Year-End Tax Reminder: Comprehensive Guide on VAT-Exempt Medicines and BIR Audit Suspension

As the year draws to a close, Philippine businesses and individual taxpayers should take note of two important announcements recently issued by the Bureau of Internal Revenue (BIR): updates to the VAT-exempt medicines list and clarifications regarding the suspension of on-site audits. This article summarizes the key information for easier understanding and compliance.

01

Update on VAT-Exempt Medicines (RMC No. 108-2025)

In Revenue Memorandum Circular (RMC) No. 108-2025 issued in 2025, the BIR published the full text of a letter from the Food and Drug Administration (FDA) dated October 16. The letter confirms the updated list of VAT-exempt medicines in accordance with the Tax Reform for Acceleration and Inclusion (TRAIN) Law (R.A. No. 10963) and the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act (R.A. No. 11534).

The updated VAT-exempt medicines cover the following major diseases and related quantities:

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Note: Sales of medicines listed above are VAT-exempt. Businesses and pharmacies must follow the updated list when processing taxes.

Taxpayers should apply the updated VAT-exempt list in their tax filings and continue to submit and pay taxes on time, without delaying due to the suspension of on-site audits.

02

Clarification on Audit Suspension (RMC No. 109-2025)

On November 24, 2025, the BIR issued RMC No. 107-2025, announcing the suspension of all on-site audits and related operations nationwide. Recently, RMC No. 109-2025 provided clarifications on the scope, exceptions, and operational details of the suspension.

1. Scope of Audit Suspension
The suspension applies to:

• All ongoing and upcoming on-site audits;

• Issuance of Letters of Authority (LOA), Memoranda of Assignment (MO), and Tax Verification Notices (TVN);

• Examination of books, verification of records, and taxpayer site visits;

• Issuance of Subpoena Duces Tecum.

The suspension covers all BIR investigation offices nationwide, including the Large Taxpayers Service, Regional Offices, Assessment Divisions, VAT Audit Sections, and related task forces. The suspension remains in effect until the BIR Commissioner officially lifts it. No on-site audits may resume prior to the official lifting.

🔑 Recommendations for Businesses:
For exceptions such as cases approaching the statute of limitations, one-time transactions (ONETT), or refund applications, cooperate promptly with the BIR. Maintain records of all taxes paid or voluntarily settled and monitor further BIR announcements to ensure smooth compliance when audits resume.

2. Cases Not Covered by Suspension:

• Cases nearing the statute of limitations: audits of cases expiring within six months from November 24, 2025, continue;

• ONETT cases: estate tax, donor’s tax, capital gains tax, withholding tax, and related documentary stamp tax filings continue;

• Retiring taxpayers or business closures: audits required if sales or asset thresholds are exceeded;

• Criminal tax cases: investigations involving potential tax evasion or fraud continue;

• Refunds and tax credit certificate (TCC) applications requiring LOA issuance continue;

• Matters with statutory deadlines set by the Commissioner of Internal Revenue (CIR);

• Verification of withholding taxes on property sales may continue.

Conclusion

While the BIR has suspended on-site audits, the obligation to file returns and pay taxes remains unchanged. Taxpayers should continue submitting reports and paying taxes on time. During the suspension, taxpayers may voluntarily pay any known deficiencies without waiting for BIR contact. Notices of assessment received before the RMC came into effect should still be paid or contested as required. Other business processes, such as registration updates, certificate applications, and report submissions, continue unaffected.

In December 2025, by suspending on-site audits, the BIR aims to optimize audit processes while maintaining normal tax filing and payment operations. Businesses and taxpayers should follow the latest announcements to ensure compliance and plan their tax activities accordingly.