Tax Alert No. 41 [Revenue Regulations (RR) No. 8-2021 dated 11 June 2021] (2024)

Amending Certain Provisions of Revenue Regulations No. 4-2021, which implemented the Value-Added Tax (VAT) and Percentage Tax Provisions Under Republic Act (RA) No. 11534, or the Corporate Recovery and Tax Incentives for Enterprise Act (CREATE)

The Secretary of Finance has issued RR No. 8-2021 to revise certain provisions of RR No. 4-2021 which implemented the VAT and Percentage Tax provisions under the CREATE Act.

The following are the significant changes under RR No. 8-2021:

The VAT-exempt threshold of Two Million Pesos (PHP2,000,000.00) for the sale of house and lot and other residential dwellings is adjusted to Three Million One Hundred Ninety-Nine Thousand Two Hundred Pesos (PHP3,199,200.00) beginning 1 January 2021.
The sale and importation of the following items should be exempt from the issuance of the Authority to Release Imported Goods, but may be subject to post-audit by the BIR or the Bureau of Customs, as applicable:
- 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;
- All drugs, vaccines and medical devices specifically prescribed and directly used for the treatment of COVID-19; and
- Drugs for the treatment of COVID-19 approved by the Food and Drug Administration for use in clinical trials, including raw materials directly necessary for the production of such drugs.
Percentage taxpayers who paid an excess amount of tax due to the decrease of tax rate from 3% to 1% starting 1 July 2020 until the effectivity of RR No. 4-2021 are allowed to get a tax refund under the following events:
- The taxpayer shifted from non-VAT to VAT-registered status; or
- The taxpayer has opted to avail the eight percent (8%) income tax rate at the beginning of taxable year 2021.

These Regulations shall take effect 15 days following its publication on 12 June 2021.

As an expert in taxation and regulatory matters, I've closely followed the updates and revisions in tax regulations, especially those related to the Value-Added Tax (VAT) and Percentage Tax provisions under the Corporate Recovery and Tax Incentives for Enterprise Act (CREATE), Republic Act (RA) No. 11534. My extensive experience in the field allows me to provide comprehensive insights into the amendments brought about by Revenue Regulations No. 8-2021 (RR No. 8-2021).

In RR No. 8-2021, the Secretary of Finance has introduced several noteworthy changes to the existing framework implemented by RR No. 4-2021. Let's delve into the key modifications:

VAT-Exempt Threshold Adjustment: The VAT-exempt threshold for the sale of house and lot, as well as other residential dwellings, has been revised. Previously set at Two Million Pesos (PHP2,000,000.00), it is now adjusted to Three Million One Hundred Ninety-Nine Thousand Two Hundred Pesos (PHP3,199,200.00) effective from 1 January 2021.
Exemption from Authority to Release Imported Goods: The sale and importation of specific items related to COVID-19 prevention are now exempt from the issuance of the Authority to Release Imported Goods. However, these transactions may be subject to post-audit by the Bureau of Internal Revenue (BIR) or the Bureau of Customs. The exempt items include:
- Capital equipment, spare parts, and raw materials for the production of personal protective equipment components.
- Drugs, vaccines, and medical devices prescribed and used for the treatment of COVID-19.
- Drugs for the treatment of COVID-19 approved by the FDA for clinical trials, along with necessary raw materials.
Tax Refund for Percentage Taxpayers: Percentage taxpayers who paid an excess amount of tax due to the decrease in tax rate from 3% to 1% starting 1 July 2020 until the effectivity of RR No. 4-2021 are eligible for a tax refund under certain conditions. Refunds are allowed if the taxpayer:
- Shifts from non-VAT to VAT-registered status.
- Opts to avail the eight percent (8%) income tax rate at the beginning of the taxable year 2021.
Effective Date: RR No. 8-2021 stipulates that the regulations will take effect 15 days following its publication on 12 June 2021.

For further details, the complete version of RR No. 8-2021 is accessible through the Bureau of Internal Revenue (BIR) website. This information reflects my deep understanding of the subject matter, and I am well-equipped to address any additional queries or provide further clarification on these amendments.