system capable of storing and processing the transmitted data, an obligation to both issue and report e-invoice data to the system will be introduced. The reporting and issuance obligation will then concern the following taxpayers:

• Taxpayers engaged in electronic commerce (e-commerce) or internet transactions, classified as Small, Medium and Large Taxpayers;
• Taxpayers under the jurisdiction of the Large Taxpayers Service (LTS);
• Taxpayers classified as Large Taxpayers;
• Taxpayers using CAS, and CBA with electronic invoicing and other invoicing software.
• Taxpayers engaged in the export of goods and services;
• Registered Business Enterprises availing of Tax Incentives;
• Taxpayers using POS System; and
• Other taxpayers as may be required by the Commissioner.

Regulations relating to the Electronic Sales Data Reporting system will be issued later, with no date confirmed at this stage.

Exceptions and extensions to the issuance and reporting obligations

If any branch office falls under the obligation to issue and report e-invoices, this requirement extends to the head office and all other branch offices of the company.

Furthermore, taxpayers classified as micro-taxpayers are exempted from the regulations, provided they do not already use electronic invoices but may choose to use them voluntarily.

Compliant businesses may deduct costs from taxable income

To reduce the burden of companies to digitalize their invoicing procedures, businesses participating voluntarily and on an obligation basis will be eligible for a cost deduction corresponding to the company size:

• Micro and small taxpayers: Allowed to deduct 100% of the cost of setting up the electronic sales reporting system;
• Medium and large taxpayers: Allowed to deduct 50% of the cost of setting up the electronic sales reporting system.

Penalties

Furthermore, following the regulations, non-compliance with the requirements has been defined, where failure to issue or report invoice data as prescribed will be subject to penalties as described in Sections 264 and 264-A of the Philippine Tax Code.

On 2 October 2024, the Philippine Congress passed the Republic Act (R.A.) No. 12023. The law extends VAT obligations for digital service providers to include non-residential providers (without physical presence in the Philippines).

The foreign digital service provider will be subject to VAT if:

• The service is offered via the internet or another electronic network with the use of information technology, and where the supply of the service is essentially automated; and
• The service is consumed within the Philippines; and
• Gross sales liable to VAT of the digital service provider is equal to or higher than the effective VAT threshold, currently at 3 million Philippine pesos (ca. EUR 47 900) over the last 12 months, or if gross sales liable to VAT of the digital service provider are with reasonable grounds expected to exceed the VAT threshold for the coming 12 months.

The VAT rate on these transactions will be 12%. However, educational and financial service providers will be exempted from the regulations.

The obligation applies to B2B and B2C transactions, but the party liable to charge and remit the VAT depends on the transaction type.

• B2B (VAT-registered taxpayer) transactions: Follow the reverse charge scheme, meaning the buyer must withhold and remit VAT on the purchase.
• B2C (non-VAT-registered taxpayer) transactions: The non-residential digital service provider is liable to remit VAT.

Furthermore, the liability extends to non-resident online marketplaces through which non-resident sellers may offer services, provided the marketplace controls key aspects of the supply.

Needed actions for concerned businesses

The non-residential digital service provider must physically or electronically register for VAT and issue an invoice for every sale. Further implementing regulations will be announced 90 days after the law has become effective.

Timeline

• The law will become effective 15 days after its publication in the Official Gazette or another newspaper of general circulation;
• 90 days after the law has become effective, implementing regulations are expected to be announced;
• 120 days after the implementing regulations have been announced, non-residential digital service providers will immediately be subject to VAT obligations.

Penalty for non-compliance

If concerned digital service providers required to register fail to do so, it may result in operations being suspended in the Philippines.