RMC No. 34-2019 — Clarifies the treatment and reporting requirements of Input Tax as of December 31, 2018 relative to VAT-exempt medicines pursuant to the TRAIN Law Digest | Full Text | Annex A

BUREAU OF INTERNAL REVENUE REPUBLIC OF THE PHILIPPINES DEPARIMENT OF FInANCE Quezon City BUREAUOF INTERNAL REVENUE RECORDS MGt.DIVISION N UI MAR 13,2019 TOAM imta

March 4, 2019

REVENUE MEMORANDUM CIRCULAR NO. .34. -- 2 O/G

SUBJECT : Clarification on the Treatment and Reporting Requirements of Input Tax

as of December 31, 2018 Relative to Value-Added Tax (VAT) Exempt Medicines Pursuant to Section 109 (1) (AA) of the National Internal Revenue Code of 1997, as Amended by Republic Act (RA) No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law

TO : All Internal Revenue Officiais, Employees and Others Concerned

purchased on or before December 31, 2018 by manufacturers, distributors, wholesalers and pertaining to drugs and medicines prescribed for diabetes, high-cholesterol and hypertension retailers which remained unsold as of December 31, 2018. This Circular is issued to clarify the treatment and reporting requirements of input tax

medicines prescribed for diabetes, high-cholesterol and hypertension shall be exempt from VAT beginning January 1, 2019. Considering that input tax attributable to VAT-exempt sale cannot be passed on to the buyer, the following shall be strictiy observed by all concerned: Pursuant to Section 34 of RA No. 10963 or the TRAIN Law, the sale of drugs and

1. Inventory list as of December 31, 2018 of drugs and medicines which became VAT- exempt beginning January 1, 2019 shall be required from all manufacturers, wholesalers, distributors and retailers regardless of whether or not there is an existing excess input tax.

2. The inventory list shall include all drugs and medicines on hand, imported and Iocally manufactured, using the format prescribed in ANNEX "A"

3. The inventory list shall be filed with the Large Taxpayer Service/Revenue District

to the Quarterly VAT Declaration Form (BIR Form 2550Q) for the first quarter of Office where the taxpayer is registered on or before April 25, 2019 as an attachment 2019.

4. As the sale of VAT-cxempt drugs and medicines are made, the input tax corresponding to the sale shall be closed to cost or expense.

SURLiY INTERNAL COMMUNICATIONS DIVISION ASAiSSSs INILKNK- HLVLNUE

G 1 a 2019

Page 2 of 3 Revenue Memorandum Circular No

Illustration 1:

on January 2019 with 30% mark-up. As of December 31, 2018, the taxpayer's list shows the following: High-Cholesterol and Hypertension in the amount of P300,000.00 which were sold excess input tax credit is P150,000.00 and the summary of the taxpayer's inventory On December 2018, the taxpayer purchased medicines prescribed for Diabetes,

Locally Manufactured Medicines Imported Medicines TOTAL Medicines Prescribed for Diabetes. Other Imported Med icines Medicines Prescribed for Diabetes, Other Locally Manufactured Medicines High-Cholesterol & Hypertens ion High-Choles terol & Hypertens ion P 1,250,000.00 Amount 300,000.00 250,000.00 700,000.00 150,000.00 Input Tax 36,000.00 84,000.00 30.000.00

The accounting entries to record the transactions will be:

To record the purchase made in December 2018:

Inventory Input Tax Cash or Accounts Payable 300.000.00 36.000.00 336.000.00

To record the sale made in January 2019:

Cash or Account Receivable Sales / Revenue 390,000.00 390,000.00

To record cost of sale / deduction from inventory:

Cost of Sale. Inventory. 300,000.00 300,000.00

To close the corresponding input tax allocable to VAT-exempt sale:

Cost of Sale / Expense Input Tax 36.000.00 36.000.00

BUREAU OF INTERNAL REVENUE RTYYN MAR 13 2019 I TD"A Mm

A FeCueuaMd DIVISON

Revenue Memorandum Circular No Page 3 of 3

When filing BIR Form 2550M/2550Q, the input tax corresponding to the sale shall be deducted from the taxpayer's allowable input tax as shown below:

13Sale tatabie *:* A 1 00n00niYt N cuout Taxoua ior the Month

390.000.00 ap TH banbxa SOTRECWRAANST 8388388838388387 150,000.00

MYOR DP VoDomET

tnnarEe mot.tem17A.17B.17C.17D&17 A e Stareoodsata G

>x

wices tenderodbvNon-esdents

$8F DorioT 70CC4 36.000.00

22NelVATPayab10f1em16810ssem21 GT'o TputTaxe(itemt91ess l6m20F)sch mof tome DB20C2020EY E N R 80 (114000.00)) 000.00

All concerned revenue officials and employees are hereby enjoined to give this circular as wide a publicity as possible.

1eaM

Commissioner of Internal Revenue CAESAR R. DULAY

BUREAUOF INtERNAL REVENUE ATTYT MAR 13 2019 :ID A M. 024214

AON M RECORDS MGT.DVISION