RMC No. 21-2026: Tax Treatment of Development Assistance Activities Carried Out by the Foreign Assistance Section of the United States Embassy in the Philippines

Key points

1. VEC procedures. The processing and issuance of VAT Exemption Certificates (VECs) still follow RMC No. 40-2007.
2. Amended provisions. In Section 2, RMO No. 22-2004 is replaced with RMO No. 10-2019. VAT treatment under Section 7 is governed by Sections 106(A)(2)(b), 108(8)(3), and 109(1)(CC) of the Tax Code and Sections 4.106-5(b) and 4.108-5(b)(3) of RR No. 16-2005, as amended by RR No. 10-2025. In Section 8, the terms ‘receipt’ and ‘official receipt’ are deleted and only ‘invoice’ stays, per RA No. 11976 (Ease of Paying Taxes Act).
3. USAID VECs. VAT-registered taxpayers keep honoring VECs issued to USAID and its implementing agents, applying the zero-percent (0%) VAT rate until the thirtieth (30th) day from the issuance of this Circular, the end date.
4. Surrender of VECs. The US-FAS has thirty (30) days to surrender the VECs issued by the BIR, through the International Tax Affairs Division, for activities that remain ongoing after the end date. VECs not returned in that period are automatically revoked and without force and effect.
5. Transfer of functions. Functions under RMC No. 40-2007 held by defunct or inoperative officials and offices, because USAID was substituted by the US-FAS, are deemed transferred to the corresponding officials and offices of the US-FAS.

Who is affected

• VAT-registered taxpayers selling to USAID-implemented activities
• USAID and its implementing agents
• Foreign Assistance Section of the United States Embassy (US-FAS)

Deadlines and effectivity

• 0% VAT rate honored until the 30th day from issuance
• VEC surrender period: 30 days
• Issued: March 19, 2026