VAT-exempt sales of select prescription drugs

The Bureau of Internal Revenue (BIR) issued last Dec. 27, Revenue Regulations (RR) 25-2018 implementing the value-added tax (VAT) exemption of sales of prescribed drugs and medicines for treating and/or preventing diabetes, high cholesterol, and hypertension under Republic Act 10963 (Tax Reform for Acceleration and Inclusion Law).

The VAT exemption applies to the sale by manufacturers, distributors, wholesalers and retailers of the drugs and medicines. However, the importation of these drugs and medicines are still subject to VAT under Section 107 of the Tax Code, as amended.

The list of VAT-exempt diabetes, high cholesterol and hypertension drugs, as identified and published by the Food and Drug Administration (FDA), will be published on the BIR website through a revenue memorandum circular.

Any updates, such as the registration of new or additional drugs and medicines, as well as the deregistration of those previously published by the FDA, will likewise be posted on the BIR website.

In accordance with invoicing requirements, the word “VAT-Exempt” must prominently be indicated on the invoice issued for the sale of drugs and prescribed for the treatment and prevention of diabetes, high cholesterol and hypertension.

For violations of RR 25-2018, a fine of not more than P1,000 or imprisonment of not more than six months will be imposed. Complaints for non-compliance and violations can be forwarded to ecomplaints@bir.gov.ph for proper handling or dissemination to the concerned BIR office.

RR 25-2019 took effect on Jan. 1.

Please be guided accordingly.