THE Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) No. 99-2021 to address some of the issues and concerns of taxpayers about the consolidated list of VAT-exempt products in RMC 81-2021 and the treatment of input VAT on said products prior to or upon the effectivity of its VAT exemption. This exemption is provided pursuant to the provisions of the Corporate Recovery and Tax Incentives for Enterprises (Create) Act, as implemented by RR No. 4-2021.
The following are the salient features of RMC 99-2021:
The VAT exemption of medicines for diabetes, high cholesterol, hypertension, cancer, mental illness, tuberculosis, kidney diseases; drugs and vaccines prescribed and directly used for Covid-19 treatment; and medical devices directly used for Covid-19 treatment shall take effect on the date of publication by the Food and Drug Administration (FDA), which was on June 17, 2021.
VAT exemption shall only apply to the sale or importation by the manufacturers, distributors, wholesalers, and retailers of drugs and medicines included in the list of approved drugs and medicines.
The consolidated list in RMC No. 81-2021 should be the sole list that will be used as a reference in checking whether a certain medicine or medical device is exempt from VAT.
Unutilized input VAT on local purchases and importations of the said VAT-exempt products from January 1, 2021 until June 16, 2021 may be carried over to the succeeding taxable quarter/s or be charged as part of cost. VAT refund will not be allowed.
Starting June 17, 2021, the current input VAT, which are directly attributable to goods now classified as VAT-exempt products, may be allowed as part of cost. For input VAT not directly attributable, only a ratable portion thereof shall be charged to cost.
In relation to the above, taxpayers are allowed to report local purchases or importation of VAT-exempt drugs under “Purchases not Qualified for Input Tax.”
Please be guided accordingly.
P&A Grant Thornton
Certified Public Accountants
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