REVENUE MEMORANDUM CIRCULAR NO. 34-2019 issued on March 13, 2019 clarifies the treatment and reporting requirements of Input Tax pertaining to drugs and medicines prescribed for diabetes, high-cholesterol and hypertension purchased on or before December 31, 2018 by manufacturers, distributors, wholesalers and retailers which remained unsold as of December 31, 2018.

An Inventory List of drugs and medicines as of December 31, 2018, which became VAT-exempt beginning January 1, 2019 pursuant to Section 34 of Republic Act No. 10963 (TRAIN Law), shall be required from all manufacturers, wholesalers, distributors and retailers regardless of whether or not there is an existing excess Input Tax.

The Inventory List, which shall include all drugs and medicines on hand, imported and locally-manufactured shall be filed (using the format prescribed in Annex A of the Circular) with the Large Taxpayer Service/Revenue District Office where the taxpayer is registered on or before April 25, 2019, as an attachment to the Quarterly VAT Declaration Form (BIR Form 2550Q) for the first quarter of 2019. When filing BIR Form 2550M/2550Q, the Input Tax corresponding to the sale shall be deducted from the taxpayer’s allowable Input Tax.

As the sale of VAT-exempt drugs and medicines are made, the Input Tax corresponding to the sale shall be closed to cost or expense.