On September 1, 2021, the Bureau of Internal Revenue released the Revenue Memorandum Circular No. 99-2021.
This Circular was issued to clarify the issues and concerns received by the BIR from the previous Revenue Memorandum Circular No. 81-2021 released in relation to the VAT Exempt goods for medical/COVID-19 purposes published by the Food and Drug Administration (FDA) in the recently mandated Republic Act (RA) No. 11534 or also known as the CREATE Law.
The following lists all the issues and concerns addressed in this Circular:
- The VAT Exemption of medicines for diabetes, high cholesterol, hypertension, cancer, mental illness, tuberculosis, kidney diseases, drugs and vaccines prescribed directly for COVID-19 treatment, and medical devices directly used for COVID-19 treatment shall take effect on June 17, 2021.
- Only COVID-19 medicines and medical devices that are listed in the FDA’s consolidated list of VAT-Exempt products with the appropriate dosage, strength, dosage form, and route of administration will be considered exempt from VAT.
- The consolidated list of VAT-Exempt products published by the FDA last June 17, 2021, is the updated and controlling list, and should only be the basis of whether a certain medicine or medical device is exempted from VAT or not.
- The treatment of the unutilized input VAT in the updated VAT Exempt on-hand inventories should be in the following manner:
- carried over to the next taxable quarters or;
- charged as a part of the cost
- Under R.A. No. 11534 or the CREATE Law, tax refund is only granted for allegedly erroneously paid VAT on local purchases and importation once a change of status from VAT to non-VAT registration was made.
- The phrase “provided that the input tax on the imported items have not been reported as an input tax credit in the monthly and/or quarterly VAT returns”, as shown in section 3 of Transitory Provision only gives validation that the improperly paid VAT on importation of VAT-exempt drugs or medicines were not imported nor claimed as an input tax credit in the monthly and quarterly VAT returns. In relation to this, the taxpayer may consider it as part of the “Purchases not Qualified for Input Tax” for the proper presentation of the purchases in the monthly and quarterly VAT returns.
- When VAT is claimed as an input VAT credit and subsequently allocated to VATable, zero-rated, or exempt sales, it implies that input tax has already been used. As a result, it will no longer be claimable as doing so is tantamount to claiming it twice.
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