RR No. 25-2018: Prescribes the regulations implementing VAT exemption on the sale of drugs and medicines prescibed for diabetes, high cholesterol and hypertension provided under the TRAIN Law

Key points

1. Scope of the exemption. Sales by manufacturers, distributors, wholesalers and retailers are VAT-exempt starting January 1, 2019. Importation of these drugs stays subject to VAT under Section 107 of the Tax Code, as amended.
2. FDA list. The FDA’s List of VAT-Exempt Diabetes, High-Cholesterol and Hypertension Drugs is posted on the BIR Website through a Revenue Memorandum Circular, with updates. Sales of drugs not on the List are subject to VAT.
3. Invoice requirement. The word VAT-EXEMPT must be prominently indicated in the invoice for these drugs.
4. Penalty. A violator pays the tax due, if any, and on conviction faces a fine of not more than One Thousand Pesos (P1,000) or imprisonment of not more than six (6) months, or both, under Section 275 of the Tax Code, as amended.
5. Complaints and reports. Complaints go to ecomplaints@bir.gov.ph. The validated revenue data report on sales of these drugs is submitted to the Department of Finance.

Who is affected

• Manufacturers
• Distributors
• Wholesalers
• Retailers

Deadlines and effectivity

• VAT exemption starts January 1, 2019