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New Year will be welcomed by VAT-exemption on some medicines starting 2019

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Good news welcomes Filipinos for the New Year 2019, as the government prepares to implement the exemption of value-added tax (VAT)  on sale of medicines for hypertension, high cholesterol and diabetes.

The Bureau of Internal Revenue released Revenue Regulations 25-2018 implementing the VAT exemption for prescription drugs used to treat cardiovascular diseases and diabetes starting Jan. 1, 2019. This is mandated by the Tax Reform for Acceleration and Inclusion Act, or TRAIN law.

However, BIR made it clear that “importation of the above-described drugs and medicines shall be subject to VAT.

Implementation of VAT exemption will cover to the “sale by manufacturers, distributors, wholesalers and retailers” of the medicines, which will be identified by the Food and Drug Authority.

The FDA’s list of VAT-exempt drugs will be posted on the BIR website thru a memorandum circular.

“Any update, such as registration of new and/or additional drugs and medicines, as well as de-registration of those previously published by the FDA, shall likewise be posted in the BIR Website,” the revenue bureau said.

To make the VAT system “fairer” and plug sources of “massive leakages,” TRAIN repealed 54 out of 61 special laws with “non-essential” VAT exemptions, and limited the relief to agriculture, education and health.

But purchases of senior citizens and persons with disability continue to be VAT-free.

Since the TRAIN law was implemented, the public expressed opposition to this due to the perceptions that higher excise levies on fuel and other goods covered by the law has contributed to the highest inflation record almost after 9 years.

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