GO TO PART 1
SEC. 19. TRANSSHIPMENT OF ALCOHOL OR TOBACCO PRODUCTS. – All alcohol or tobacco products intended for transshipment to a foreign port shall not be subject to the imposition and payment of excise and value-added taxes provided all of the following conditions are satisfied:
(a) The foreign port of destination shall be clearly indicated in the cargo manifest accompanying the shipment;
(b) The shipment shall not be unloaded or transported to any other Philippine port of entry prior to the transport thereof to the foreign port of destination as indicated in the cargo manifest;
(c) The alcohol or tobacco products intended for transshipment shall be transported abroad within fifteen (15) days from the date of arrival thereof in the Philippine territory;
(d) A guarantee in the amount equivalent to not less than the amount of internal revenues taxes and duties otherwise due from the shipment, shall be filed with the Bureau of Customs (BOC), in a form and validity period acceptable to the Commissioner of Customs; and
(e) Submission to BOC of any document satisfactorily showing that the transshipped products have actually arrived and have been unloaded in the foreign port of destination (e.g., certificate of discharge, import entry declaration duly received by the foreign port of entry, etc.).
The cancellation/release of such guarantee shall be effected only upon submission of complete documents showing proof of actual shipment of the alcohol or tobacco products to, and receipt thereof by, the intended foreign port of destination. Failure to submit the liquidation documents within the period to be prescribed by the BOC or to transport the shipment to the intended foreign port of destination within the prescribed 15-day period shall cause the automatic forfeiture by the BOC of the guarantee.
SEC. 20. DENATURATION OF ETHYL ALCOHOL AND SALE OF DENATURED ALCOHOL. – Domestic alcohol of not less than one hundred eighty degrees (180°) proof (ninety percent [90%] absolute alcohol) shall, when suitably denatured and rendered unfit for oral intake, be exempt from the payment of excise tax. The following rules and procedures shall be strictly observed in the conduct of denaturation of ethyl alcohol and sale of the denatured alcohol:
A. Persons Authorized To Purchase Denatured Alcohol. – The following persons are authorized to purchase tax-free denatured alcohol:
(1) Registered buyer of denatured alcohol who shall directly purchase the same from distillers for use in the production of its own products;
(2) Registered dealer of denatured alcohol who is a holder of a valid permit to purchase denatured alcohol and sell the same directly to manufacturers of products; and
(3) Registered buyer of denatured alcohol who shall directly purchase the same from distillers for its own consumption as fuel or motive power, subject to the payment of appropriate excise tax as petroleum product.
B. Persons Qualified to Request for the Approval of Denaturing Formula. - An application for the approval of the formula to be used in the denaturation of ethyl alcohol shall be filed by any manufacturer who intends to use denatured alcohol in its manufacturing operations as raw materials or as fuel or motive power. The application shall be filed with the LTAD II of the BIR National Office, Diliman, Quezon City before any denaturation of ethyl alcohol can be conducted.
For tax-exempt removals of alcohol for purposes of denaturation, only heads and tails alcohol shall be used in accordance with the following formulae:
(1) For “completely denatured alcohol”, the formula to be used shall be: “To every one hundred (100) parts by volume of ethyl alcohol, two (2) parts by volume of approved methyl alcohol and one half of one (1) part by volume of approved pyridine bases”; and (2) For “specially denatured alcohol”, any formula duly approved by the Commissioner of Internal Revenue or his duly authorized representative.
Provided, That medicinal preparation, using denatured alcohol as raw material in the manufacture thereof, shall be subject to excise tax as distilled spirits.
The provisions of existing revenue regulations applicable to the administrative schedules, paragraphs and assessment numbers assigned to denaturers, repackers and dealers of denatured alcohol shall still apply. In addition thereto, buyer-manufacturers of denatured alcohol shall be permanently assigned a separate administrative schedule, paragraph and assessment number to be called O-4.
C. Conduct of Denaturation of Ethyl Alcohol - The ethyl alcohol shall be denatured strictly in accordance with the denaturing formula duly approved by the Commissioner of Internal Revenue or his duly authorized representative.
The denaturation of ethyl alcohol shall be conducted only in the distillery where the same is produced or manufactured, in the presence of the duly authorized representatives of the BIR. Prior to every denaturation of ethyl alcohol, the distiller-denaturer shall secure from the appropriate BIR Office an authority to denature ethyl alcohol. The application for such authority shall be accompanied by the following documents:
(1) Duly approved denaturing formula;
(2) Copy of the permit issued to the buyer of denatured alcohol;
(3) A duly notarized liquidation statement on the disposition of denatured alcohol previously purchased by the buyer-manufacturer. The liquidation statement shall contain the following information:
(a) Date(s) of the conduct of the previous denaturation;
(b) Volume of ethyl alcohol transferred to the denaturing tank;
(c) Name and quantity of the denaturants used;
(d) Beginning and ending stock balances of denatured alcohol;
(e) Date of removal and quantity of removed denatured alcohol;
(f) Names and addresses of the consignees; and
(g) Serial numbers of sales invoices, delivery receipts and Official Delivery Invoices accompanying the removal
Such statement shall also be supported by certified true copies of the sales invoices, delivery receipts, and Official Delivery Invoices;
(4) Original copy of the purchase invoice or duly certified copy thereof to evidence the purchase of denaturants to be used;
(5) Samples of denaturant(s); and
(6) Statement on the quantity of ethyl alcohol to be denatured (in gauge liters and proof liters)
Any request for authority to denature ethyl alcohol shall not be processed and issued without the submission of such liquidation statement on previously denatured alcohol. In case of transfer of heads and tail alcohol from the storage tank to the denaturing tank without the approved formula for denatured alcohol, the same shall be subject to the payment of the excise tax due thereon, inclusive of all applicable penalties.
D. Prohibition on Sale to Other Persons, Rectification, or Re-Distillation of Purchased Tax-free Denatured Alcohol. – No qualified buyer of tax-free denatured alcohol shall be allowed to sell the same to other persons, or whether by himself or through others, rectify, re-distill, or by any other process render the purchased tax-free denatured alcohol fit again for oral intake. In the event that the denatured alcohol has been rendered fit again for oral intake, the said qualified buyer or the person who caused the rectification or redistillation of the same shall be liable to pay, upon demand, the excise tax due thereon, inclusive of penalties.
SEC. 21. TOLLING, BOTTLING AND OTHER SUB-CONTRACTING AGREEMENTS. – In cases of tolling, bottling and other sub-contracting agreements by manufacturer or importer/owner of alcohol or tobacco products with other persons or entities, the following rules and procedures shall be strictly observed:
A. Registration Requirements
Any person who is engaged as a sub-contractor to manufacture alcohol or tobacco products or to undertake any part of the manufacturing process such as bottling, packaging, etc. shall first be registered with the BIR as an excise taxpayer. In case the sub-contractor is a newly registered taxpayer for excise tax purposes, he shall be issued an Assessment Number. In case the sub-contractor is already a registered excise taxpayer, a separate assessment number for this purpose shall no longer be required.
The newly registered sub-contractor shall be required to install and maintain ORBs as well as the preparation and submission of the transcript sheets thereof with the BIR.
For sub-contractors who are already registered as an excise taxpayer, the installation and maintenance of a separate ORB for the sub-contracted activity shall be required.
The deadline of submission of the transcript sheets prescribed herein shall be on or before the eighth (8th) day of the month immediately following the month of operation and every 8th day of every month thereafter.
B. Separate Application for Permits
For each brand of alcohol or tobacco products, the manufacturer or importer/owner and the sub-contractor shall file separate applications for a permit with the BIR Office having jurisdiction over their respective excisable activities prior to the initial production of the brand. The application shall be supported by the following documents:
For the application of the manufacturer or importer/owner of the product:
(1) Sub-contracting agreement (tolling, bottling, packaging, etc); and
(2) Permit to engage in business as manufacturer or importer of alcohol or
tobacco products. In case the manufacturer is not yet a duly registered taxpayer for excise tax purposes, he shall first undergo the usual registration process.
For the application of the sub-contractor:
(1) Sub-contracting agreement (tolling, bottling, packaging, etc);
(2) Permit to engage in business as sub-contractor of alcohol or tobacco products. In case the sub-contractor is not yet a duly registered taxpayer for excise tax purposes, he shall first undergo the usual registration process;
(3) Plant layout of the sub-contractor clearly indicating the line of production where the brand shall be manufactured, bottled, packaged, etc.; and
(4) Production process flow charts
C. Terms and conditions during the sub-contracted activity
(1) In case the basic raw materials (ethyl alcohol, essences, leaf tobacco, partially manufactured tobacco, cigarette paper, etc.) shall be supplied by the manufacturer/importer/owner of the brand, the same shall be directly transported to and unloaded in the premises of the sub-contractor from the production premises/warehouse of the manufacturer/importer/owner of the brand or from the customs’ custody, in case of importation;
(2) Every delivery of the said basic raw materials shall be accompanied by an ETRD or any form to be prescribed by the BIR duly issued by the authorized taxpayer’s representative and attested to by the revenue officer assigned at the manufacturer’s/importer’s/brand owner’s place of production/warehouse. In case of direct delivery from the customs’ custody, the same shall be accompanied by the applicable BIR permits, importation documents and proofs of excise tax payments;
(3) The dedicated storage areas, storage tank and line of production that are to be used for the purpose shall be clearly identified as depicted in the supporting plant layout. Only the assigned storage area, storage tank and line of production as granted in the permit shall be used during the period of the subcontracting agreement. In case of any change thereof, a prior permit shall be secured from the concerned BIR Office. However, if such change is temporary or emergency in nature such as due to the occurrence of fortuitous events, force majeure, etc., a written notification therefor shall be filed immediately with the BIR, in lieu of the said permit;
(4) In cases where the concerned BIR Office cannot provide a revenue officer to monitor the operations of the sub-contractor, an advance production schedule, together with documents that may be prescribed under the permit, shall be submitted to the LT Field Operations Division (LTFOD) prior to every scheduled production run indicating the quantity of the basic raw materials to be used for production, the scheduled date of production/tolling/bottling and the quantity of the finished products that will be produced;
(5) The finished products or results of the sub-contracted activity shall be immediately removed from the sub-contractor’s premises and shall be directly delivered to the intended customers, as the case may be;
(6) An ETRD or any form to be prescribed by the BIR shall cover all removals from the sub-contractor’s production premises/warehouse. For this purpose, a separate set of ETRDs or any form to be prescribed by the BIR shall be issued exclusively for activity covered by the sub-contracting agreement;
(7) A liquidation report for each brand shall be submitted to the LTFOD duly attested by the sub-contractor’s authorized representative(s) and the revenue officer assigned at the sub-contractor’s premises, as the case maybe, not later than three (3) days immediately after each and every sub-contracted production batch. All losses incurred during the sub-contracted activity shall, likewise, be reflected in the liquidation report. Moreover, such losses shall, in no case be allowed to be off-set against the losses incurred in the production of the manufacturer’s, importer’s or owner’s own products; and
(8) Such other terms and conditions that are deemed necessary in the performance of the sub-contracting activity.
SEC. 22. LOSSES ON DISTILLED SPIRITS. – No claim for excise tax refund or credit shall be allowed on distilled spirits that have been lost or destroyed after removal thereof from the place of production or released from the customs’ custody. In case of losses incurred on bonded distilled spirits, the corresponding excise tax due on such losses shall be paid to the BIR.
Losses of distilled spirits or rectified alcohol incurred before removal thereof from the distillery premises shall be accounted for and recorded in the ORBs as they occur on a daily basis. For this purpose, a loss of not more than one percent (1%) for distillation and four percent (4%) of excise tax-paid distilled spirits for rectification may be allowed when such loss is not caused by fraud, negligence or carelessness of the distillers or owners of the rectifying establishments.
However, no deduction for losses shall be allowed on bonded distilled spirits delivered and subsequently stored for rectification purposes as well as losses arising from rectification of such bonded distilled spirits.
The total volume of losses incurred during the month less the allowable percentage of loss, if any, shall be computed and the corresponding excise tax due thereon shall be paid to the BIR on or before every eighth (8th) day of the month immediately following the month of operations.
SEC. 23. ADMINISTRATIVE REQUIREMENTS. – All manufacturers, exporters and importers of alcohol or tobacco products shall comply with the following administrative requirements:
A. Registration of New Brands and Variants of Existing and New Brands. Prior to the initial manufacture or importation of new brands and variants of existing brands and variants of new brands, an application for registration thereof shall be filed with the BIR Office where the manufacturer or importer is registered or required to be registered as an excise taxpayer. The application shall be accompanied by the following:
(1) Exact replica of the proposed label, as well as the ‘artwork’ of the secondary containers (e.g. reams, cartons, boxes, etc.), of the brand in three copies. On the face of the label and all sides of secondary containers of alcohol or tobacco products, the following shall be conspicuously printed in easily recognizable and readable manner:
(a) Name, address and assessment number of the manufacturer, in case of locally manufactured alcohol or tobacco products. For imported products, the name and address of the foreign manufacturer, as well as the name, address and assessment number of the importer, if applicable, shall be indicated on the label. In case the manufacturer has two or more production plants, the address and the assessment number of the production plant where the brand of the excisable product is to be manufactured shall be printed on the label;
(b) The phrase “FOR DOMESTIC SALE ONLY”, in case the brand shall be sold in the domestic market or the phrase “FOR EXPORT ONLY”, in case the brand shall be exported;
Provided, That no exportation of alcohol or tobacco products by any person shall be allowed unless the required export markings are prominently printed on the said containers: Provided, further, That the exportation of alcohol and tobacco product bearing the phrase “FOR DOMESTIC SALE ONLY” shall be prohibited in any case;
(d) The phrase “DUTY-FREE AND NOT FOR RESALE”, in case of importation by the DFP; and (e) The phrase “FOR EXPORT TO THE PHILIPPINES; TAX AND DUTY PAID” in case the brand shall be imported for domestic market.
(2) A duly notarized manufacturer’s or importer’s sworn statement for each brand and variant of the brand showing, among others, the following information:
(a) Name, address, TIN and assessment number of the manufacturer or importer;
(b) Complete root name of the brand as well as the complete brand name with modifiers, if any;
(c) Complete specifications of the brand detailing the specific measurements, weights, manner of packaging, etc.;
(d) Name(s) of the region(s) where the brand is/are to be marketed;
(e) Wholesale price per case, gross and net of VAT and excise tax;
(f) Suggested retail price, gross and net of VAT and excise tax, per pack or per bottle, as the case may be;
(g) Detailed production/importation costs and all other expenses incurred or to be incurred until the product is finally sold (e.g. materials, labor, overhead, selling and administrative expenses) per case;
(h) Applicable rate of excise tax per unit of measure or value, as the case may be; and
(i) Corresponding excise and value-added taxes per case.
The manufacturer or importer shall submit thereafter an updated sworn statement of the brand on or before the end of the months of June and December of the year: Provided, however, That whenever there is a change in the cost to manufacture, produce and sell the brand or change in the actual selling price of the brand, the updated sworn statement shall be submitted at least five (5) days before the actual removal of the product from the place of production or release from the custom’s custody, as the case may be:
Provided, further, That if the manufacturer or importer sells or allows such goods to be sold at wholesale in another establishment of which he is the owner or the profits thereof of which he has an interest, the selling price in such establishment shall constitute the wholesale price. Should such price be less than the said costs and expenses, a proportionate margin of profit of not less than ten percent (10%) thereof shall be added to constitute the wholesale price.
With respect to imported alcohol or tobacco products, the cost of importation shall, in no case, be less than the value indicated in the reference books or any other reference materials used by the BOC in determining the proper valuation of the imported products, or the dutiable value as defined under the Tariff and Customs Code of the Philippines, as amended, whichever, is higher:
Provided, finally, That in case a new brand, variant of an existing brand or variant of a new brand shall be subsequently marketed in another region/other regions before the proper tax classification is finally determined by the BIR, an updated sworn statement shall be submitted to the appropriate BIR Office before the same shall be removed from the place of production.
The sworn statement prescribed herein shall be subject to verification by the BIR to validate its contents with respect to its accuracy and completeness.
In the event that the contents thereof are found to be inaccurate and/or incomplete, the taxpayer shall be required to submit a revised sworn statement, without prejudice to the imposition of corresponding sanctions and penalties.
B. Use of Pre-Printed Cases
Only ‘master’ cases with information prominently printed in specified areas of the ‘master’ case prescribed below shall be used for packaging of alcohol and tobacco products:
(1) On All Sides
(a) Complete name of the brand;
(b) For cigarette products, the number of sticks printed in the following order, (i) per pack, (ii) per carton and (iii) per ‘master’ case; and
(c) For alcohol products, the specific contents printed in the following order: (i) number of bottles, (ii) content in gauge liter and proof per bottle and (iii) total content in gauge liter per ‘master’ case.
(2) On At Least One Side
(a) If for export market, the phrase “FOR EXPORT ONLY”; or, if for local consumption, the phrase “FOR DOMESTIC SALE ONLY”;
(b) The phrase “Made in the Philippines”, if applicable;
(c) Manufacturer’s complete name and address where the alcohol or tobacco products are actually produced; and
(d) Assessment number of the factory/plant where the alcohol or tobacco products are actually produced.
Except for fermented liquors packed in beer ‘shells’, all ‘master’ cases to be used for packaging of alcohol and tobacco products shall be pre-approved by the BIR, subject to the applicable registration requirements prescribed in Section 23.A hereof.
The use of ‘master’ cases that are not pre-approved by the BIR shall be a ground for confiscation or seizure by any authorized BIR personnel.
C. Notice of Stoppage of Production of a Particular Brand.
A written notice shall be filed with the BIR Office where the manufacturer is registered or required to be registered as an excise taxpayer with the information that a particular brand(s) shall not be manufactured whether on a permanent or temporary basis. For this purpose, the prescribed notice for temporary stoppages shall be applicable in cases of production shutdown due to scheduled maintenance program, major repairs, labor strikes, orders by other concerned government agencies, and such other similar incidents; or due to occurrence of fortuitous events such as typhoons, floods, fire, etc.
The said notice shall be filed at least five (5) days before the actual date of production stoppage of the brand(s). However, in case of occurrence of unforeseen events which will cause the temporary stoppage of production of any brand, and the manufacture cannot comply with the filing of such prior notice, the BIR shall be notified within three (3) days from the actual occurrence of such unforeseen event.
D. Application for Authority to Release Imported Goods (ATRIG) on Importation of Alcohol or tobacco Products.
All importers of alcohol or tobacco products shall file an application for Authority to Release Imported Goods (ATRIG) with the BIR Office where they are registered or required to be registered as an excise taxpayer prior to the release of such products from the customs’ custody, in accordance with existing revenue rules, regulations, policies and procedures.
No ATRIG shall be issued in case the imported alcohol or tobacco products are already released from the customs’ custody. Likewise, no subsequent application for ATRIG shall be processed unless the importer has submitted proofs of payment of the excise tax due on the imported products covered by previously issued ATRIG.
E. Requisition of Internal Revenue Labels and Strip Stamps on Imported Alcohol or Tobacco Products and Manner of Affixture Regular labels (for locally produced ethyl alcohol, imported distilled spirits and wines), auxiliary labels (for imported distilled spirits and wines), and internal revenue strip stamps (for imported chewing tobacco, cigars and cigarettes) shall be requisitioned from the BIR Office where the importer is registered or required to be registered for excise tax purposes.
For imported alcohol or tobacco products, the said labels and strip stamps shall be firmly affixed on the said products under the supervision of an authorized representative from the Bureau of Customs in the manner provided below before the products are removed from the customs’ warehouse. For locally produced ethyl alcohol, the regular labels shall be firmly affixed in the manner provided below before the said product is removed from the distillery.
1. Regular labels
Each regular label shall be firmly affixed midway across the edge of the cover flap and the side of the box used as a secondary container hindering the removal of its contents without breaking the said label. In case of tank trucks, iso-tanks or barge, the regular label shall be firmly affixed to the outside or exterior valve/opening of the container/tanker/receptacle in a manner that it cannot be opened without breaking the said label.
2. Auxiliary labels
Each auxiliary label must be securely affixed to every bottle or immediate container with the use of a good adhesive or paste before placing the bottles, flasks or other immediate containers or distilled spirits or wines in packages, cartons, cases, or other exterior containers. The adhesive or paste must be spread throughout the entire length and breadth of the label and care must be taken to press the whole surface of the label firmly against the surface of the bottle sufficiently long to cause the entire surface of the label to adhere securely to the bottle. The label must pass over the mouth of the bottle, or over cup or cap placed over the opening of the bottle extending an approximately equal distance or two sides of the mouth of the bottle in such a manner that the label will be torn apart or destroyed upon opening the bottle but leaving a portion of the label attached to the bottle.
3. Internal Revenue Strip Stamps
Each internal revenue strip stamp shall be affixed across the upper end of the pack and tin can, as the case maybe, overlapping both sides of the immediate container before the same is wrapped in cellophane or transparent wrapper in such a manner as to effectively seal the container and prevent the removal of the cigarettes or cigars without breaking the stamps.
The internal revenue labels and strip stamps may be requisitioned in advance from the concerned BIR Office for purposes of sending them abroad and subsequent affixture thereof while the alcohol or tobacco products are still being packed by the foreign manufacturer/supplier: Provided, however, That the corresponding excise tax on the alcohol or tobacco products where the internal revenue labels and strip stamps are to be attached shall be paid to the BIR prior to the issuance of the labels and stamps. A notarized liquidation statement indicating therein the beginning balance, usage/affixture, breakage/loss and ending balance of the quantity and serial numbers of internal revenue labels and strips stamps previously requisitioned, shall be submitted and attached as one of the required supporting documents in the application for ATRIG covering the imported alcohol or tobacco products upon which the advanced internal revenue labels and strips stamps are intended to be affixed. The importer shall, likewise, surrender all internal revenue labels and strip stamps that were not affixed by reason of breakage during the packaging process.
For this purpose, a broken internal revenue label or strip stamp shall be acceptable in the liquidation only if at least three-fourths (3/4) of its original size is being surrendered. In case of failure to surrender any internal revenue label or revenue stamp or the same is surrendered in an unacceptable state (less than ¾ of the original size), the corresponding excise tax otherwise due thereon shall be immediately assessed and collected by the BIR.
F. Use of a New BIR Form on All Removals of Alcohol or Tobacco Products In lieu of the existing BIR forms, the Excise Tax Removal Declaration (ETRD) (BIR Form No. 207) is hereby prescribed to be used and issued by all registered manufacturers and identified importers/dealers/traders for all removals of alcohol or tobacco products.
The ETRD shall be requisitioned from the LT Field Operations Division (LTFOD) in the BIR National Office, or from the Excise Tax Area Offices at the different BIR Revenue Regions, having respective jurisdiction over the manufacturers/dealers/traders of alcohol or tobacco products. The manner of preparation, issuance and cancellation thereof as well as the applicable reportorial requirements shall be strictly observed in accordance with the existing rules, regulations and procedures issued for this purpose.
G. Revised Deadline for the Submission of Transcript Sheets of the Official Register Books for Alcohol or Tobacco Products The submission of all transcript sheets of ORBs by all manufacturers, importers and dealers, including sub-contractors, for alcohol or tobacco products to the concerned BIR Office shall be on or before the eighth (8th) day of the month immediately following the month of operation and every 8th day of every month thereafter in the form prescribed under existing rules and regulations.
H. Amount of Manufacturer’s and Importer’s Bond The amount of bond to be posted by a manufacturer or importer of alcohol or tobacco products, for each place of production or warehouse, as the case may be, shall be subject to the following conditions:
a. Initial Bond – In case of initial bond, the amount shall be equal to One hundred thousand pesos (P100,000): Provided, That if after six (6) months of operation, the amount of initial bond is less than the amount of the total excise tax paid during the period, the amount of the bond shall be adjusted to twice the tax actually paid for the period.
b. Bond for the Succeeding Years of Operation – The bonds for the succeeding years of operation shall be equivalent to the actual total excise tax paid on locally manufactured and/or imported alcohol or tobacco products during the year immediately preceding the year of operation. However, for taxpayers availing of the tax prepayment, advance deposit, or similar schemes, the amount of bond herein prescribed shall be in accordance with the following schedule:
Excise Tax Payment --- Minimum Amount of Bond
P 1,000,000 and below - P 100,000
Over P 1,000,000 up to P 5,000,000 - P 500,000
Over P 5,000,000 up to P 10,000,000 - P 1,000,000
Over P 10,000,000 up to P 25,000,000 - P 2,500,000
Over P 25,000,000 up to P 50,000,000 - P 5,000,000
Over P 50,000,000 up to P 100,000,000 - P 10,000,000
Over P 100,000,000 up to P 500,000,000 - P 15,000,000
Over P 500,000,000 up to P 1,000,000,000 - P 30,000,000
Over P 1,000,000,000 up to P 10,000,000,000 - P 50,000,000
Over P 10,000,000,000 up to P 20,000,000,000 - P 75,000,000
Over P 20,000,000,000 - P 100,000,000
Provided, however, That a higher amount of bond may be required from any manufacturer or importer, for meritorious reasons, subject to the prior written approval by the Commissioner of Internal Revenue.
The Commissioner of Internal Revenue may, when deemed necessary, also require any dealer or trader of alcohol or tobacco products to post a bond in accordance with the above provisions.
The bond prescribed herein shall be conditioned upon the faithful compliance, during the time such business is pursued, with the law and regulations relating to such business and for the satisfaction of all fines and penalties imposed by the NIRC of 1997, as amended. The bond shall be subject to the regular examination by the BIR to be assured of the continued obligations and responsibilities of the taxpayer and the bonding company.
SEC. 24. INCREMENTAL REVENUE UNDER THE ACT. – For purposes of allocation of the two and one-half percent (2.5%) of the annual incremental revenue collection under the Act, each in favor of the Philippine Health Insurance Corporation (PHIC) and Department of Health (DOH) for the next five (5) years from the date of effectivity of the Act, the BIR and the BOC shall submit to the Department of Finance (DOF), on or before April 30 of the year immediately following the year of collection, a sworn report of their respective annual incremental revenue collected from locally manufactured and imported alcohol or tobacco products, respectively, that were remitted to the Bureau of Treasury. The said report shall be validated by the Bureau of Treasury before submission thereof by the DOF to the Department of Budget and Management (DBM). The said validated report shall be submitted by the DOF to the DBM, copy furnished the PHIC and the DOH , on or before May 31 of each year.
For alcohol or tobacco products, the incremental revenue shall be computed based on the difference between the tax rates prescribed in R.A. No.8240 and the applicable new tax rates prescribed under the Act applied on the net incremental volume removed from the place of production or released from the customs’ custody, as the case may be, during a given calendar year.
ILLUSTRATION:
No. 11 – Computation of incremental revenue allocation on excise tax collections from cigarettes
A. Details of Removals and Collection on Cigarettes for the Years 2004, 2005 and 2007
2004 | 2005 | 2007 | |||||||
Cigarette Brand | Volume | Tax | Tax | Volume | Tax | Tax | Volume | Tax | Tax |
High- Priced | 5,000 | P8.96 | P44,800 | 20,000 | P10.35 | P207,000 | 18,000 | P10.88 | P195,840 |
Medium-Priced | 15,000 | P5.60 | P84,000 | 13,000 | P6.35 | P 82,550 | 11,000 | P6.74 | P74,140 |
Low-Priced | 30,000 | P1.12 | P33,600 | 20,000 | P2.00 | P 40,000 | 19,000 | P2.23 | P 42,370 |
Totals | 50,000 | P162,400 | 53,000 | P329,550 | 48,000 | P312,350 | |||
B. Computation of Incremental Revenue for Allocation to Philippine Health Insurance Corp. and Department of Health
| Differential Tax Rate | Volume Variance (packs) | |||||
| Cigarette Brand | Previous Year | Tax Rates for | Differential | Previous | Volume on the | Volume |
| YEAR 2005 | | | | | | |
| High- Priced | P8.96 | P10.35 | P 1.39 | 5,000 | 20,000 | 15,000 |
| Medium-Priced | P5.60 | P6.35 | P 0.75 | 15,000 | 13,000 | ( 2,000) |
| Low-Priced | P1.12 | P2.00 | P 0.88 | 30,000 | 20,000 | (10,000) |
| Totals | | | | 50,000 | 53,000 | 3,000 |
| | | | | | | |
| YEAR 2007 | | | | | | |
| High- Priced | P10.35 | P10.88 | P .53 | 20,000 | 18,000 | ( 2,000) |
| Medium-Priced | P6.35 | P6.74 | P .39 | 13,000 | 11,000 | ( 2,000) |
| Low-Priced | P2.00 | P2.23 | P .23 | 20,000 | 19,000 | ( 1,000) |
| Totals | | | | 53,000 | 48,000 | (5,000) |
Incremental Revenue from Tax Differential | Incremental Revenue from Volume | ||||||
Cigarette | Tax | Last Year | Totals | Volume | Current | Totals | Incremental |
YEAR 2005 | |||||||
High- Priced | P 1.39 | 5,000 | P 6,950 | 15,000 | P10.35 | P 155,250 | 162,200 |
Medium-Priced | P 0.75 | 15,000 | 11,250 | ( 2,000) | P6.35 | ( 12,700) | ( 1,450) |
Low-Priced | P 0.88 | 30,000 | 26,400 | (10,000) | P2.00 | ( 20,000) | 6,400 |
Totals | 50,000 | P 44,600 | 3,000 | P 122,550 | P 167,150 | ||
YEAR 2007 | |||||||
High- Priced | P .53 | 20,000 | P 10,600 | ( 2,000) | P10.88 | (P 21,760) | (P 11,160) |
Medium-Priced | P .39 | 13,000 | 5,070 | ( 2,000) | P6.74 | ( 13,480) | ( 8,410) |
Low-Priced | P .23 | 20,000 | 4,600 | ( 1,000) | P2.23 | ( 2,230) | 2,370 |
Totals | 53,000 | P 20,270 | (5,000) | (P 37,470) | (P 17,200) | ||
Tax Collection | |||
Cigarette | Previous | Current | Incremental |
YEAR 2005 | |||
High- Priced | P44,800 | P207,000 | P 162,200 |
Medium-Priced | P84,000 | P 82,550 | (P 1,450) |
Low-Priced | P33,600 | P 40,000 | P 6,400 |
Totals | P162,400 | P329,550 | P 167,150 |
YEAR 2007 | |||
High- Priced | P207,000 | P 195,840 | (P 11,160) |
Medium-Priced | P 82,550 | P74,140 | (P 8,410) |
Low-Priced | P 40,000 | P 42,370 | P 2,370 |
Totals | P329,550 | P312,350 | (P 17,200) |
Incremental Revenue Allocation | ||
2005 | 2007 | |
Philippine Health Insurance Corporation | ||
P 167,150 x 2.5% | P 4,178.75 | Since no |
Department of Health | ||
P 167,150 x 2.5% | P 4,178.75 | |
On the other hand, for cigars whose manner of taxation was changed from purely specific tax to ad valorem tax prescribed by the Act, the incremental revenue shall be computed as follows:
ILLUSTRATION:
NO. 12 – Computation of incremental revenue allocation on excise tax collection from cigars A. Details of Removals and Collection on Cigars for the Years 2004 and 2005
2004 | 2005 | ||||||
Brand | Volume of | Specific Tax | Tax Collection | Volume of | Net | Ad Valorem | Tax |
Brand 1 | 400 | P 1.12 | P 448 | 250 | P 550 | P57.50 | P 14,375 |
Brand 2 | 100 | P 1.12 | 112 | 50 | P 600 | P65.00 | 3,250 |
Brand 3 | 150 | P 1.12 | 168 | 300 | P 20 | P 2.00 | 600 |
Brand 4 | 500 | P 1.12 | 560 | 800 | P 5 | P 1.12 * | 896 |
Totals | 1,150 | P 1,288 | 1,400 | P 19,121 | |||
* Note: Since downward reclassification is prohibited, the applicable tax rate per piece of cigar for Brand No. 4 should be P1.12 instead of P0.50
B. Computation of Incremental Revenue for Allocation to Philippine Health Insurance Corp. and Department of Health
Differential Tax Rate | Volume Variance (pieces) | |||||
Brand | Previous Year Rates | Tax Rates for | Differential | Previous | Volume on the | Volume |
Brand 1 | P 1.12 | P57.50 | P 56.38 | 400 | 250 | (150) |
Brand 2 | P 1.12 | P65.00 | 63.88 | 100 | 50 | ( 50) |
Brand 3 | P 1.12 | P 2.00 | .88 | 150 | 300 | 150 |
Brand 4 | P 1.12 | P 1.12 | - | 500 | 800 | 300 |
Totals | 1,150 | 1,400 | ||||
Incremental Revenue from Tax | Incremental Revenue from Volume | ||||||
Brand | Tax | Last Year | Totals | Volume | Current | Totals | Incremental |
Brand 1 | P 56.38 | 400 | P 22,552 | (150) | P57.50 | (P 8,625) | P13,927 |
Brand 2 | 63.88 | 100 | 6,388 | ( 50) | P65.00 | ( 3,250) | 3,138 |
Brand 3 | .88 | 150 | 132 | 150 | P 2.00 | 300 | 432 |
Brand 4 | - | 500 | - | 300 | P 1.12 | 336 | 336 |
Totals | 1,150 | P 29,072 | P 11,239 | P 17,833 | |||
Tax Collection | |||
Brand | Previous | Current | Incremental |
Brand 1 | P 448 | P 14,375 | P 13,927 |
Brand 2 | 112 | 3,250 | 3,138 |
Brand 3 | 168 | 600 | 432 |
Brand 4 | 560 | 896 | 336 |
Totals | P 1,288 | P 19,121 | P 17,833 |
Incremental Revenue Allocation | |
Philippine Health Insurance Corporation | |
P 17,833 x 2.5% | P 445.83 |
Department of Health | |
P 167,150 x 2.5% | P 4,178.75 |
SEC. 25. TRANSITORY PROVISIONS. – Upon the effectivity of the Act, the following transitory provisions shall be strictly observed by all concerned:
(1) Manufacturers and importers of distilled spirits and wines shall submit to the BIR Office where it is registered or required to be registered as an excise taxpayer a sworn statement of the volume and amount of sales, including the name, address and TIN of customer(s) per brand of said products, summarized on a monthly basis covering the last quarter of the calendar year 2004 within thirty (30) days from the effectivity of these Regulations.
(2) All manufacturers-importers and importers of alcohol or tobacco products, including DFP, duty-free shops, locators within the economic and freeport zones, shall prepare and submit the following duly notarized inventory lists as of December 31, 2004:
(a) Imported alcohol or tobacco products already covered by final import entry declarations (warehouse entries) whether or not the same are already in their possession; and
(b) Imported alcohol or tobacco products that have already arrived at the ports of entry but are not yet covered by final import entry declarations.
Goods shipped by foreign suppliers that are still in-transit as of December 31, 2004, including importations covered by pre-selling arrangements/advance purchase orders that have not yet been shipped out by foreign suppliers, shall not qualify as part of the aforesaid inventory lists for tax-exemption purposes.
The notarized inventory lists shall be submitted to the Chief, LT Assistance Division II (LTAD II) of the BIR, National Office, Diliman, Quezon City, not later than fifteen (15) days immediately after the date of effectivity of these Regulations. The same shall contain the complete name and description of each brand, content per packaging/container, proof per bottle/container (for distilled spirits), gross and net retail prices per bottle/pack/piece, the corresponding quantity for each brand, as well as the reference number of the covering final import entry declaration. The said inventory list shall be subject to verification by the BIR for purposes of determining the accuracy thereof.
Imported alcohol or tobacco products that have already arrived at the ports of entry and already covered by import entry declarations and to which the corresponding VAT and excise tax have already been paid to the BOC, although still in the customs’ premises at the date of the effectivity of the Act, shall still be covered by the provisions of R.A. No. 8240. However, if any of the aforementioned conditions are not satisfied, such products shall be deemed imported after the effectivity of the Act and shall be subject to the imposition of the new excise tax rates prescribed under the Act. 41 In case of failure by the DFP and the locators within the freeport zones to submit the prescribed inventory list or has submitted an erroneous inventory list, the unreported inventory on-hand as of December 31, 2004 shall be deemed to be importation made on or after the effectivity of the Act.
All inventories of imported alcohol or tobacco products, except fermented liquors, in the possession of DFP, duty-free shops and locators within the economic and freeport zones shall comply with the labeling requirements (affixture of regular and labels on alcohol products and strip stamps on tobacco products) as well as with the printed information on the labels (“For Export to the Philippines; Tax and Duty Free” and “Not For Resale Outside of Free Port Zone”), if applicable, as prescribed under the existing rules and regulations. In the absence thereof, the corresponding VAT and excise tax shall be immediately paid; otherwise, the same shall be subject to forfeiture and confiscation by the BIR.
The said products forming part of the inventory that fall under the provisions of R.A. No. 8240 shall only be sold to duly accredited locators in the freeport zones for their consumption within the said zone. In the event that these goods will be sold to nonregistered locators, the purchaser/consignee thereof, shall be deemed the importer of these articles and, therefore, liable to the payment of the applicable excise and value-added taxes imposed pursuant to the Act.
(3) Upon the date of the effectivity of these Regulations, all under-bond ethyl alcohol in the possession of rectifiers and rectifiers-compounders that do not fall squarely under the definition of rectification prescribed by these Regulations shall be immediately subject to the payment of excise tax imposed under the Act. For this purpose, all rectifiers and rectifiers-compounders shall submit to the Chief, LTAD II or EXTA, as the case may be, a duly notarized inventory list of ethyl alcohol, whether tax-paid or under-bond, that are on-hand as of the date of effectivity of these Regulations. The said inventory list shall be submitted within fifteen (15) days immediately after the date of effectivity of these Regulations. The excise tax due on the under-bond stocks shall be paid within five (5) days after actual date of receipt of notice of disqualification as a rectifier or rectifiercompounder from the BIR.
(4) Pursuant to the provisions of these Regulations, all under-bond ethyl alcohol owned by distillers that are stored outside their distillery plants shall be immediately subject to the payment of excise tax imposed under the Act. For this purpose, all distillers maintaining extension warehouses/storage facilities outside the distillery plants shall submit to the Chief, LTAD II or EXTA, as the case may be, a duly notarized inventory list of underbond ethyl alcohol stored therein as of the date of effectivity of these Regulations. The said inventory list shall be submitted within fifteen (15) days immediately after the date of effectivity of these Regulations. The excise tax due on the under-bond stocks shall be paid within five (5) days after actual date of receipt of notice of revocation of the permit to maintain under-bond warehouse/storage facilities from the BIR.
(5) The ETRD prescribed by these Regulations shall be used and issued only after all the
unused ODIs and GUIAs are completely exhausted. For this purpose, all concerned taxpayers shall submit an inventory list of all unused ODIs and GUIAs in their possession as of the date of effectivity of these Regulations. The inventory list shall be submitted to the LTFOD not later than fifteen (15) days from the date of effectivity of these Regulations. In case of failure to submit the inventory list, or submission of incomplete inventory list, the unreported inventory of unused old form shall be deemed cancelled. All transactions covered by “deemed cancelled” old forms shall be subject to all applicable penalties under existing revenue rules and regulations.
(6) With respect to a new brand or a variant of a new brand of an alcohol or tobacco product that was introduced between January 1, 2004 and December 31, 2004, as well as a new brand, variant of a new brand or variant of an existing brand that was introduced from January 1, 2005 up to the effectivity of these Regulations, the manufacturer/importer thereof shall submit to the Chief, LTAD II, not later than ten (10) days from the effectivity of these Regulations, a notarized statement stating whether its brand of alcohol or tobacco product was nationally or regionally marketed.
The said notarized statement shall also indicate the specific name(s) of the region(s) where the brand was introduced or marketed. A copy of the sworn statement duly received by the BIR for such brand shall be attached to the said notarized statement.
For a new brand or a variant of a new brand that was introduced between January 1, 2004 and December 31, 2004 which was not yet subjected to the initial validation, its tax classification according to its suggested net retail price as reflected in the manufacturer’s/importer’s sworn statement shall be deemed its proper tax classification pursuant to these Regulations. However, the running of the 18-month period for the revalidation of such brand shall commence from the date of actual receipt of the aforesaid notarized statement or from the time the herein prescribed minimum volume requirements for commercial production and marketing of the brand has been continuously satisfied, whichever comes later.
However, for a new brand, a variant of a new brand or a variant of an existing brand that was introduced from January 1, 2005 up to the effectivity of these Regulations, its tax classification according to its suggested net retail price as reflected in the manufacturer’s/importer’s sworn statement shall still be subject to initial validation notwithstanding the lapse of 3 months. For this purpose, the 3-month period subject to the initial validation shall be reckoned from the date of actual receipt by the BIR of the said notarized statement, subject to the minimum requirements for commercial production and marketing as prescribed in these Regulations.
(7) A notarized list of inventory-on hand as of the date of effectivity of these Regulations of all unused labels previously approved by the BIR without the marking “FOR DOMESTIC SALE ONLY”, for products intended for domestic market, as well as all the printed reams, cartons, boxes or ‘master’ cases without the necessary information prescribed under the provisions of Section No. 23.A(1) and 23.B hereof, indicating the complete name of brands of alcohol or tobacco products to be packed and the quantity thereof (in pieces), shall be submitted to the Chief, LTFOD not later than ten (10) days immediately after the date of effectivity of these Regulations. Failure to submit the said list shall be tantamount to the inexistence of such inventories as of the effectivity of these Regulations. Accordingly, the use of primary and secondary containers not containing the information prescribed herein without the submission of the said inventory list or the use of such containers for brands not included in the inventory list or in excess of the quantity declared in the inventory list shall be subjected to confiscation and seizure by any authorized BIR personnel.
SEC. 26. PENALTIES. – Violations of these Regulations shall be subject to the corresponding penalties under Title X of the NIRC of 1997, as amended. Further, the following penalty provisions are hereby prescribed pursuant to the provisions of the Act, as follows:
(a) Any manufacturer or importer who knowingly misdeclares or misrepresents in his or its sworn statement herein required any pertinent data or information shall, upon discovery, be penalized by a summary cancellation or withdrawal of his or its permit to engage in business as a manufacturer or importer of alcohol or tobacco products;
(b) Any corporation, association or partnership liable for any of the acts or
omissions in violation of the Act and implemented by these Regulations shall be fined treble the aggregate amount of deficiency taxes, surcharges and interest which may be assessed pursuant to the provisions of the Act;
(c) Any person liable for any of the acts or omission prohibited under the Act and implemented by these Regulations shall be criminally liable and penalized under Section 254 of the NIRC of 1997, as amended; and
(d) If the offender is not a citizen of the Philippines, he shall be deported immediately after serving the sentence, without further proceedings for deportation.
SEC. 27. SEPARABILITY CLAUSE - If any of the provisions of these Regulations is declared invalid by a competent court, the remainder of these Regulations or any provision not affected by such declaration of invalidity shall remain in force and effect.
SEC. 28. REPEALING CLAUSE. – All regulations, rulings, orders, or portions thereof which are inconsistent with the provisions of these Regulations are hereby revoked, repealed or amended, accordingly.
SEC. 29. EFFECTIVITY. – These Regulations shall take effect after fifteen (15) days following publication in leading newspapers of general circulation.
(Original Signed)
MARGARITO B. TEVES
Secretary of Finance
Recommending Approval:
(Original Signed)
JOSE MARIO C. BUÑAG
Commissioner of Internal Revenue
