List of VAT-exempt Diabetes, High-Cholosterol and Hypertension Drugs Prescribed by FDA

In compliance with Joint Administrative Order (JAO) No. 2-2018 entitled "Implementing Guidelines on the Value-Added Tax (VAT) Exemption on the Sale of Drugs Prescribed for Diabetes, High-Cholesterol and Hypertension under Republic Act No. 8424 Otherwise Known as the National International Revenue Code of 1997, as Amended by Republic Act No. 10963", Revenue Memorandum Circular (RMC) No. 4-2019 has issued by the bureau publishing the full text of the letter from the Food and Drug Administration (FDA) containing the "List of VAT-exempt Diabetes, High-Cholosterol and Hypertension Drugs".

Please refer: https://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/RMC%20Full%20Text%202019/Letter.pdf of the letter dated January 10, 2019 from Atty. Katherine M. Austria-Lock, OIC Center for Drug Regulation and Research, FDA. 

For the List of VAT-exempt Drugs Prescribed, please consider the links as follows:

1. https://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/RMC%20Full%20Text%202019/Diabetes.pdf for the Sale of Drugs Prescribed for Diabetes;

2. https://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/RMC%20Full%20Text%202019/High-Cholesterol.pdf for the Sale of Drugs Prescribed for High-Cholesterol and

3. https://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/RMC%20Full%20Text%202019/Hypertension.pdf for the Sale of Drugs Prescribed for Hypertension.

Please refer: https://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/RMC%20Full%20Text%202019/RMC%20No%204-2019.pdf of the full text of RMC No. 4-2019.

Application for Registration for Individuals Earning Compensation Income (BIR Form No. 1902)

In relation with Republic Act No. No. 10963, Revenue Regulations (RR) No. 1-2020 has issued by the bureau amending Section 8 of RR No. 11-2018 to read as follows:

"SECTION 8. Section 2.79.1 of RR No. 2-98, as amended, is hereby amended and shall read as follows:

SECTION 2.79.1. Application for Registration for Individuals Earning Compensation Income (BIR Form No. 1902). - The application for registration of employees shall be accomplished by both employer and employee relating to the following information and other requirements:

(A) Employee - xxx

(B) Employer - xxx

(C) Procedures for the filing of the Application for Registration (BIR Form No. 1902) and/or Application for Registration Information Update (BIR Formm No. 1905).

(1) All employers shall require their concerned employees to accomplish in triplicate the Application for Registration BIR Form 1902 (if the employee does not have existing TIN), distributed as follows:

(1.1) Original copy - RDO;

(1.2) Duplicate - employer; and

(1.3) Triplicate - employee

The said forms shall be accomplished and submitted based on the following manner:

(a) xxx

(b) In case of changes in the information data in the Application for Registration (BIR Form No. 1902) previously submitted by the employee to its current employer, such as changes in employment, multiple employment status and amount of compensation income, the employee should furnish his/her employer a copy of BIR Form No. 1905 duly stamped received by the RDO where the employee is registered. The employer shall then make the necessary adjustments on the withholding tax of the employee based on the new information;

(2) Registration and information updates of employees receiving purely compensation income shall follow the existing policies and procedures thereon."

Please refer: https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%202020/RR%20NO.%201-2020.pdf of the full text of RR No. 1-2020.

Top Withholding Agents Who Are Obliged to Remit 1% and 2% Creditable Withholding Taxes

As part of ease of doing business, the bureau has issued Revenue Memorandum Circular (RMC) No. 143-2019 dated December 16, 2019 for the clarifications on the inclusion of Taxpayers as Top Withholding Agents who are obliged to remit the 1% and 2% Creditable Withholding Taxes Pursuant to the Criteria of Revenue Regulations (RR) No. 7-2019.

It is clearly stated in the regulations that it should be observed in the revenue regulations (RR No. 12-94; RR No. 17-2003; RR No. 14-2008 and RR No. 6-2009) that the obligation to withhold and remit these CWTs to this Bureau is mandated only to those taxpayers whose business operations have a significant level of economic impact contributory to the collection of revenues. Under this perspective, more potential revenues can be detected and collected by this Bureau through the other stakeholders and business partners of these taxpayers. Based on this rationale that RR No. 7-2019 was issued in order to simplify the criteria for the selection of Top Withholding Agents (TWAs), which were introduced by RR No. 11-2018.

Further, in implementing the said Regulations and consistent to the policy of ease of doing business by ensuring that the list of TWAs only reflect taxpayers who are complaint to the prescribed criteria of RR No. 7-2019, Operations Memorandum (OM) Order No. 20-2019 was issued by the Deputy Commissioner for Operations Group to all Regional Director's and Revenue District Officers. The OM excludes the following taxpayers in the identification of TWAs although they have satisfied the prescribed criteria of the said RR:

a. National government agencies. government-owned controlled corporations. state

universities and colleges. and local government units:

b. Taxpayers who were included because of one-time  transactions (i.e. estate and donor's tax);

c. Individual taxpayers deriving income on commission basis such as but not limited to insurance agent, and real estate broker, subjext to verification of their duly-filed 2018 Quarterly Income Tax Returns (BIR Form No. 1701Q) in order to determine the regularity of their transactions. Accordingly, if the P12M criteria has been satisfied only in one (1) taxable quarter, the taxpayer shall not be qualified as TWA; and

d. Taxpayers who are tax exempt from payment of income taxes with no proprietary activities (i.e. foundations. non-stock. non-profit and tax exempt educational

institutions, religious and charitable institutions. etc.).

On the basis of the above discussions and clarifications, in cases of publication of TWAs in the newspaper of general circulation wherein certain taxpayers are included or not deleted in existing list of TWAs but do not satisfy the criteria of RR No. 7-2019, or if they may have satisfied the same but qualify as taxpayers enumerated in OM No. 20-2019 who should be excluded from the list of TWAs, these taxpayers cannot be compelled to withhold the 1% and 2% CWTs.

Please refer: https://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/RMC%20Full%20Text%202019/RMC%20No.%20143-2019.pdf of the full text of RMC No. 143-2019.