Taxation

I. Excise Tax

REPUBLIC ACT NO. 10351

AN ACT RESTRUCTURING THE EXCISE TAX ON ALCOHOL AND TOBACCO PRODUCTS BY AMENDING
SECTIONS 141, 142, 143, 144, 145, 8, 131 AND 288 OF REPUBLIC ACT NO. 8424. OTHERWISE KNOWN AS
THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED BY REPUBLIC ACT NO. 9334, AND FOR
OTHER PURPOSES

R.A. 10351 simplified the excise tax structure of sin products by increasing the tax rates and gradually
shifting the excise taxation of fermented liquors (except brewed and sold at microbreweries or small
establishments) and cigarettes to unitary tax system by 2017, with the principal objectives of
generating revenues to fund the universal health care program (UHCP) of the government and
reducing consumption of tobacco and alcohol, thus improving the general well-being of the people.
The law also changed the excise taxation of distilled spirits from specific tax to a compound tax
structure to comply with the World Trade Organization (WTO) ruling1 on the discriminatory taxation
of imported distilled spirits in the country.
The law also provides for an automatic annual adjustment of four percent (4%) on the specific excise
taxes of certain sin products effective on the following dates, viz.:
(a) On January 1, 2014 for wines, fermented liquors brewed and sold at microbreweries, tobacco
products and cigars;
(b) On January 1, 2016 for distilled spirits; and
(c) On January 1, 2018 for fermented liquors, except those brewed and sold at microbreweries, and
cigarettes.
Presented in Appendix A are the revised tax rates of alcohol products under R.A. 10351.
The law also amended the price classification frees provision under the old law (R.A. 93342) which
pegged sin products to 1996 prices as basis for tax classification. The proper tax classification of wines
and fermented liquors are to be determined every two (2) years from the date of effectivity of R.A.
10351.
The importation of cigars and cigarettes, distilled spirits, fermented liquors and wines into the
Philippines, even if destined for tax and duty-free shops, shall be subject to all applicable taxes, duties,
charges, including excise taxes due thereon.
The importations of cigars and cigarettes, distilled spirits, fermented liquors and wines made directly
by a government-owned and operated duty-free shop, like the Duty-Free Philippines (DFP), shall be
exempted from all applicable duties only:
The following are the penalties under the National Internal Revenue Code (NIRC) with respect to the
payment of excise tax:

1
The European Union and the United States in 2009 complained to the World Trade Organization (WTO), claiming
the Philippines, in imposing lower taxes on products made from domestic raw materials, was discriminating against
imported distilled spirits. The WTO ruled against the Philippines in 2011 and urged the country to reform its tax
system.
2
Entitled, An Act Increase in the Excise Tax Rates on Alcohol and Tobacco Products, Amending For the Purpose
Sections 131, 141, 142, 143, 144, 145 and 288 of the National Internal Revenue code of 1997, As Amended, which
took effect on January 1, 2005.
 o The penalty for unlawful possession or removal of imported articles subject to excise tax without
payment of tax shall be based on the appraised value of the article under the Tariff and Customs
Code (TCC)
i. If the value does not exceed 1,000, it is punishable by a fine of P1,000-2,000 and
imprisonment of not less than 60 days but not more than 100 days 1,000 50,000;
ii. If the value exceeds 1,000 but does not exceed 5,000, it is punishable by a fine of 10,000-
20,000 and imprisonment of not less than 2 years but not more than 4 years;
iii. If the value exceeds 50,000 but does not exceed 150,000, it is punishable by a fine of
30,000-60,000 and imprisonment of 4 years but not more than 6 years; and
iv. And if the value exceeds 150,000, it is punishable by a fine of 50,000-100,000 and
imprisonment of not less than 10 years but not more than 12 years.
o Failure to pay annual registration fee by a person engaged in the business of distilling, rectifying,
repacking, compounding or manufacturing article subject to excise tax is punishable by a fine of
not less than P30,000 but not more than P50,000 and imprisonment of not less than 2 years but
not more than 4 years.
o Unlawful possession of locally manufactured articles subject to excise tax without payment of the
tax is punishable by a fine of not less than 10 times the amount of excise tax due but not less than
P500 and imprisonment of not less than two (2) years but not more than four (4) years.
o Unlawful removal of untaxed articles subject to excise tax from the place of production shall be
punishable by a fine of not less than 10 times the amount of excise tax due but not less than
P1,000 and imprisonment of not less than one (1) year but not more than two (2) years.
o Selling or offering for sale any box or package containing articles subject to excise tax with false,
spurious or counterfeit stamps or labels or sells from any such fraudulent box, package or
container as aforesaid shall be punishable by a fine of not less than P20,000 but not more than
P50,000 and imprisonment for not less than 4 years but not more than 8 years.
o Misdeclaration or misrepresentation by manufacturers of articles subject to excise tax, or of any
pertinent data or information required therein shall be punishable by summary cancellation or
withdrawal of permit to engage in business as a manufacturer of articles subject to excise tax.
The enforcing agency is the Bureau of Internal Revenue (BIR).

II. Customs Duties

REPUBLIC ACT NO. 10863

AN ACT MODERNIZING THE CUSTOMS AND TARIFF ADMINISTRATION

All articles, when imported from any foreign country into the Philippines, shall be subject to duty upon
each importation, even though previously exported from the Philippines, except as otherwise
provided in this law or in other laws.
The provisions of Section 104 on Rates of Import Duty of Presidential Decree No. 1464, otherwise
known as the Tariff and Customs Code of the Philippines of 1978, as amended, specifically providing
for the tariff sections, chapters, headings and subheadings and the rates of import duty, shall still
apply. Presented in Appendix B is the schedule of rates of duty for Beverages, Spirits and Vinegar.
All imitations of whisky, rum, gin, brandy, spirits or wines, imported by or under any name
whatsoever shall be subjected to the highest rate of duty provided for the genuine articles
respectively intended to be represented, with a surtax of fifty per cent (50%).
Importation begins when the carrying vessel or aircraft enters the jurisdiction of the Philippines with
the intention to unlade there, and it is deemed terminated upon payment of the duties, taxes and
other charges due upon the articles, or secured to be paid, at a port of entry and legal permit for
 withdrawal shall have been granted, or in the case of tax-free importations, until they have legally left
the jurisdiction of the customs.
The liability of the importer for custom duties is considered a personal debt which can be discharged
only by payment in full of the custom duties. The liability is also considered a lien upon the imported
article while they are in custody or subject to the control of the government.
Imported articles shall be subject to the rate or rates of import duty existing at the time of entry, or
withdrawal from warehouse in the Philippines, for consumption.
Assessment shall be deemed final fifteen (15) days after the receipt of the notice of assessment by
the importer. In the absence of fraud and when the goods have been finally assessed and released,
the assessment shall be conclusive upon all the parties three (3) years from the date of final payment
of duties and taxes, or upon completion of the post clearance audit.
Failure to pay the duties, taxes and other charges of an assessment within fifteen (15) days from the
date of final assessment, a surcharge or ten (10%) of the total assessed amount or balance thereon
shall be added and collected, which surcharge shall be increased to twenty-five (25%) if the
delinquency lasts for more than one (1) year. After payment of duties and taxes, the importer will
then have a non-extendible period of thirty (30) days from posting of notice to claim the goods from
customs custody.
The enforcing agencies are the Bureau of Customs (BOC) and the Tariff Commission (TC), an attached
agency of the National Economic and Development Authority (NEDA).
ANNEX A - EXCISE TAX RATES

A. ALCOHOL PRODUCTS
NEW TAX RATES based on Republic Act No. 10351 Remarks
PARTICULARS 2018
2013 2014 2015 2016 2017 onwards
A. DISTILLED SPIRITS, AD VALOREM & SPECIFIC TAX
1) AD VALOREM TAX
RATE - Based on the Net
Retail Price (NRP) per
proof (excluding the 15% 15% 20% 20% 20% 20%
excise and value-added
taxes);
and
Effective
1/1/2016,
the specific
tax rate
2) SPECIFIC TAX - Per
Php20 Php20 Php20 Php20.80 Php21.63 shall be
proof liter
increased
by 4% every
year
thereafter
B. WINES, per liter of volume capacity
1) Sparkling wines/
champagnes, where the
NRP (excluding the
excise and VAT) per
bottle of 750ml volume
capacity, regardless of
proof is: Effective
1/1/2014,
Php500.00 or less Php250 Php260 Php270.40 Php281.22 Php292.47
the specific
More than Php500.00 Php700 Php728 Php757.12 Php787.40 Php818.90 tax rate
shall be
2) Still wines and
increased
carbonated wines
by 4% every
containing 14% of Php30.00 Php31.20 Php32.45 Php33.75 Php35.10
year
alcohol by volume or
thereafter
less
3) Still wines and
carbonated wines
containing more than Php60.00 Php62.40 Php64.90 Php67.50 Php70.20
14% (of alcohol by
volume) but not more
25% of alcohol by
volume
4) Fortified wines
containing more than
Taxed as distilled spirits
25% of alcohol by
volume
C. FERMENTED LIQUORS, per liter of volume capacity
1) If the NRP (excluding Effective
excise and VAT) per liter 1/1/2018,
of volume capacity is: the specific
tax rate
Php 50.60 and below Php15.00 Php17.00 Php19.00 Php21.00 Php23.50
shall be
increased
by 4% every
year
More than Php 50.60 Php20.00 Php21.00 Php22.00 Php23.00 Php23.50 thereafter
Effective
1/1/2014,
2) If brewed and sold at
the specific
microbreweries or
tax rate
small establishments
Php28.00 Php29.12 Php30.28 Php31.50 Php32.76 shall be
such as pubs and
increased
restaurants, regardless
by 4% every
of the NRP
year
thereafter
NOTE:
IN CASE OF FERMENTED LIQUORS AFFECTED BY THE "NO DOWNWARD RECLASSIFICATION "
PROVISION, THE 4% INCREASE SHALL APPLY TO THEIR RESPECTIVE APPLICABLE TAX RATES
ANNEX B SCHEDULE IV. - Prepared Foodstuffs; Beverages, Spirits and Vinegar; Tobacco:

Chapter 22. Beverages, Spirits and Vinegar

22.01 Waters, including mineral waters and aerated waters; ice:

A. Mineral waters, unsweetened ad val. 25%

B. Aerated waters, unsweetened ad val. 100%

22.02 Lemonade, flavored aerated waters and other non-alcoholic ad val. 100%
beverages, not including fruit and vegetable juices falling within
heading No. 20.07

22.03 Beer, ale, porter and stout ad val. 75%

22.04 Grape must, in fermentation or with fermentation arrested ad val. 75%

otherwise than by addition of alcohol

22.05 Wine of fresh grapes, including grape must with added spirit:

A. Sparkling wines ad val. 200%

B. Other:

1. Containing by volume fourteen per cent or less of alcohol:

(a) In receptacles containing each more than two liters l. P0.10 or ad

val. 100%

(b) In other receptacles l. P0.20 or ad

val. 100%

2. Containing by volume over fourteen per cent of alcohol:

(a) In receptacles containing each more than two liters l. P0.40 or ad

val. 100%

(b) In other receptacles l. P0.70 or ad

val. 100%

22.06 Vermouths and other wines flavored with aromatic extracts; rice wine or sake:

A. Containing by volume fourteen per cent or of alcohol:

1. In receptacles containing each more than two liters l. P0.10 or ad

val. 100%

2. In other receptacles l. P0.20 or ad

val. 100%

B. Containing by volume over fourteen per cent of alcohol:

 1. In receptacles each more than two liters l. P0.40 or ad
val. 100%

2. In other receptacles l. P0.70 or ad

val. 100%

22.07 Other fermented beverages (e.g., cider, perry and mead):

A. In receptacles containing each more than two liters l. P0.15 or ad

val. 100%

B. In other receptacles l. P0.25 or ad

val. 100%

22.08 Ethyl alcohol, whether or not denatured:

A. Denatured l. P0.75

B. Other l. P2.00

22.09 Spirits, liqueurs and all other spirituous beverages:

A. Spirits (e.g., whisky rum, gin, brandy, arrack) l. P2.00 or ad

val. 100%

B. Other (e.g., cocktails liqueurs, cordials, bitters) l. P2.50 or ad

val. 100%

22.10 Vinegar l. P0.50