Cheaper medicine for every Juan

Font Size
Iris Kristine D. Lacebal

Taxwise Or Otherwise

Last year, the government’s initiative to reform the tax system kicked off when Republic Act 10963 or the “Tax Reform for Acceleration and Inclusion” (TRAIN) Law took effect. To promote a healthy lifestyle and provide better health care for Filipinos, the TRAIN Law amended provisions in the National Internal Revenue Code on value-added tax (VAT), expanding the list of VAT-exempt transactions to include sale of drugs and medicines prescribed for diabetes, high cholesterol, and hypertension starting Jan. 1.

By way of implementing guidelines, the Bureau of Internal Revenue (BIR) issued Revenue Regulations (RR) No. 25-2018 on Dec. 21 to cover the identification and sale transactions of VAT-exempt drugs and medicines. On that same day, a Joint Administrative Order was signed by coordinating government agencies mandated to implement this VAT exemption policy, namely the Department of Health (DoH), Food and Drug Authority (FDA), Department of Finance (DoF), and the BIR.

Under the RR, the VAT exemption shall apply to sales made by manufacturers, distributors, wholesalers and retailers of the identified drugs and medicines beginning the first day of 2019. However, the importation of these drugs and medicines shall remain subject to VAT under Section 107 of the Tax Code.

Further, the joint order clarified that the VAT exemption granted to persons under RA No. 7432 (otherwise known as the Senior Citizens Act of 1992) and RA No. 7277 (also known as the Magna Carta for Persons with Disability) shall not be covered by the guidelines. This means that senior citizens and persons with disabilities (PWD) shall continue to enjoy VAT-exemption and a discount of 20% on their medicine purchases, regardless of whether or not such medicines are for diabetes, high cholesterol and hypertension, and whether or not they have been identified as VAT-exempt medicines by the implementing agencies.

To commence implementation, the FDA is tasked to come up with a list of VAT-exempt drugs and medicines. The list shall be provided to the DoH and BIR 30 days prior the beginning of every quarter, and thereafter be posted in the BIR website through a revenue memorandum circular. Any update, such as registration of new and/or additional drugs and medicines, as well as deregistration of those previously published by the FDA, shall likewise be posted in the BIR website. Consequently, any sale of drugs and medicines excluded from the FDA list shall be subject to applicable VAT unless purchased by a senior citizen or PWD.

On the side of DoH, it is mandated to ensure the affordability and accessibility of medicines that promote the health and well-being of Filipinos. Specifically, the DoH is tasked to institute a drug price monitoring and regulation system under the Universally Accessible Cheaper and Quality Medicines Act of 2008. As coordinating agency, the DoF shall monitor the revenue impact of the VAT exemption.

To document the transaction, a VAT-exempt invoice must be issued by the seller in accordance with the invoicing requirements of the Tax Code and other applicable regulations. In addition, the word “VAT-EXEMPT” must be indicated prominently on the issued invoice.

Any person who violates the provisions of RR No. 25-2018 shall be punished with a fine of not more than P1,000 or suffer imprisonment of not more than six months, or both, in addition to payment of the required tax, if any. Complaints for non-compliance or violations of the Regulations may be filed with the BIR thru

Having taken the initial step of exempting medications for the three most dreaded diseases among Filipinos, the TRAIN Law is on its way to boosting the Philippine health care system. With the right momentum, the current tax reform program aims to upgrade 704 local hospitals and 25 new rural and urban health units to disaster-resilient facilities, build 15,988 new barangay health stations and 2,424 new rural health units and urban health centers.

Many are now hoping that with the exemption from VAT of these drugs and medicines, the government will also consider the possibility of broadening the regulation’s coverage to include other kinds of pharmaceutical products. In this way, the rising cost of consumer goods, which many Filipinos attribute to the enactment of the TRAIN law, could somehow be compensated with improved health benefits.

In these times when the cost of health care is exorbitant and inaccessible, the expression, “Mahirap magkasakit” rings truer than ever for an ailing body and an empty pocket. The implementation of the VAT exemption on covered drugs and medicines finally brings good news from the tax reform law. We can now see that tax policies are being formulated not only to raise state revenue, but more relevantly, to improve the quality of public health care by making it cheaper for everyone.

The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.


Iris Kristine D. Lacebal is a manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.

(02) 845-27 28