Question & AnswerQ&A (Republic Act No. 11346)
Republic Act No. 11346 is an act increasing the excise tax on tobacco products, imposing excise tax on heated tobacco products and vapor products, increasing penalties for excise tax violations, and earmarking a portion of excise tax collections from sugar-sweetened beverages, alcohol, tobacco, heated tobacco, and vapor products for universal healthcare.
An excise tax of Ten pesos (₱10.00) per pack of twenty (20) units or packaging combinations of not more than twenty (20) units is levied on heated tobacco products effective January 1, 2020.
The excise tax rates imposed on heated tobacco products and vapor products shall be increased by five percent (5%) every year starting January 1, 2021, through revenue regulations issued by the Secretary of Finance.
They may face summary cancellation or withdrawal of their permit to engage in business, fines of treble the amount of deficiency taxes, surcharges and interest, and criminal liability under Section 254 of the National Internal Revenue Code.
'Heated tobacco products' refer to tobacco products consumed by heating tobacco sufficiently to release an inhalable aerosol without combustion. They include liquids and gels part of the product heated to generate the aerosol.
The sale, distribution, transfer, purchase, and use of heated tobacco products and vapor products by minors (persons below 18 years old) are prohibited. Violations attract penalties under Republic Act No. 9211 (Tobacco Regulation Act of 2003).
The excise tax on vapor products depends on the quantity of liquid or gel in milliliters: ₱10 for 0.00 ml to 10.00 ml; ₱20 for 10.01 ml to 20.00 ml; ₱30 for 20.01 to 30.00 ml; ₱40 for 30.01 to 40.00 ml; ₱50 for 40.01 to 50.00 ml; beyond 50.00 ml, ₱50 plus ₱10 for every additional 10.00 ml.
Unit packets and outer wrappings of heated tobacco and vapor products must carry health warnings compliant with the Graphic Health Warnings Law (RA No. 10643). Manufacturers/importers have one year from the Act's effectivity to comply, and selling/distributing packages without compliant warnings eighteen months after effectivity is prohibited and penalized.
Fifty percent (50%) of total excise tax revenues from sugar-sweetened beverages are allocated 80% to PhilHealth for Universal Health Care implementation and 20% nationwide for medical assistance and the Health Facilities Enhancement Program (HFEP) determined by the Department of Health.
Upon conviction, penalties include a fine ranging from One million five hundred thousand pesos (₱1,500,000) to Fifteen million pesos (₱15,000,000) and imprisonment from six years and one day up to twelve years.
Any person selling heated tobacco or vapor products below the combined excise and VAT shall be fined ten times the excise plus VAT amount, but not less than ₱100,000, and imprisoned for 2 to 4 years.
'Vapor products' means liquid solutions or gels containing nicotine that produce an aerosol through heating without combustion, including e-liquids for e-cigarettes and electronic nicotine delivery systems with up to 65 mg/ml nicotine and their devices.
They must submit sworn statements to the Commissioner within 30 days from the Act’s effectivity and within the first 5 days of every month thereafter, reporting sales volumes of each brand for the prior three-month period.
Possessing imported or locally manufactured taxable articles without paying excise tax, removing them without tax payment, concealing illegally removed articles, or aiding such acts are violations punishable with fines and imprisonment depending on appraised value and severity.
Annually, 5% of tobacco excise tax revenues (not exceeding ₱4 billion) is allocated to tobacco-producing provinces divided 50% to provincial governments and 50% proportionately to municipalities/cities based on tobacco leaf production for alternative livelihood and infrastructure projects.