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BIR clarifies COVID-19 drug VAT exemptions

The Bureau of Internal Revenue (BIR) clarified that only medicines and medical devices for the treatment of coronavirus disease 2019 (COVID-19) included in an updated government list will be exempt from value-added tax (VAT). 

The medical products are only those included in a list submitted by the Food and Drug Administration (FDA) in June, BIR said in a press release on Thursday. 

“Only the medicines and medical devices for COVID-19 with the corresponding dosage strength, and dosage form and route of administration included in the consolidated Iist of VAT-exempt Products submitted by the FDA to the BIR shall be considered as exempt from VAT,” the bureau said.  

The clarification was done in response to stakeholders who have asked about the VAT exemption of medicines for diabetes, high cholesterol, hypertension, cancer, mental illness, tuberculosis, kidney diseases, drugs and vaccines, and medical devices prescribed and directly used for COVID-19 treatment under the Tax Code, as amended by the TRAIN Law and the CREATE Act. 

The Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act allows for the VAT exemption of the importation and sale of medicines and medical devices used to treat COVID-19. 

The VAT exemptions of said medicines and devices took effect on June 17, the day the FDA published its list. 

According to BIR memorandum circular 99-2021 issued last month,  any list provided by the FDA prior to the one issued in June are no longer in effect. 

“The consolidated list was intended to update the previous lists for ease of reference and for use by all stakeholders concerned,” BIR said. 

Unutilized input VAT on now VAT-exempt inventories may be carried over to the succeeding taxable quarters or be charged as part of cost. 

The BIR also said that there will be no tax refund “for the supposed erroneously paid VAT on local purchases and importation.” 

“A tax refund may be allowed only in cases where there is a change of status from VAT to Non-VAT registration.” — Jenina P. Ibañez 

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