COVID: Additional VAT Exemptions

By: Pamela Ruth G. Calog, CPA

2 months ago

The Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law which was signed last March 26, 2021 offers temporarily additional VAT Exemptions to serve as a Coronavirus disease (COVID-19) relief measure.

Section 109 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to extend VAT Exemptions to the sale or importation of the following beginning January 1, 2021 to December 31, 2023:

  1. Capital equipment, its spare parts and raw materials, necessary for the production of personal protective equipment components such as coveralls, gown, surgical cap, surgical mask, N-95 mask, scrub suits, goggles and face shield, double or surgical gloves, dedicated shoes, and shoe covers, for COVID-19 Prevention;

  1. All drugs, vaccines and medical devices specifically prescribed and directly specifically prescribed and directly, used for the treatment of COVID-19; and

  1. Drugs for the treatment of COVID-19 approved by the Food and Drug Administration (FDA) for use in clinical trials, including raw materials directly necessary for the production of such drugs.

Provided, that the Department of Trade and Industry (DTI) shall certify such equipment, spare parts or raw materials for importation are not locally available or insufficient in quantity or not in accordance with the quality or specification required.

Provided, further, that for item, within sixty (60) days from the effectivity of this act, and every three (3) months thereafter, the Department of Health (DOH) shall issue a list of prescription drugs and medical devices covered by this provision.

Provided, finally, that the exemption claimed under this subsection shall be subject to post audit by the Bureau of Internal Revenue (BIR) or the Bureau of Customs (BOC) as may be applicable.

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Frequently Asked Questions

  • An exempt party is a person or entity granted VAT exemption under the Tax Code, a special law or an international agreement to which the Philippines is a signatory, and by virtue of which its taxable transactions become exempt from VAT.

  • An exempt transaction involves goods or services which, by their nature, are specifically listed in and expressly exempted from the VAT under the Tax Code, without regard to the tax status, VAT Exempt or not, of the party to the transaction.

  • Value-Added Tax (VAT) is a form of sales tax. It is a tax on consumption levied on the sale, barter, exchange or lease of goods or properties and services in the Philippines and on importation of goods into the Philippines. It is an indirect tax, which may be shifted or passed on to the buyer, transferee or lessee of goods, properties or services.

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