BIR exempts imported diabetes drugs from VAT

THE Bureau of Internal Revenue (BIR) is exempting imports of prescription drugs to treat diabetes, high cholesterol and hypertension from value-added tax (VAT).

Revenue Regulations (RR) No. 18-2020, which was signed on June 30 but published on July 9, stated that the sale or importation of prescription drugs and medicines for diabetes, high cholesterol and hypertension are exempted from the 12% VAT starting Jan. 1, 2020.

VAT collected from these drugs from Jan. 27, 2020 until the effectivity of the new rules will be refunded, “provided that the input tax on the imported items have not been reported and claimed as input tax credit in the monthly and/or quarterly VAT returns,” the BIR said.

Department of Health Food and Drug Administration (DOH-FDA) approved on Jan. 27 a list medicines eligible for tax privileges under Republic Act (RA) No. 11467.

At the same time, drugs and medicines for cancer, mental illness, tuberculosis and kidney diseases will also be VAT-exempt beginning Jan. 1, 2023.

“The exemption from VAT under this subsection shall only apply to the sale or importation by the manufacturers, distributors, wholesalers and retailer of drugs and medicines included in the ‘list of approved drugs and medicines’ issued by the DoH for this purpose,” the regulation stated.

The latest directive amends the RR 25-2018 issued in December 2018 when the BIR laid out the rules on the VAT-exempt status of drugs for the treatment of selected cardiovascular and related diseases that did not include imported drugs.

Under the Tax Reform for Acceleration and Inclusion (TRAIN) Act, drugs for diabetes, high cholesterol, and hypertension were VAT-exempt starting Jan. 1, 2019.

NEW TAX RATES FOR TOBACCO
The BIR also released the new tax rates for tobacco, heated tobacco, vapor, and nicotine-based products.

Revenue Memorandum Order (RMO) No. 20-2020 outlined the new excise tax rates on cigarettes packed by machines to P45 per pack starting this year, increasing it to P50 in 2021, P55 in 2022 and P60 in 2023.

An excise tax of P10 was imposed on a pack of heated tobacco on Jan. 1, 2020, which was raised to P25 on Jan. 27. This will go further to P27.50 per pack beginning 2021, P30 in 2022 and P32.50 in 2023.

Salt nicotine-based vapor products were slapped with a P37 per milliliter (ml) specific tax on Jan. 27 this year, which will increase to P42 in 2021, P47 in 2022 and P52 in 2023.

Meanwhile, vapor products with conventional nicotine were charged P45 per 10 ml on Jan. 27, and will be raised to P50 starting 2021, P55 in 2022 and P60 in 2023.

BIR has also set an inspection fee worth 10 centavos per 1,000 units of heated tobacco products and a fee of one centavo per ml of vapor products.

This is set to increase by P5 annually until it reaches P60 in 2023. All these rates will be increased by 5% every year effective Jan. 1, 2024.

Finance Secretary Carlos G. Dominguez III had said the new rates will be applied retroactively.

The guidelines also laid out the new rates as mandated under RA 11346 signed into law in July 2019 imposing higher rates for tobacco products, as well as RA 10351 that restructured the excise tax on alcohol and tobacco products passed in 2012.

Meanwhile, specific tax for cigars rose to P6.57 each starting Jan. 1, and will increase to P6.83 next year, P7.10 in 2022 and P7.38 in 2023. The ad valorem tax was kept unchanged at 20% of the net retail price per cigar.

Cigarettes packed by hand were also slapped with a higher rate of P45 per pack at the start of 2020, before increasing to P50 in 2021, P55 in 2022 and P60 in 2023.

The new rates for chewing tobacco that are unsuitable for use in any other manner were hiked to P1.97 per kilogram this year. This will be raised to P2.05 next year, P2.13 in 2022 and P2.22 in 2023. — Beatrice M. Laforga