Summary
RMC No. 99-2021 clarifies issues on the VAT exemption of certain medicines and medical devices for COVID-19 under Sections 109(1)(AA) and 109(1)(BB)(ii) of the Tax Code, as amended by RA Nos. 10963, 11467 and 11534.
Key points
- Start of the exemption. The VAT exemption for the covered medicines, drugs, vaccines and medical devices takes effect on the date the Food and Drug Administration (FDA) published the consolidated list of VAT-Exempt Products, which was June 17, 2021.
- Controlling list. Only items in the FDA’s consolidated list, with the listed dosage strength, dosage form and route of administration, are VAT-exempt. This list includes the lists earlier circularized through RMC Nos. 4-2019, 62-2020 and 101-2020, and it was circularized through RMC No. 81-2021.
- Unutilized input VAT. Unutilized VAT on local purchases and importation from January 1, 2021 until June 17, 2021 may be carried over to the succeeding taxable quarters or charged as part of cost under Section 110. Input VAT attributable to the now VAT-exempt goods may be allowed as part of cost, and only a ratable portion is charged to cost if it cannot be attributed.
- Refund limits. A tax refund is allowed only when a taxpayer changes from VAT to Non-VAT registration under Sec. 112(B). VAT on imported drugs or medicines already claimed as input tax credit in the monthly and quarterly VAT returns cannot be refunded under Section 204(C).
- RR No. 4-2021 and RR No. 18-2020. RR No. 4-2021 implements RA No. 11534 (CREATE Act), while RR No. 18-2020 is based on RA Nos. 10963 and 11467. Taxpayers may show imported items under the row Purchases not Qualified for Input Tax of the VAT returns.
Who is affected
- Sellers and importers of the covered medicines and medical devices
- VAT-registered taxpayers with unutilized input VAT on these items
Deadlines and effectivity
- VAT exemption effective June 17, 2021
- Unutilized VAT covered: January 1, 2021 until June 17, 2021
Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.
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