Excise Tax Amendments on Alcohol, Tobacco Products

Scope: what goods are taxed

Section 138 imposes specific excise taxes on distilled spirits.
Section 139 imposes specific excise taxes on wines.
Section 140 imposes a specific excise tax on beer, lager beer, ale, porter, and other fermented liquors.
Section 142 imposes specific excise taxes on cigars and cigarettes.
Section 140 excludes tuba, basi, tapuy and similar domestic fermented liquors from the fermented liquors tax.

Definitions governing distilled spirits

“Spirits or distilled spirits” means ethyl alcohol, ethanol or spirits of wine, including all dilutions, purifications and mixtures thereof, from whatever source by whatever process produced.
“Spirits or distilled spirits” includes whisky, brandy, rum, gin and vodka, and other similar products or mixtures.
“Proof spirits” means liquor containing 1/2 of its volume of alcohol of a specific gravity of 0.7939 at 15 degrees centigrade.
A proof liter is a liter of proof spirits.
Distilled spirits tax attaches to the substance as soon as it is in existence as such, whether subsequently separated or transformed during production or by subsequent processes (Section 138).

Distilled spirits: rates and classifications

Section 138(a) imposes a specific tax per proof liter of Eight pesos (P8) when produced from sap of nipa, coconut, cassava, camote, or buri palm, or from the juice, syrup, or sugar of the cane, provided the materials are produced commercially in the country where processed.
Section 138(a) imposes a lower specific tax of Four pesos (P4) per proof liter if produced in a pot still or other similar primary distilling apparatus by a distiller producing not more than 100 liters a day, containing not more than fifty percent (50%) of alcohol by volume.
Section 138(b) imposes distilled spirits tax for products made from raw materials other than those enumerated in Section 138(a) based on net retail price per bottle of seven hundred fifty milliliter (750 ml.) capacity (excluding excise tax and value-added tax) using:
- Less than Two hundred and fifty pesos (P250): Seventy-five pesos (P75) per proof liter.
- From Two hundred and fifty pesos (P250) up to Six hundred and seventy-five pesos (P675): One hundred and fifty pesos (P150) per proof liter.
- More than Six hundred and seventy-five pesos (P675): Three hundred pesos (P300) per proof liter.
Medicinal preparations, flavoring extracts, and all other preparations (except toilet preparations) in which (excluding water) distilled spirits form the chief ingredient are taxed the same as the chief ingredient (Section 138(c)).
Distilled spirits tax rates are increased by twelve percent (12%) on January 1, 2000 (Section 138).
New brands must be classified by their current net retail price, and brand classifications based on average net retail price as of October 1, 1996 remain in force until revised by Congress (Section 138).
Net retail price is defined for distilled spirits as the retail price in 10 major supermarkets in Metro Manila excluding amounts intended to cover applicable excise tax and value-added tax as of October 1, 1996 (Section 138).
Brand classifications for distilled spirits are adopted from Annex “A” as an integral part of the Act (Section 7).

Wines: rates, fortified wines

Section 139 imposes specific excise taxes on wines per liter of volume capacity under:
- Sparkling wines/champagnes regardless of proof, where the net retail price per bottle (excluding excise tax and VAT) is:
  - P500 or less: P100.
  - More than P500: P300.
- Still wines with 14% alcohol by volume or less: P12.
- Still wines with more than 14% but not more than 25%: P24.
Fortified wines containing more than 25% alcohol by volume are taxed as distilled spirits.
“Fortified wines” means natural wines to which distilled spirits are added to increase alcoholic strength (Section 139).
Wine tax rates are increased by twelve percent (12%) on January 1, 2000 (Section 139).
New wine brands are classified by current net retail price, while classifications based on average net retail price as of October 1, 1996 remain until revised by Congress (Section 139).
Net retail price for wines means the retail price in 10 major supermarkets in Metro Manila excluding excise tax and value-added tax amounts as of October 1, 1996 (Section 139).
Wine brand classifications are adopted from Annex “B” as an integral part of the Act (Section 7).

Fermented liquor: brackets, variants, reporting

Section 140 levies a specific tax on beer, lager beer, ale, porter, and other fermented liquors (except tuba, basi, tapuy and similar domestic fermented liquors) using the following schedule based on net retail price (excluding specific tax and VAT) per liter of volume capacity:
- Less than P14.50: P6.15 per liter.
- P14.50 up to P22: P9.15 per liter.
- More than P22: P12.15 per liter.
Variants of existing fermented liquor brands introduced in the domestic market after the effectivity of the Act are taxed under the highest classification of any variant of that brand (Section 140).
Fermented liquor brewed and sold at microbreweries or small establishments such as pubs and restaurants is taxed under paragraph (c) rate (P12.15 per liter) (Section 140).
For three (3) years from the effectivity of the Act, the specific tax from any brand of fermented liquor shall not be lower than the tax due from that brand on October 1, 1996 (Section 140).
Specific tax rates on fermented liquor under paragraphs (a), (b), and (c)** increase by twelve percent (12%) on January 1, 2000 (Section 140).
New brands are classified by current net retail price, and brand classifications based on average net retail price as of October 1, 1996 remain until revised by Congress (Section 140).
Net retail price for fermented liquor is measured in 20 major supermarkets in Metro Manila for nationally marketed brands, and in five major supermarkets in the region for brands marketed only outside Metro Manila, excluding amounts intended to cover applicable excise tax and VAT (Section 140).
A variant of a brand means a brand with a modifier prefixed and/or suffixed to the root name and/or a different brand carrying the same logo or design (Section 140).
Every brewer or importer must submit to the Commissioner of Internal Revenue:
- A sworn statement of volume of sales for each brand for the three-month period immediately preceding.
- Filing timing is within thirty (30) days from the effectivity of the Act, and within the first five (5) days of every month thereafter (Section 140).

Fermented liquor: sanctions and criminal exposure

Knowingly misdeclaring or misrepresenting any pertinent data in the required sworn statement triggers summary cancellation or withdrawal of the brewer’s or importer’s permit to engage in business as brewer or importer (Section 140).
A corporation, association, or partnership liable for acts or omissions in violation is fined treble the amount of deficiency taxes, surcharges, and interest assessed pursuant to Section 140 (Section 140).
Persons liable for prohibited acts or omissions are criminally liable and penalized under Section 253 of the National Internal Revenue Code.
A person who willfully aids or abets is criminally liable in the same manner as the principal (Section 140).
If the offender is not a citizen of the Philippines, the offender is deported immediately after serving the sentence, without further proceedings for deportation (Section 140).

Cigars and cigarettes: rates, packing, stamps

Cigars are taxed at One peso (P1) per cigar (Section 142(a)).
Cigarettes packed by hand are taxed at Forty centavos (P0.40) per pack (Section 142(b)).
Cigarettes packed by machine are taxed per pack based on net retail price (excluding excise tax and VAT) as:
- Above P10 per pack: P12 per pack.
- Exceeds P6.50 but does not exceed P10: P8 per pack.
- P5 but does not exceed P6.50: P5 per pack.
- Below P5: P1 per pack (Section 142(c)).
Variants of existing cigarette brands introduced in the domestic market after the effectivity of the Act are taxed under the highest classification of any variant of that brand (Section 142).
For three (3) years from the effectivity of the Act, the specific tax from any cigarette brand shall not be lower than the tax due from each brand on October 1, 1996 (Section 142).
If machine-packed cigarette specific tax increases would raise excise tax by more than seventy percent (70%) for a brand, the increase takes effect in two tranches:
- 50% of the increase effective in 1997; and
- 100% of the increase effective in 1998 (Section 142).
Duly registered or existing cigarette brands and new brands packed by machine shall be packed only in twenties (Section 142).
Cigars and cigarettes specific tax rates under the machine- and hand-rate provisions increase by twelve percent (12%) on January 1, 2000 (Section 142).
New brands are classified according to their current net retail price, and classifications based on average net retail price as of October 1, 1996 remain until revised by Congress (Section 142).
Net retail price for cigarettes means retail price in 20 major supermarkets in Metro Manila for nationally marketed brands, and in five major supermarkets in the region for brands marketed only outside Metro Manila, excluding amounts intended to cover applicable excise tax and VAT (Section 142).
A variant of a brand for cigarettes means a brand with a modifier prefixed and/or suffixed to the root name and/or a different brand carrying the same logo or design (Section 142).
Manufacturers and importers of cigars and cigarettes must submit to the Commissioner of Internal Revenue a sworn statement of volume of sales for each brand for the three-month period immediately preceding:
- within thirty (30) days from the effectivity of the Act; and
- within the first five (5) days of every month thereafter (Section 142).

Cigars and cigarettes: enforcement and penalties

Knowingly misdeclaring or misrepresenting any pertinent data in the sworn statement triggers summary cancellation or withdrawal of the manufacturer’s or importer’s permit to engage in business upon discovery (Section 142).
A corporation, association, or partnership liable for acts or omissions in violation is fined treble the amount of deficiency taxes, surcharges, and interest assessed pursuant to Section 142 (Section 142).
Persons liable for prohibited acts or omissions are criminally liable and penalized under Section 253 of the National Internal Revenue Code.
A person who willfully aids or abets is criminally liable in the same manner as the principal (Section 142).
If the offender is not a citizen of the Philippines, deportation is immediately after serving the sentence, without further proceedings for deportation (Section 142).

Stamps, duty-free marking, committees and rules

Internal revenue stamps, whether bar code or fuson design, must be firmly and conspicuously affixed on each pack of cigars and cigarettes subject to specific tax in the manner and form prescribed by the Commissioner of Internal Revenue upon approval of the Secretary of Finance (Section 6).
Excisable articles such as distilled spirits, fermented liquor, cigars and cigarettes sold tax and duty free in authorized establishments must be marked tax and duty free in a manner and form prescribed by the Secretary of Finance (Section 6).
Annex “A”, Annex “B”, Annex “C”, and Annex “D” classifications for distilled spirits, wines, fermented liquor, and cigarettes are adopted and made an integral part of the Act (Section 7).
Fifteen percent (15%) of incremental revenue collected from the excise tax on tobacco products under the Act is allocated among provinces producing burley and native tobacco according to volume of tobacco leaf production, and the fund is exclusively used for:
- cooperative projects enhancing better quality agricultural products and increasing farmers’ income and productivity;
- livelihood projects for development of alternative farming systems to enhance farmers’ income; and
- agro-industrial projects enabling tobacco farmers to participate in management and subsequent ownership of projects including post-harvest and secondary processing such as cigarette manufacturing and by-product utilization (Section 8).
The Department of Budget and Management in consultation with the Oversight Committee issues rules and regulations governing allocation and disbursement (Section 8).
An Oversight Committee is created, composed of the Chairmen of the Committees on Ways and Means of the Senate and House of Representatives and four (4) additional members from each House designated by the Senate President and the Speaker of the House of Representatives, respectively.
The Oversight Committee monitors and ensures proper implementation of the Act (Section 9).
The Secretary of Finance promulgates necessary rules and regulations for effective implementation upon the recommendation of the Commissioner of Internal Revenue (Section 10).

Separability, repeals, continuity

If any provision is declared invalid by a competent court, the remainder of the Act or provisions not affected continue in force and effect (Section 11).
All laws, decrees, ordinances, rules, regulations, executive or administrative orders, and other presidential issuances inconsistent with any provision of the Act are repealed, amended, or otherwise modified accordingly (Section 12).