Purpose and national policy
- Section 15 declares, as a national policy, the prohibition of the cultivation of marihuana (indian hemp) and opium poppy.
Covered drugs and regulated acts
- The Act covers opium, marihuana, opium poppies, coca leaves, and any synthetic drugs which may hereafter be declared habit forming by the President of the Philippines, including their salts, derivatives, or preparations, and also any compound of, manufactured salt of, derivative of, or preparation of the covered drugs. (Section 2)
- Registration and fixed/special taxation apply to persons who import, manufacture, produce, compound, sell, deal in, dispense, or give away the covered drugs (and their specified related forms). (Section 2)
- Transfer taxation applies to transfers of marihuana and/or opium poppies carried out pursuant to written order forms. (Section 2)
Mandatory registration and fixed taxes
- Every person who, with prior authority from the Collector of Internal Revenue, imports, manufactures, produces, compounds, sells, deals in, dispenses, or gives away the covered drugs must register with the Collector of Internal Revenue on or before January twenty of each year and must pay the fixed taxes. (Section 2)
- Persons already engaged on January 1, 1952, or who first engaged between that date and the passage of the Act, must complete registration within thirty days after the passage of the Act and pay the proportionate part of the tax for the period ending December 31, 1952. (Section 2)
- Persons first engaging in the covered activities after passage must immediately register and pay the proportionate tax for the period ending December 31. (Section 2)
- The law defines “person” to include a partnership, association, company, or corporation, as well as a natural person. (Section 2)
Who pays what fixed tax
- Importers, manufacturers, producers, or compounders who are lawfully entitled to import, manufacture, produce, or compound must pay seventy-two pesos a year. (Section 2)
- Wholesale dealers lawfully entitled to sell and deal must pay thirty-six pesos a year. (Section 2)
- Retail dealers lawfully entitled to sell and deal must pay twelve pesos a year. (Section 2)
- Physicians, dentists, veterinary surgeons, and other practitioners lawfully entitled to distribute, dispense, give away, or administer to patients in the course of professional practice must pay six pesos a year. (Section 2)
- Persons not registered as importers, manufacturers, producers, or compounders and lawfully entitled to obtain and use in a laboratory the covered drugs for research, instruction, or analysis must pay six pesos per annum and must keep special records as the Collector requires with the Secretary of Finance’s approval. (Section 2)
- The law deems certain functions to determine tax category:
- Anyone who imports, manufactures, compounds, or otherwise produces for sale or distribution is deemed an importer, manufacturer, or producer. (Section 2)
- Anyone who sells or offers for sale in the original stamped packages is deemed a wholesale dealer. (Section 2)
- Anyone who sells or dispenses from original stamped packages is deemed a retail dealer. (Section 2)
Registration mechanics and business place
- For purposes of the Act, the office, or if none, the residence of the person is considered the place of business. (Section 2)
- Employees of a registered and tax-paid person, acting within the scope of employment, are not required to register and pay fixed tax provided by this Section 2. (Section 2)
- Government officials and employees of national, provincial, city, or municipal governments (and political subdivisions) who, in the exercise of official duties, engage in the regulated activities are exempt from registration and payment of fixed tax, and from stamping. The exemption must be evidenced in the manner the Collector requires with the Secretary of Finance’s approval by regulations. (Section 2)
Fixed-tax compliance prohibition
- It is unlawful for any person required to register under Section 2 to import, manufacture, produce, compound, sell, deal in, dispense, distribute, administer, or give away any covered drugs without having registered and paid the fixed tax. (Section 2)
Special internal revenue stamps and rates
- The Act imposes an internal revenue tax of five centavos per thirty grams on opium, coca leaves, and synthetic drugs (including specified compounds/salts/derivatives/preparations) produced in or imported into the Philippines and sold, or removed for consumption or sale. (Section 2)
- Any residue of less than thirty grams in a package is taxed as thirty grams. (Section 2)
- The tax is paid by the importer, manufacturer, producer, or compounder and is represented by appropriate stamps provided by the Collector with the Secretary of Finance’s approval. (Section 2)
- Stamps must be affixed to the bottle or other container to securely seal the stopper, covering, or wrapper. (Section 2)
Tax on transfers of marihuana/opium poppies
- Transfers of marihuana and/or opium poppies carried out pursuant to written order forms are taxed as follows: (Section 2)
- Two pesos per thirty grams (or fraction thereof) when transferred to a person who has paid the fixed tax and is registered under Section 2. (Section 2)
- Two hundred pesos per thirty grams (or fraction thereof) when transferred to a person who has not paid the fixed tax and is registered under Section 2. (Section 2)
- The tax must be paid by the transferee when securing each order form, and it is in addition to the price of the order form. (Section 2)
- Payment is represented by appropriate stamps provided by the Collector, and the Collector or representatives must affix the stamps to the original order form. (Section 2)
- The transfer tax is in addition to any import duty imposed on the drugs. (Section 2)
Stamped-package rule and evidentiary consequences
- It is unlawful to purchase, sell, dispense, or distribute the covered drugs except in the original stamped package or from the original stamped package. (Section 2)
- The absence of appropriate tax-paid stamps is prima facie evidence of a violation by the person in whose possession the drugs are found. (Section 2)
- Possession of an original stamped package containing covered drugs by any person who has not registered and paid fixed taxes creates prima facie evidence of liability to the special tax. (Section 2)
- An exemption from the prima facie rule exists where possession comes from a registered dealer pursuant to a prescription for legitimate medical uses by a registered physician, dentist, veterinary surgeon, or other practitioner, and strict identification and record conditions are met (including name/registry number of the druggist, serial number of prescription, patient name/address, and prescriber name/address/registry number). (Section 2)
- The exemption also covers dispensing, administration, or giving away to a patient by a registered professional for legitimate medical purposes, with the record kept as required by the Act. (Section 2)
- Provisions on engraving, issuance, sale accountability, cancellation, and destruction of tax-paid stamps under the National Internal Revenue Code are extended to stamps under this Act as far as necessary. (Section 2)
- All unstamped packages of covered drugs found in the possession of any person (except as provided) are subject to seizure and forfeiture, and National Internal Revenue Code search, seizure, and forfeiture provisions for unstamped articles extend to these taxed articles and persons. (Section 2)
Books, records, returns, and inspection access
- Importers, manufacturers, compounders, and wholesale dealers must keep books/records and render returns on covered drug transactions as the Collector requires with the Secretary of Finance’s approval. (Section 2)
- Persons registered under Section 2 must, whenever required by the Collector, submit true and correct statements/returns verified by affidavit covering:
- quantity received during the period immediately preceding the demand (in no case more than twelve months),
- names of persons from whom received,
- quantity received from each person, and
- date received. (Section 4)
- The Act requires inspection access:
- duplicate order forms and prescriptions preserved under Section 3 and statements/returns filed under Section 4 are open to inspection by Bureau of Internal Revenue and National Bureau of Investigation officials duly authorized, and also officials charged with enforcement at the provincial, city, or municipal level. (Section 6)
- the Collector must furnish certified copies of statements/returns to such officials upon written request free of charge. (Section 6)
- persons who disclose information in statements/returns or duplicate order forms (except for enforcing this Act and except as expressly provided) face fines or imprisonment as provided under Section 347 of the National Internal Revenue Code. (Section 6)
- the Collector may furnish certified copies of lists of names of taxpayers upon written request for a fee of two pesos for each one hundred names or fraction thereof. (Section 6)
License to deal in narcotic drugs
- A license to deal in narcotic drugs is issued only to a person, in the opinion of the Secretary of Finance or duly authorized representative, who meets all:
- good moral character,
- compliance with additional requirements reasonably necessary for control of narcotic drug traffic, and
- experience in manufacturing, compounding, and marketing other medicinal drugs so as to make orderly and lawful distribution reasonably probable, especially for importation, exportation, manufacturing, compounding, or wholesaling of narcotic drugs. (Section 2)
- The Collector of Internal Revenue with Secretary of Finance approval must make all rules and regulations necessary to carry the Act into effect. (Section 2)
Order forms for sale, barter, exchange, giving away
- It is unlawful to sell, barter, exchange, or give away covered drugs except in pursuance of a written order from the person to whom the article is sold, bartered, exchanged, or given, using a form to be issued in blank by the Collector of Internal Revenue. (Section 3)
- Every person who accepts such order and sells/barters/exchanges/gives away must:
- preserve the order for five years,
- keep it readily accessible to inspection by authorized Bureau of Internal Revenue officers/agents/employees and the other officials named in Section 6. (Section 3)
- Anyone giving an order must, at or before giving it, make or cause to be made a duplicate on a blank form issued by the Collector and preserve the duplicate for five years in readily accessible form for inspection by authorized officers/agents/employees and the officials named in Section 6. (Section 3)
- The order-form prohibition does not apply to:
- dispensing or distribution to a patient by a registered physician, dentist, or veterinary surgeon in professional practice, if the professional keeps a record showing amount dispensed/distributed, date, and patient name/address for five years subject to inspection; (Section 3)
- sale, dispensing, or distribution by a dealer to a consumer under and in pursuance of a written prescription issued by a registered physician/dentist/veterinary surgeon, provided the prescription is dated as of the day signed and is signed by the issuing professional, and the dealer preserves the prescription for five years in readily accessible manner; (Section 3)
- sales/exportation/shipment/delivery within the Philippines by any person to a person in a foreign country, regulating entry according to the foreign country’s importation regulations promulgated from time to time by the Secretary of Foreign Affairs. (Section 3)
Order form issuance limits and form pricing
- The Collector of Internal Revenue with Secretary of Finance approval prepares suitable forms for order-form and related purposes and sells them only to persons registered and tax-paid under Section 2, except for government officers lawfully purchasing for various departments and agencies (including the Philippine Army, Bureau of Health, Bureau of Hospitals, national/provincial/city hospitals, and penitentiaries). (Section 3)
- The Collector sets the form price with Secretary of Finance approval, but it must not exceed five pesos per hundred. (Section 3)
- The Collector keeps an account of forms sold (number, purchaser names, and number sold to each purchaser) and writes or stamps the purchaser’s name plainly on the forms before delivery. (Section 3)
- No person other than the named purchaser may use forms bearing that purchaser’s name to procure the covered drugs, and no person may furnish those named forms to another person with intent to procure shipment or delivery. (Section 3)
- It is unlawful to obtain any covered drugs by means of these order forms for any purpose other than use, sale, or distribution in lawful business or legitimate professional practice. (Section 3)
- All revenues collected under the Act accrue to the general fund of the National Government. (Section 3)
Tax-based shipment restriction
- It is unlawful for any person not registered and not having paid the fixed tax under Section 2 to send, ship, carry, or deliver covered drugs from one province/city/municipality to another. (Section 5)
- Exceptions apply for:
- common carriers transporting the drugs,
- employees acting within scope of employment,
- persons registered and fixed-tax paid under Section 2, and
- delivery of drugs prescribed or dispensed by a registered physician/dentist/veterinarian, by a person employed to prescribe for the particular patient receiving the drug,
- officers or officials acting within scope of official duties. (Section 5)
Exempted preparations and thresholds
- The Act does not apply to preparations and remedies that do not exceed specified quantities per measure:
- opium: not more than two grains,
- morphine: not more than one-fourth of a grain,
- heroin: not more than one-eighth of a grain,
- codeine: not more than one grain,
- plus any salt or derivative of those substances in one fluid ounce, or in one avoirdupois ounce for solid or semisolid preparations. (Section 7)
- The Act also does not apply to liniments, ointments, or other preparations for external use only, except those that contain cocaine or any of its salts or alpha or beta eucaine or any of their salts, or any synthetic substitute for them. (Section 7)
- Exemptions apply only when such remedies/preparations are manufactured, sold, distributed, given away, dispensed, or possessed as medicines and not for the purpose of evading the Act’s intention and provisions. (Section 7)
- Manufacturers, producers, compounders, and vendors (including dispensing physicians) entitled to deal in exempt preparations must:
- keep records of all sales, exchanges, disposals, or gifts as directed by the Collector with Secretary of Finance approval,
- preserve the records for five years for inspection by authorized Bureau of Internal Revenue officers and the officials named in Section 6, and
- register as required under Section 2 and, if not paying a tax under Section 2(d), pay a special tax of six pesos for each year they engage in the business to the Collector.
- Importers/manufacturers/producers/compounders of exempt preparations who sell to authorized dealers for resale must pay the fixed tax of seventy-two pesos a year, if they are not already paying that tax. (Section 7)
Further coca-leaf exemption
- The Act does not apply to decocainized coca leaves or preparations made therefrom, or other coca-leaf preparations that do not contain cocaine. (Section 8)
Tax administration extensions
- The Act extends and makes applicable all laws on the assessment, collection, remission, and refund of internal revenue taxes, so far as applicable and not inconsistent, to the special taxes imposed by the Act. (Section 9)
Presumptive evidence of unlawful possession
- It is unlawful for any person not registered and not having paid the fixed tax to have in possession or under control any covered drugs. (Section 10)
- Such possession or control is presumptive evidence of violation of Section 10 and also presumptive evidence of a violation of Section 2. (Section 10)
- Exceptions apply for:
- employees of a registered person,
- a nurse under a registered physician/dentist/veterinary surgeon’s supervision,
- possession by virtue of employment/occupation and not on the employee’s own account,
- possession of drugs prescribed in good faith by a registered physician/dentist/veterinary surgeon,
- possession by an officer or official by reason of official duties,
- possession by a warehouseman holding possession for a registered and tax-paid person,
- common carriers engaged in transporting the drugs. (Section 10)
- The law places the burden of proof of exemptions on the defendant, and requires no negative allegations of exemptions in complaints/information/indictment or other writs/proceedings. (Section 10)
Penalties and repeat-offense escalation
- Any person who violates or fails to comply with requirements of the Act faces, upon conviction, a fine of not more than five thousand pesos, imprisonment of not more than five years, or both, at the court’s discretion. (Section 11(a))
- If a person, after conviction for unlawfully selling, importing, or exporting (or conspiring to do so), again sells/imports/exports (or conspires in violation) the enumerated narcotic drugs (including opium, coca leaves, marihuana, opium poppies, cocaine, and synthetic habit-forming drugs declared by presidential executive order and specified salts/derivatives/preparations), the court imposes upon conviction of the second offense a fine not more than five thousand pesos or imprisonment for not more than ten years, or both. (Section 11(b))
- If a person, after having been convicted two times for unlawfully selling/importing/exporting (or conspiring) and then again commits the same, the third or subsequent conviction carries a fine not more than ten thousand pesos or imprisonment for not more than twenty years, or both. (Section 11(c))
- When it appears after conviction and before or after sentence that the person previously has been convicted for the same kind of unlawful sale/importation/exportation (or conspiracy), the Provincial Fiscal or City Fiscal must file an information alleging prior convictions and their number; the court must then:
- cause the defendant to appear (even if confined or otherwise),
- apprise the defendant of allegations and the right to a trial on the truth and number of prior convictions,
- enter a plea of not guilty if the defendant denies identity, refuses to answer, or remains silent,
- conduct a trial on the sole issue of the truth of the prior-conviction allegations,
- punish under subsections for the appropriate offense level if identity is established or acknowledged after caution,
- vacate the prior sentence and deduct time actually served under the vacated sentence from the new sentence. (Section 11(d))
Bureau of Internal Revenue administration
- The Collector of Internal Revenue, with the approval of the Secretary of Finance, may create a Narcotic Drugs Section in the Bureau of Internal Revenue and transfer employees to serve as narcotic drugs inspectors to enforce the Act. (Section 12)
Administrative remedies and tax-law applicability
- Administrative remedies under laws on assessment, remission, collection, and refund of national internal revenue taxes apply to all provisions of the Act and the taxes imposed by it, to the extent consistent with the Act. (Section 13)
Relation to other laws
- Nothing in the Act impairs, alters, amends, or repeals provisions of:
- the Administrative Code and amendments relating to the Food and Drugs Act,
- Act Numbered Twenty-three hundred and eighty-one and amendments,
- Title V of Act Numbered Thirty-eight hundred and fifteen and amendments,
- and Sections 339 and 356 of the National Internal Revenue Code, as amended, relating to opium and other prohibited drugs. (Section 14)