RR No. 18-2020: Implements Section 1 of Republic Act (RA) No. 11467, further amending Section 109 (AA) of the NIRC of 1997, as amended by RA No. 10963 (TRAIN Law), providing for VAT Exemption on the sales and importation of drugs and medicines prescribed for diabetes, high cholesterol, hypertension, cancer, mental illness, tubercolosis and kidney diseases.

Key points

1. Amended provision. Section 4.109-1 of RR No. 16-2005, as amended by RR No. 13-2018, is further amended to include the exemption in paragraph (aa) of the VAT-exempt transactions.
2. Covered medicines and start dates. Prescription drugs and medicines for diabetes, high cholesterol and hypertension are exempt beginning January 1, 2020. Those for cancer, mental illness, tuberculosis and kidney diseases are exempt beginning January 1, 2023.
3. Limit of the exemption. The exemption applies only to sales or importation by manufacturers, distributors, wholesalers and retailers of drugs and medicines in the “list of approved drugs and medicines” issued by the Department of Health (DOH).
4. Refund of VAT on importation. VAT on imported diabetes, high cholesterol and hypertension drugs in the DOH-FDA approved list, from January 27, 2020 until the Regulations take effect, is refunded under Section 204(C) of the Tax Code under the existing refund procedures. This holds only if the input tax was not reported and claimed as input tax credit in the VAT returns, and it cannot be claimed as input tax credit under Section 110.

Who is affected

• Manufacturers, distributors, wholesalers and retailers of listed prescription drugs and medicines
• Importers of listed drugs and medicines

Deadlines and effectivity

• Diabetes, high cholesterol, hypertension: from January 1, 2020
• Cancer, mental illness, tuberculosis, kidney diseases: from January 1, 2023
• Refund covers importations from January 27, 2020 until effectivity of the Regulations