Clarification on Excise Tax for Locally Produced Wines

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BIR REVENUE MEMORANDUM CIRCULAR NO. 41-2011: Clarification on Excise Tax for Locally Produced Wines

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Title Supreme Court: Clarification on Excise Tax for Locally Produced Wines

Law: Bir Revenue Memorandum Circular No. 41-2011

Decision Date: Sep 8, 2011

The BIR clarifies the excise tax treatment of locally produced wines, confirming that fruit-derived wines like mango and strawberry wines are subject to excise tax, while certain fermented liquors made from non-fruit materials are exempt.

alcohol products

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Relevant Legal Provisions Under the NIRC

Section 142 imposes excise tax on wines as alcohol products.
Section 143 separately addresses excise tax on fermented liquors, including tuba, basi, tapuy, and similar fermented liquors, exempting them from excise tax.
Necessitates reconciliation of Sections 142 and 143 to resolve the proper tax treatment.

Definitions and Distinctions Between Wines and Fermented Liquors

"Wines" under Section 142 broadly covers alcohol products subject to excise tax.
"Fermented liquors" under Section 143 include products like tuba, basi, and tapuy, which are exempt from excise tax.
Fermented liquors are generally beer-type beverages made from malted cereal grains and flavored with hops.
Wines are alcoholic beverages produced by fermentation without distillation from the juice of any fruit (Section 2(17) of RR No. 2-97).

Classification of Wines Based on Raw Materials

Wines from fruits (e.g., mango, strawberry, bugnay) are subject to excise tax as per Section 142.
Wines produced from non-fruit raw materials (e.g., rice wine, ginger wine), which includes tuba, basi, and tapuy, are considered fermented liquors and exempted from excise tax under Section 143.

Impact of Republic Act No. 9334

The term "domestic" was removed from Section 143, which previously caused misconceptions about excise tax exemptions applying only to domestic fermented liquors.
This deletion means all fermented liquors fitting the definition are exempt from excise tax, regardless of origin.

Summary of Tax Treatment for Specific Locally Produced Wines

Mango wine, strawberry wine, bugnay wine, and other fruit-derived wines are taxable excise products.
Fermented liquors like tuba, basi, and tapuy made from non-fruit raw materials are exempt from excise tax.

Directive for Revenue Officials

Revenue officials are instructed to widely disseminate the guidelines and clarifications contained in this Circular to ensure uniform application.

Authority

The Circular was adopted on September 8, 2011, and signed by the Commissioner of Internal Revenue, Kim S. Jacinto-Henares.

END