Percentage Tax on Overseas Communications: NIRC Section 120 Explained

NIRC Section 120 imposes a 10% tax on every overseas dispatch, message, or conversation transmitted from the Philippines by telephone, telegraph, telewriter exchange, wireless, and other communication equipment services. It’s a percentage tax the telecommunications carrier collects from the person paying for the overseas service — commonly called the Overseas Communications Tax (OCT) — separate from VAT and separate from the carrier’s own income tax.

This guide explains what’s covered, who’s exempt, and how Republic Act No. 11976 (the Ease of Paying Taxes or EOPT Act) changed the provision’s tax base.

What does NIRC Section 120 actually say? #

Section 120 is a Title V “Other Percentage Taxes” provision — separate from VAT — that specifically targets overseas communications originating from the Philippines. The statutory text reads:

“There shall be collected upon every overseas dispatch, message or conversation transmitted from the Philippines by telephone, telegraph, telewriter exchange, wireless and other communication equipment services, a tax of ten percent (10%) on the amount paid for such services.”

The 10% applies to overseas dispatches, messages, and conversations specifically — domestic calls and messages within the Philippines are not covered by this provision.

Who collects and remits the tax? #

The customer paying for the overseas call, telegram, or dispatch bears the economic cost of the tax, but the telecommunications company is legally responsible for collecting and remitting it. The carrier collects the 10% at the time of payment for the service and is required to remit it to the BIR within the period the law and regulations prescribe for percentage tax filings.

This structure — tax borne by the customer, collected and remitted by the service provider — is the same basic mechanic as VAT and other percentage taxes on services, just applied to a narrower category (overseas dispatches specifically) at its own 10% rate.

Who is exempt from the Overseas Communications Tax? #

NIRC Section 120 carves out three categories of exempt payments, reflecting the diplomatic and governmental nature of the communications involved rather than any exemption tied to the paying customer’s tax status generally:

• Government messages — amounts paid for messages transmitted by the Philippine government or any of its political subdivisions or instrumentalities
• Diplomatic services — amounts paid for messages transmitted by any embassy or consular office of a foreign government
• International organizations — messages of international organizations and their diplomatic missions accredited to the Philippines

Ordinary business and personal overseas calls, faxes, and similar dispatches do not qualify for any of these carve-outs, regardless of the caller’s own tax-exempt status for other purposes.

How the EOPT Act changed Section 120’s tax base #

Republic Act No. 11976, the Ease of Paying Taxes Act, amended Section 120 along with a cluster of other percentage tax provisions (Sections 116 through 120 and 128) to shift the tax base from a cash-basis concept to an accrual/invoice-basis concept. For Section 120 specifically, the EOPT Act changed the phrase “amount paid” to “amount billed” — mirroring the same invoice-basis shift the EOPT Act made to VAT on services generally, covered in VAT on Sale of Services: Accrual (Invoice) Basis Under the EOPT Act.

In practical terms, this means the 10% is computed against what the carrier bills for the overseas service in a given period, consistent with the EOPT Act’s broader move toward invoice-basis taxation rather than requiring carriers to track exactly when cash for each overseas call was actually collected.

Worked example: an overseas business call #

A company pays its telecom provider ₱5,000 billed for a month’s worth of overseas conference calls to a supplier abroad.

The telecom provider includes the ₱500 as a separate line item (or component) on the bill, collects it along with payment for the calls, and remits it to the BIR as part of its percentage tax compliance — separate from any VAT charged on the carrier’s other services.

Frequently asked questions #

What is the Overseas Communications Tax under NIRC Section 120? #

It’s a 10% percentage tax on every overseas dispatch, message, or conversation transmitted from the Philippines by telephone, telegraph, telewriter exchange, wireless, and other communication equipment services. The carrier collects it from the customer paying for the service and remits it to the BIR.

Who actually pays the Overseas Communications Tax — the caller or the telecom company? #

The person paying for the overseas call, message, or dispatch bears the tax, but the telecommunications company rendering the service is the one legally required to collect it at the time of payment and remit it to the BIR within the prescribed period.

Is the Overseas Communications Tax the same as VAT on telecom services? #

No. It’s a separate percentage tax under Title V of the NIRC (Other Percentage Taxes), specific to overseas dispatches, messages, and conversations. It exists alongside, not instead of, VAT on the carrier’s other telecommunications services.

Who is exempt from the Overseas Communications Tax? #

NIRC Section 120 exempts amounts paid for messages transmitted by the Philippine government or any of its political subdivisions or instrumentalities, by embassies and consular offices of a foreign government, and by international organizations and their diplomatic missions.

How did the EOPT Act change NIRC Section 120? #

Republic Act No. 11976 (the Ease of Paying Taxes Act) amended Section 120’s tax base from “amount paid” to “amount billed,” aligning the overseas communications tax with the invoice-basis approach the EOPT Act applied across several percentage tax provisions, rather than requiring carriers to track actual cash collection to compute the tax.

Summary #

NIRC Section 120 imposes a 10% Overseas Communications Tax on overseas dispatches, messages, and conversations billed from the Philippines, collected by the telecom carrier and remitted to the BIR, with narrow exemptions for government, diplomatic, and international-organization communications. The EOPT Act shifted the tax base from “amount paid” to “amount billed,” aligning it with the invoice-basis approach used elsewhere in the Act. For the broader EOPT Act changes to percentage taxes and VAT, see EOPT Act: File and Pay BIR Taxes at Any RDO and VAT vs. Percentage Tax: Which Applies to Your Business?