REVENUE MEMORANDUM CIRCULAR NO. 21-2026 issued on March 19, 2026 amends the relevant provisions of Revenue Memorandum Circular (RMC) No. 40-2007 regarding tax treatment of development assistance activities carried out by the Foreign Assistance Section of the United States Embassy in the Philippines.
The processing and issuance of VAT Exemption Certificates (VECs) shall follow the procedures set forth in Revenue Memorandum Circular (RMC) No. 40-2007.
In order to align the provisions of the Circular with the existing laws and revenue issuances, the following provisions of RMC No. 40-2007 are hereby amended:
a. Section 2:
Revenue Memorandum Order (RMO) No. 22-2004 shall be replaced with RMO
No. 10-2019.
b. The appropriate VAT treatment under Section 7 shall be governed by the following:
i. Sections 106(A)(2)(b), 108(8)(3), and 109(1)(CC) of the National Internal Revenue Code of 1997, as amended (Tax Code); and
ii. Sections 4.106-5(b) and 4.108-5(b)(3) of Revenue Regulations (RR) No. 16-
2005, as amended by RR No. 10-2025
c. 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. 11976, otherwise known as the Ease of Paying Taxes Act.
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 of goods or services relating to USAID-implemented activities until the thirtieth (30th) day from the issuance of this Circular, which shall constitute as the end date.
The US-FAS is given thirty (30) days within which to surrender the VECs issued by the BIR, through the International Tax Affairs Division (ITAD), to USAID and its implementing agents for activities that remain ongoing after the said end date. VECs that are not returned to the issuing authority within the prescribed period shall be deemed automatically revoked and rendered without force and effect.
The functions and responsibilities under RMC No. 40-2007 that were vested in officials and offices 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 transferred to the corresponding officials and offices of the latter.