THE BUREAU of Internal Revenue (BIR) is ready to implement the value-added tax (VAT) exemption for prescription drugs to treat medicine diabetes, high cholesterol, and hypertension beginning Jan. 1, 2019, as called for by the Tax Reform for Acceleration and Inclusion (TRAIN) law.
BIR Revenue Regulation 25-2018 dated Dec. 21 and signed by Finance Secretary Carlos G. Dominguez III and BIR Commissioner Caesar R. Dulay, laid out the implementing rules and regulations (IRR) on the VAT-exempt status of drugs for the treatment of selected cardiovascular and related diseases.
Under the TRAIN law, the 12% VAT will not apply to drugs for diabetes, high cholesterol, and hypertension starting Jan. 1, 2019.
“The exemption from VAT provided herein shall apply to the sale by manufacturers, distributors, wholesalers, and retailers of drugs and medicines prescribed for the treatment and/or prevention of diabetes, high cholesterol and hypertension starting January 1, 2019,” according to the BIR regulation.
However, it clarified that “the importation of the above-described drugs and medicines shall be subject to VAT.”
It said that the Food and Drug Authority (FDA) will identify and publish a list of drugs eligible for the VAT-exempt status, and those that are not part of the list will be subject to the 12% VAT.
The regulation also said that individuals who violate the provision shall be fined not more than P1,000, and/or be jailed for not more than six months.
A separate Joint Administrative Order issued by the BIR, Department of Finance (DoF), Department of Health (DoH), and the FDA, meanwhile spelled out the various agencies’ responsibilities in implementing the measure.
It said that manufacturers, distributors, and retailers should report the prices of the affected drugs to the DoH’s Electronic Drug Price Monitoring System. It also said that within 60 days of effectivity of the guidelines, stakeholders should submit to the DoH a sworn statement containing the wholesale price, suggested retail price, and actual retail price of the affected drugs before and after the effectivity of the guidelines.
The TRAIN law seeks to make the tax system more efficient and equitable while raising revenue for the government’s socioeconomic priorities.
The law sought to expand the tax base and make it simpler and fairer by, among others, repealing some 54 out of 61 special lows providing for VAT exemptions, and limiting it to vital sectors such as agriculture, food, education, and health.
The DoF has yet to respond to queries as of press time on how the VAT exemption will affect revenues for 2019 onwards. — Elijah Joseph C. Tubayan
