RMC No. 21-2026 — Tax Treatment of Development Assistance Activities Carried Out by the Foreign Assistance Section of the United States Embassy in the Philippines Digest | Full Text

REPUBL]C OF T]IIi PHILIPPINES DLPART]\'1I:\'1 oI FINANCE RUREAU OI' IN'I'T]RNAI- RfvENUE /' il;it B.ACONC Bringjng ln Revenues PIL'P'NAS for Nation-Building l4AR I S 2026 REVENUE MEMORANDUM CIRCIJLAR NO. 2I-2026 SUBJECT: Tax Treatment ofDevelopment Assistance Activities Canied Out by the Foreign Assistance Section ofthe United States Embassy in the Philippines TOr All Intemal Revenue Officials, Employees, and Others Concemed Section 1. Background and Purpose In 1951, the Philippines and the United States of America (U.S.) signed the Agreemeht ot1 Econofiic and Technical.Coopetation beh4een the Governnent of the Phil@irres and lhe Gorernment of lhe United States of America (the 1951 Agreerneht), whereby the fomer agreed to receive a Special Technical and Economic Mission (STEM) for the purpose of discharging the responsibilities of the U.S. Govemment in the Philippines under the said Agreement and, upon appropriate notification fiom the U.S. Ambassador in the Philippines, to considerthe STEM (including experts) and its personnel as part ofthe US Diplomatic Mission for the purpose ofenjoying the same privileges and immunities accorded to such mission. Thus, after rece ipt ofthe required notification on December 18,2006, the Philippine Govemment recognized the United States Agency for Intemational Development (USAID) as the STEM ofthe US Govemment in the Philippines. On June 14, 2007, the Bureau of lntemal Revenue (BlR) issued Revenue Memorandum Circrilar (RMC) No. 40-2007 to lay down the coverage ofand basis for the value added tax (VAT) zero-rating or exemption and direct tax exemption of the USAID and its recognized implementing agents in connection with their development assistance activities in the Philippines, and to prescribe the guidelines for the implementation thereof with respect to the purchase ofgoods and services associated with said activities. On June 23, 2025, the U.S Ambassador informed the Philippine Government ofthe replacement ofthe USAID by the Foreign Assistance Section ofthe U.S. Embassy in the Philippines (US-FAS) effective Jdy 1,2025. The US-FAS is part of the Diplomatic Mission ofthe Govemment ofthe U.S. in the Philippines. This Circular is hereby issued to amend the relevant provisions ofRMC No. 40- 2007 insofar as it concems the USAID and to accord or extend to the US-FAS the same privileges and exemptions previously granted to the former. .\G-/\ BUREAU OMF4NINAT'rEENMNEANL TRDElVVEI5NIOUNE HECOSD5 l',lAR 19 2020 I J oqt R uNt T 8Y: faDMll{ TIMT; BIR National Office Bldg., Senator l\,,liriam Defensor-Santiago Avenue, Diliman, Quezon Cjty W ehsite: www. b i r. gov. p h Trunkline: 8981-7000 i 8929-7676

For the purposes ofthis Circular, the terms 'United States Agency for International Development'and 'USAID' as used in RMC No. 40-2007 shall be replaced with ,Foreign Assistance Section ofthe U.S. Embassy in the Philippines, and 'US-FAS,, respectively. Section 2 Issuance of VAT Exemption Certificates (VECS); Responsibilities of all Parties The processing and issuance of VAT Exemption Certificates (VECs) shall follow the procedures set forth in RMC No. 40-2007. Section 3. Amendments and Revisions In order to align the provisions ofthis Circular with the existing laws and rcvenue issuances, the following provisions ofRMC No. 40-2007 are hereby amended: l. Section 2: Revenue Memorandum Order (RMO) No. 22-2004 shall be replaced with RMO No. I0-2019. 2. The appropriate VAT treatment under Section 7 shall be governed by the following: a. Sections 106(AX2Xb),r 108(BX3), and 109(|XCC): ofthe National lnternal Revenue Code of 1997, as amended (Tax Code); and b. Sections 4.106-5(b)r and 4.108-5(b)(3) ofRevenue Regulations (RR) No. t6- 2005, as amended by RR No. l0-2025 3. Section 8 The term 'receipt' and 'official receipt' shall be deleted, and only the term .invoice' shall be retained, pursuant to the amendments introduced by Republic Act No. ! 1976, otherwise known as the Ease ofPaying Tares Act. SectioD 4. Transitory Provision VAT-registered taxpayers shall continue to honor all VECs issued to USAID and its implementing agents and shall, therefore, apply the zero-percent (0%) VAT rate on the sale ofgoods or services relating to USAID-implemented activities untit the thirtieth (30th) day from the issuance ofthis Circular, which shall constitute as the end date. The US-FAS is given thirry (30) days within which to surrender the VECS issued by the BlR, through the lnternational Tax Aflairs Division (ITAD), to USAID and irs implementing agents for activities that remain ongoing after the said end dare. VECS that I Forrnerly Section 106(A)(2)(c) ofth Tax Code r'? Formerly Secrion 109(l)(V) ofrhe Tax Code. ,L47\SURRCEOAFUD5 OF INTERNAL REVENI]E Section 4.106-5(c) ofLR No. l6-2005. MANAGfMENT DIVISION le l'{AR 2020 I 2 R oDMtN uNtr^.,l J:|0ft1 BY:

are not returned to the issuing authority within the presc bed period shall be deemed automatically revoked and rendered without force and effect. Finally, the functions and responsibilities under RMC No. 40-2007 that were vested in oflicials and oflices which.have since been rendered defunct or otherwise inoperative by reason of the substitution of USAID by the US-FAS shall, by operation hereof, be deemed transGffed to the corresponding oflicials and offices ofthe latter. SECTION 5. Repealing Clause All revenue issuances, or pertinent portions thereof, that are inconsistent with the provisions ofthis Circular are hereby repealed, modified, o. amended accordingly. SECTION 6. Effectivitv This Circular shall take effect immediately. All concemed are hereby enjoined to be guided accordingly and give this circulqr as wide a publicity as possible. CHARLITO MARTIN R. Commissioner of Intcmal Revenue ,(iBUREAU 91,^,^lilrl,xA,,rLE,Yt"r"E R llAR 19 2026 B-vr lN UntT - 1 3:t1ffi