Republic Act No.

11534, The Corporate Recovery

and Tax Incentives for Enterprises Act
(CREATE)
Online Briefing
13 April 2021
Revenue Regulations No. 4 – 2021
(Published in the Philippine Star
on April 9, 2021)

Implements the New Items of VAT

Exemption and Temporary Reduction
of Percentage Rate under RA No.
11534 or the CREATE Act
Th r e e ( 3 ) I t e m so f V A T Ex e m p t i
on
(1) Sale, importation, publication of digital or electronic format
of books, any newspaper, magazine, journal, review bulletin
and educational reading materials covered by the UNESCO
Agreement on the importation of educational, scientific and
cultural materials;
(2) Sale or importation of prescription drugs and medicines (for
diabetes, high cholesterol, hypertension, cancer, mental illness,
tuberculosis and kidney diseases), (maintenance drugs); and,

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Th r e e ( 3 ) I t e m so f V A T Ex e m p t i
on
(3) Sale or importation of capital equipment, spare parts and raw
materials for the production of personal protective equipment
(PPE) components; sale or importation of drugs, vaccines and
medical devices for the treatment of COVID-19, including raw
materials directly necessary for the production of drugs for
treatment of COVID-19 (temporary COVID-19 measures)

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Ve t o e d VA T E x e m p t i
o n  The reversion of the sale of low cost housing and residential
lot as a VAT-exempt transaction
 Increasing the threshold value of the sale of residential lot to
2.5 Million
 Increasing the threshold value of the sale of house and lot and
other residential dwellings to P4.2 Million

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SE C T I O N 2 . AM E NDM E
NT S
(V A T E xe m p t T ra n s a
Reiteration of the provision of RA No. 10963, or the TRAIN Law, on sale
ctofireal
o nproperties
s)
That beginning January 1, 2021, the VAT exemption shall only apply to
 sale of real properties not primarily held for sale to customers or held
for lease in the ordinary course of trade or business;
 sale of real property utilized for socialized housing as defined by
Republic Act No. 7279, as amended; and,

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SE C T I O N 2 . AM E NDM E
NT S
(V A T E xe m p t T ra n s a
ct i on sale
s ) of house and lot, and other residential dwellings with selling price of
not more than P2Million, as adjusted in 2011 using the 2010 Consumer
Price Index values; Provided, That every three (3) years thereafter, the
amounts stated herein shall be adjusted to its present value using the CPI
values, as published by the Philippine Statistics Authority (PSA).

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Ta k e N o t e
: The adjustment of the threshold amount of 1.5 Million for sale of
residential lot and of 2.5 Million for sale of house and lot and other
residential dwellings in 2011 using the 2010 CPI was made thru RR
No. 16-2011
- 1.5 Million became P1,919,500.00 (residential lot)
- 2.5 Million became P3,199,200.00 (house and lot)

Applying the formula in RR 16-2011, the P2 Million, as adjusted in

2011 using the 2010 CPI values is P2,599,300.00

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April 2021
Fi rs t I t e m o n V A T E x em p t i o
n:
Sale, importation, printing or publication of the digital and
electronic format of books, and any newspaper, magazine,
journal, review bulletin, or any such educational reading material
covered by the United Nations Educational, Scientific and Cultural
Organization (UNESCO) Agreement on the importation of
educational, scientific and cultural materials.

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April 2021
Re q u i r e m e n t s t o Warrant VA T
E x eenumerated
(1) That the materials m p t i o nherein
: are not devoted principally to the
publication of paid advertisements; and,
(2) That the materials enumerated herein are compliant with the requirements
set forth by the National Book Development Board pursuant to R.A. No.
8047 or the Book Publishing Industry Development Act.

The VAT exemption of the sale, importation or publication of the digital

and electronic format of books, etc., begins upon the effectivity of
CREATE on April 11, 2021.

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April 2021
Se c o n dIt e m o f V A T E xe m p ti
on
Sale or importation of prescription drugs and medicines for:
(i) Diabetes, high cholesterol, and hypertension beginning
January 1, 2020 onwards; and,
(ii) Cancer, mental illness, tuberculosis, and kidney diseases
beginning January 1, 2021 onwards.

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Re q u i r e m e n t s t o W a r r a n t VA T E x e m p t i o n :

 the drugs and medicines are included in the “list of approved

drugs and medicines” issued by the Department of Health
(DOH)

Once the BIR receives the DOH’s list of approved drugs and
medicines, the CIR issues a revenue issuance circularizing the DOH
list for the information and observance of all concerned revenue
personnel

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April 2021
Th i r d It e m o f V A T Ex e m p t i
oSale
n or importation of the following beginning January 1, 2021 to December 31,
2023 or for a 3-year period:
(i) Capital equipment, its spare parts and raw materials, necessary for the production
of personal protective equipment (PPE) 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;
(ii) All drugs, vaccines and medical devices specifically prescribed and directly used for
the treatment of COVID-19;
(iii) 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.

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April 2021
Re q u i r e m e n t s t o W a r r a n t VA T E x e m p t i o n :
For item (i), the Department of Trade and Industry (DTI) shall certify
that 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.
For item (ii), the prescription drugs and medical devices are included
in the DOH list, to be issued within sixty (60) days from the
effectivity of the CREATE, and every three (3) months thereafter

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April 2021
Re q u i r e m e n t s t o Warrant VA T
E xone the
For items (i) and (iii), m psale
t i oornimportation
: of equipment, spare parts and
raw materials for the production of PPE components as well as the sale or
importation of raw materials directly necessary for the production of drugs for the
treatment of COVID-19, the supplier/s or importer shall submit, for the purpose of
availing the exemption, the following:
(1) Certified true copy of “License to Operate”, issued to the manufacturer-
buyer by the DOH-FDA authorizing the manufacture of medical grade
PPE components and drugs for the treatment of COVID-19; and
(2) “Sworn Declaration” from the manufacturer-buyer that the items shall be
used for the manufacture of the PPE components and drugs for the
treatment of COVID-19.

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April 2021
Ta k e N o t e
:
In item (i), what is VAT exempt is the sale or importation of capital
equipment, spare parts and raw materials for the production of PPE
components. Thus, sale or importation of finished PPEs is subject to
VAT unless they are also VAT exempt pursuant to other provisions of
the Tax Code.

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April 2021
Co n d u c t of Post
Au d i t :
The exemption claimed hereunder 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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SE C T I O N 2 . A M E N D M
E NReiteration
TS of the 3 Million VAT-exempt threshold

(cc) Sale or lease of goods or properties or the performance of

services other than the transactions mentioned in the preceding
paragraphs, the gross annual sales and/or receipts do not exceed the
amount of Three Million Pesos (P3,000,000.00).

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April 2021
SE C T I O N 2. AMENDM
ENTS
Tax on Persons Exempt from VAT. —
Any person whose sales or receipts are exempt under Section 109(1)(CC) of
the Tax Code from the payment of VAT, i.e., falling under the 3 Million VAT-
exempt threshold, and who is not a VAT-registered person shall pay a tax
equivalent to three percent (3%) of his gross quarterly sales or receipts:

Provided, that effective July 1, 2020 until June 30, 2023, or for a 3-year
period, the rate shall be one percent (1%)

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The following, however, shall be exempt from the payment of three
percent (3%) percentage tax, including the reduced rate of 1%:
1. Cooperatives; and
2. Self-employed individuals and professionals availing of the 8%
tax on gross sales and/or receipts and other non-operating
income, under Sections 24(A)(2)(b) and 24(A)(2)(c)(2)(a) of the
Tax Code.

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April 2021
Ta k e N o t e
:
Purchases made by GOCCs, National Government Agencies, local
government units (LGUs) and other instrumentalities of the
government from persons/entities subject to percentage tax under
Section 116 of the Tax Code, as amended, shall be subject to 1%
withholding tax for the period July 1, 2020 until June 30, 2023.

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April 2021
SE C T I O N 3 . T R A N SI T O
R Y P R O V I SI O N S
1. A VAT-registered taxpayer who opted to register as non-VAT as a result of the
additional VAT-exempt provisions under Sections 109(1)(R), 109(1)(AA), and
109(1)(BB) of the Tax Code, as amended by CREATE and provided that it did
not meet the threshold set under Section 109(1)(CC) thereof, shall:
a. Submit an inventory list of unused invoices and/or receipts as of the
date of filing of application for update of registration from VAT to
Non-VAT, indicating the number of booklets and its corresponding
serial numbers; and
b. Surrender the said invoices and/or receipts for cancellation.

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SE C T I O N 3 . T R A N SI T O
RY P R O V I SI O N S
A number of unused invoices/receipts, as determined by the taxpayer
with the approval of the appropriate BIR Office, may be allowed for
use, provided the phrase “Non-VAT registered as of (date of filing an
application for update of registration). Not valid for claim of input
tax.” shall be stamped on the face of every copy thereof, until new
registered non-VAT invoices or receipts have been received by the
taxpayer or until August 31, 2021.

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April 2021
SE C T I O N 3 . T R A N SI T O
RY P R O V I SI O N S
Upon receipt of newly-printed registered non-VAT invoices or
receipts, the taxpayer shall submit immediately a new inventory list
of, and surrender for cancellation, all unused previously-stamped
invoices/receipts."

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SE C T I O N 3 . T R A N SI T O
R2.Y The taxpayerPshall
RO Vthe
treat I SI O N excess
resulting S taxes paid due to the inclusion in
the items exempt from VAT in the following manner:
a. Unutilized VAT paid on local purchases and importation under
subsections 4.109-1(B)(aa)(ii), i.e., sale or importation of prescription
drugs for cancer, mental illness, tuberculosis and kidney diseases,
and 4.109-1(B)(bb), i.e., sale or importation of capital equipment,
spare parts and materials for PPE production, sale or importation of
drugs, vaccines and medical devices for the treatment of COVID 19,
from their specified effectivity on January 1, 2021 until the
effectivity of these Regulations may be:

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April 2021
SE C T I O N 3 . T R A N SI T O
RY  P R O V I SI O N S
Carried-over to the succeeding taxable quarter/s or be charged
as part of the cost, pursuant to Section 110 of the Tax Code
 Input VAT which are directly identifiable to goods now
classified as VAT-exempt may be allowed as part of the cost.
For input VAT that cannot be identified to goods now
classified as VAT-exempt, only the ratable portion shall be
charged to cost.

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April 2021
SE C T I O N 3 . T R A N SI T O
R Yb. Excess percentage
P R O tax
V Ipayments
SI O NasSa result of the decrease of tax
rate from 3% to 1% starting July 1, 2020 until the effectivity of
these Regulations may be carried forward to the succeeding
taxable quarter/s by reflecting the excess percentage tax
payment under Line 17 of the Quarterly Percentage Tax Return
(BIR Form No. 2551Q), “Other Tax Credit/Payment”,
specifying therein as “Carry-Over Excess Percentage Taxes
Paid from Previous Quarter/s”.

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SE C T I O N 3 . T R A N SI T O
RY P R O V I SI O N S
3. Excess/Unutilized input taxes as a result of the change of status from
VAT to Non-VAT registration, under Sec. 112(B) of the Tax Code of
1997, as amended, may be applied for refund or the issuance of Tax
Credit Certificate (TCC), at the option of the taxpayer.

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 CRE AT E P r o j e c t T e
am ELENITA B. QUIMOSING LARRY M. BARCELO
ACIR, Project Management & Implementation Service (PMIS) ACIR, Legal Service
VAT, Percentage, Administrative & Reorganization
MAPEMAROMA M. CANTILLEP
Director II, PMIS
Shirley Cuenco
Jose Ric A. Cabrera ADC, VAT Credit Audit Division
PMIS Junjun B. Andallo
Venus T. Gaticales ADC, Tax Audit Review Division
PMIS Louie Marz A. Tangkia
Juanito H. Balbastre ADC, Law & Legislative Division (LLD)
Chief, Law & Legislative Division Gelmo P. Sabayle, LLD

Head Secretariat: Members:

MA. GENEROSA L. CASTILLO, PMIS
BUREAU OF INTERNAL REVENUE
April 2021
Maria Concepcion G. Jimenez, PMIS
Gemia Katrine C. Marinas, PDMD
29
Website Address: Email: create@bi
www.bir.gov.ph r.gov.ph

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