EXCISE TAXES

Excise Taxes
 In addition to the VAT (or OPT)
 Deductible for income tax purposes.

Goods/Services Subject to Excise Taxes –

1. Goods manufactured or produced in the
Philippines for domestic sale or consumption or
for any other disposition;
2. To things imported.
3. Non-essential services (added by TRAIN LAW)

Note: Excise tax is collected in addition to value-added

tax. It should be emphasized, however, that not all goods
manufactured or produced in the Philippines for domestic
consumption are subject to excise tax.

Purposes of Excise Tax:

1. To raise revenue;
2. To curtail the consumption of certain commodities;
3. To protect domestic industries.

EXCISE TAX

 Excise tax is a hybrid consumption tax with a

regulatory overture. It is imposed only on certain
goods or services.
 As a consumption tax, it normally applies when the
goods are intended for domestic consumption.
Hence, it taxes goods domestically produced or
imported for domestic use and exempts goods
produced for export.
 If the goods are exported out of the country, the
manufacturer or producer of the goods subject to
excise tax may claim tax credit or tax refund for
the excise tax paid.
 In certain cases, however, the regulatory feature
of excise tax is so intense that it disregards its
consumption tax nature by taxing even exports.
As a matter of national interest or public policy,
the transshipment of sin product such as alcohol or
cigarettes into designated ecozones and the export
of locally extracted mineral products is subject to
excise tax even if they are for foreign
consumption.
 Excise taxes are generally levied at the point of
production or importation. The tax is collected

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 before the goods are removed at the point of production or before the removal of the goods from Customs.
Exceptionally, cosmetic surgery and mineral products are subject to excise tax at the point of sale.

Scope of Excise Tax

 The Philippines version of excise tax is limited only to certain goods with the exception of cosmetic surgery – the
only service currently subject to excise tax. In other countries, even vices such as gambling or morally damaging
activities such as prostitution are taxed.

List of Excisable Articles and Services in the Philippines

1. Alcohol products, such as distilled spirits, wines and fermented liquors
2. Tobacco products, such as cigars and cigarettes
3. Petroleum products, such as gas, gasoline, diesel, wax, lubricant oils and greases, kerosene, naphtha,
denatured alcohol coke, asphalt and bunker fuel oil
4. Mineral products whether as metallic or non-metallic minerals and quarry resources
5. Miscellaneous articles, such as automobiles, non-essential goods like jewelry, perfume and yacht, and
sweetened beverages like soft drinks and sweetened drinks.
6. Non-essential services such as cosmetic surgery.

Note:

The excise tax covered in these lectures should be differentiated with the excise tax imposed on privilege. The excise
tax in this lecture are the excise taxes imposed on certain goods and services.

Timing of Excise Taxation

Taxation at the point of
Import Production Sale
Alcohol products √ √ ×
Tobacco products √ √ ×
Petroleum products √ √ ×
Mineral products √ × √
Automobiles √ √ ×
Non-essential goods √ √ ×
Sweetened beverages √ √ ×
Non-essential services × × √

NATURE OF PHILIPPINE EXCISE TAX

A. Excise tax as a 1. Environmental tax – It is imposed on products which causes harm to the
regulatory tax environment when produced or extracted or used. It is also known as green tax.

Examples are excise tax levied on:

a. Petroleum products
b. Quarry resources
c. Mineral products

2. Sumptuary tax – It is imposed to restrain luxury or extravagance. It is also

referred to as vanity tax.

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 Examples are excise taxes levied on:
a. Intrusive cosmetic surgery
b. Automobiles and yacht
c. Jewelry

3. Sin tax – It is imposed on the consumption of sin products or those known to pose
health risk. It is also known as health tax.

Examples are excise taxes levied on:

a. Alcoholic beverages
b. Tobacco products such as cigar and cigarettes

The excise taxes may be imposed on purely punitive grounds or to raise funds to
alleviate the damage caused on society by the consumption of the undesirable
products.

B. Excise tax as an Excise tax is an indirect tax. It is levied upon producers or importers with the
indirect tax understanding that he will pass-on the same to the consumers.

C. Excise tax as a The excise tax is usually levied at the point of production or importation, except excise
consumption tax tax on minerals and cosmetic surgery which is levied at the point of sale. Thus, it is a
typical pre-consumption tax, compared to other business taxes which are levied at the
point of sale or consumption.

D. Excise tax as an A business normally pays either percentage tax or value added tax. However, if it
additional business tax produces or imports excisable goods or sells excisable services, the excise tax is
imposed in additional tax to the usual business tax.

Thus, a business importing or producing excisable goods or selling excisable services

shall be taxed as follows:
Business registration Tax to pay
VAT taxpayer VAT and Excise tax
Non-VAT taxpayer Percentage tax and Excise tax

E. Excise tax as specific Excise taxes imposed in the Philippines are primarily specific taxes but there are also ad
and ad valorem tax valorem imposition and mixed of them.

Differences between excise tax and the other business tax

Excise tax Other business tax
Indirect tax levied at the point of production or Levied only at the point of sale
importation
A specific or per unit tax Purely ad valorem tax
Covers the production or import or sale of narrower range Covers the sale of almost all products and services
of products and services. including those already subjected to excise tax
Imposes heavier tax rates compared to reasonable Which are fairly reasonable
May subject even non-business producers Covers only those engaged in business
Is a revenue tax with a regulatory overture as it intend to Purely levied to raise revenue
curb health risk, or social, moral, or environmental
wrongs.

Similarities of excise tax and the other business tax

1. Excise tax is generally a consumption tax similar to other business taxes. Thus, the export of the goods is both
exempted from excise or business tax. Exceptionally, export of minerals is subject to excise tax.
2. Excise tax which are imposed ad valorem are similar to business taxes which are also imposed based on selling price.
3. Excise tax and business tax are both classified as indirect taxes since it is normally passed on by sellers to consumers.

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TYPES OF EXCISE TAX

1. Specific tax – excise tax imposed based on

weight or volume capacity or any other
physical unit of measurement.
2. Ad valorem tax - excise tax imposed on
selling price and other specified value,
exclusive of VAT and tariff and customs
duties (if imported).

MANNER OF COMPUTATION:
 Specific Tax = No. of Units/other
measurements x Specific Tax Rate
 Ad Valorem Tax = No. of Units/other
measurements x Selling Price of any
specific value per unit x Ad Valorem Tax
Rate

Note: But in computing VAT on importation, excise tax and tariff and customs duties are included in the tax base.

Specific sin taxes are now index to inflation at a rate of 4% per annum to preserve the regulatory potency of the tax
from the gradual decline in purchasing power of money over time.

Examples of Specific Tax:

ALCOHOL PRODUCTS
1. Distilled spirits (including proof spirits) – whisky, brandy, rum, gin, and vodka, fortified wines;
2. Wines – sparkling wines, champagne, still wines;
3. Fermented liquor – beer, lager beer, ale, porter and other fermented liquors except tuba, pasi, tapuy.

TOBACCO PRODUCTS
4. Tobacco products (except stemmed leaf tobacco or tobacco by-products which are to be exported or used in the
manufacture of cigar and cigarettes)
- Includes tobacco specially prepared for chewing
5. Cigars
6. Cigarettes

PETROLEUM PRODUCTS
7. Lubricating oils and greases;
8. Processed gas;
9. Waxes and petrolatum;
10. Denatured alcohol to be used for motive power;
11. Naphtha, regular gasoline, and other similar products of distillation;
12. Leaded and unleaded premium gasoline;
13. Aviation turbo jet fuel;

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 14. Asphalts;
15. Kerosene;
16. Diesel fuel oil;
17. Liquefied petroleum gas
18. Bunker fuel oil.

MINERAL PRODUCTS
19. Coal and coke

SWEETENED BEVERAGES – imposes a tax per liter of volume capacity on sweetened beverages.
The following products are excluded from the excise tax on sweetened beverages.
a. All milk products;
b. 100% natural fruit juices;
c. 100% natural vegetable juices;
d. Meal replacement and medically indicated beverages; and
e. Coffee – ground coffee, instant solution coffee, and pre-packed powdered coffee products.

Examples of Ad valorem Tax:

1. Distilled spirits
2. Cigars
3. Automobiles excluding:
a. Buses, trucks;
b. Cargo vans;
c. Jeepneys/jeepney substitutes (A vehicle used as public transport in the Philippine);
d. Single cab chassis;
e. Special-purpose vehicles; and
f. Automobiles used exclusively within the Freeport zones

Provides:
a. Purely electric vehicles and pick-ups are exempt from excise tax.
b. Hybrid vehicles shall be tax at 50% of the applicable excise tax rates.

Note:

Pick-ups are considered trucks, and therefore exempt from excise tax.
Jeeps (A vehicle (of a particular brand) suitable for rough terrain) are considered automobiles subject to excise
tax.

NON-ESSENTIAL GOODS
4. Jewelry, whether real or imitation, pearls; precious and semi-precious stones and imitations;
5. Goods made of or ornamented, mounted or fitted with precious metals or imitations thereof or ivory;
Except:
a. Surgical and dental instruments;
b. Silver-plated wares, frames, or mountings for spectacles or eyeglasses; and
c. Dental gold or gold alloys and other precious metals used in filling, mounting, or fitting the teeth.
6. Opera glasses and lorgnettes;
7. Perfumes and toilet waters;
8. Yachts and other vessels intended for pleasure or sports.

MINERAL PRODUCTS
9. Non-metallic minerals and quarry resources such as marble, granite, volcanic cinders, basalt, tuff and rock
phosphate;
10. Metallic minerals;
a. Copper and other metallic minerals;
b. Good and chromite
11. Indigenous petroleum including locally-extracted mineral oil, hydrocarbon gas, bitumen, crude asphalt, mineral
gas.
Except:
a. Locally-extracted natural gas; and
b. Locally-extracted liquefied natural gas

NON-ESSENTIAL SERVICES – 5% tax on gross receipts, net of excise tax and VAT, derived from the performance of
invasive cosmetic surgeries procedures and body enhancements for aesthetic/cosmetic purposes.

The following shall be exempt from the 5% excise tax:

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 a. Procedures to ameliorate a deformity arising from or directly related to a congenital or development defect or
abnormality, a personal injury resulting from an accident or trauma, or disfiguring disease, tumor, virus, or
infection; and
b. Cases and treatment covered by the National Health Insurance Program.

BASIS OF AD VALOREM TAX

Locally produced goods

 Locally produced goods imposed with ad valorem
tax is subject to tax on gross selling price.
 Gross selling price means the price, excluding VAT,
at which the goods are sold at wholesale in the
place of production or through their sales agent to
the public shall constitute the gross selling price.
 If the manufacturer also sells or allows such goods
to be sold at wholesale in another establishment of which he is the owner or in the profits of which he has an
interest, the wholesale price in such establishment shall constitute the selling price.
 Should such price be less than the cost of manufacture plus expenses incurred until the goods are finally sold,
then a proportionate margin of profit, not less than 10% of such manufacturing costs and expenses, shall be
added to constitute the gross selling price. (Sec. 130(B), NIRC)

Note:
Gross Selling Price of Good Subject to Ad Valorem Tax
1. The price, excluding the VAT, at which the goods are sold at wholesale or through sales agents;
2. If the manufacturer also sells the goods at wholesale in another establishment of which he is the owner, the
wholesale price is the latter establishment shall be the gross selling price;
3. If the price is less than the cost of manufacturing plus expenses, the gross selling price shall equal such cost +
expenses + a proportionate margin of profit (≥10% of the cost + expenses)

Manufacturer’s or producer’s sworn statement is

required

Manufacturer’s or producer’s shall file with CIR a statement

showing the different products or goods manufactured or
produced and their corresponding selling price or market
value, together with the cost of manufacturer or production
plus expenses incurred or to be incurred until the goods are
finally sold.

REVIEW QUESTIONS

Problem 1: ABC Company produced 1,000 units of an excisable goods that has a total wholesale value of P1,120,000,
inclusive of VAT. If sold retail, the goods would earn P1,400,000. The goods are subject to a 20% ad valorem tax.

Required: Compute the excise tax.

Wholesale invoice price 1,120,000

Divide by: 112%
Wholesale price 1,000,000
Multiply by: 20%
Excise tax 200,000

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Problem 2: DEF Company produced 5,000 units of an excisable goods. The goods were delivered to consignees who
sells the goods at P1,000 a unit to customers. The consignees take 20% of the retail sales and 16% of wholesales.
Consignees are allowed to sell the units at P900 a unit at a minimum wholesale value of 100 units. The excisable goods
are subject to a 15% ad valorem tax.

Required: Compute the excise tax.

Wholesale invoice price (P900 x 5,000) 4,500,000

Divide by: 112%
Wholesale price 4,017,857
Multiply by: 15%
Excise tax 602,679

Problem 3: A manufacturer of excisable goods, subject to 20% excise tax, made the following declaration in filing its
excise tax return for goods produced:
Wholesale invoice price P8,500,000
Production cost 7,500,000
Cost to sell 1,500,000

Required: Compute the excise tax.

Production costs 7,500,000

C ost to sell 1,500,000
Total costs 9,000,000
Minimum Margin (10% x P9M) 900,000
Tax base 9,900,000
Multiply by: 20%
Excise tax 1,980,000

The tax is based on the total cost since it is higher than the wholesale price.

Imported goods
 Unless otherwise specified by law, imported goods imposed with ad valorem tax shall be subject to the same
rates and basis of excise taxes applicable to locally manufactured articles. (Sec. 131 (B), NIRC)

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 REVIEW QUESTIONS

Problem 1: CCC Enterprise imported excisable goods subject to 10% excise tax and 20% custom duties. Data relating
to the imported articles were as follows:

Purchase price P4,000,000

Other inland costs 1,000,000
Domestic wholesale price, net of VAT 9,000,000

Required: Compute the excise tax.

The excise tax shall be computed as:

Wholesale price 9,000,000
Multiply by: 10%
Excise tax 900,000

The customs duties shall be computed as:

Purchase price 4,000,000
Other inland cost 1,000,000
Excise tax 900,000
Transaction value 5,900,000
Multiply by: 20%
C ustom duties 1,180,000

The VAT on importation shall be computed as follows:

Purchae price 4,000,000
Other inland costs 1,000,000
C ustom duties 1,180,000
Excise tax 900,000
Landed costs 7,080,000
Multiply by: Excise tax rate 12%
VAT on importation 849,600

Note: You have to note the specific unit bases of specific excise taxes but for CPA examination purposes, they are not
required to be memorized as the rates will be given when tested.

TAX COMPLIANCE REQUIREMENTS

WHO ARE THE PERSONS LIABLE TO EXCISE TAX?

For domestically produced excisable article

General rule: Excise tax is paid by manufacturers or producers of excisable goods or services in the
Producer Philippines for domestic sale or consumption, and importers of excisable goods.
Exception rule: 1, The excise tax on indigeneous petroleum, natural gas or liquefied natural gas is
payable by the following person:
If the goods is The taxpayer is
For local sale The first buyer or assignee
For export sale The owner, lessee, concessionaire or operator of the mining claim

2. Removal without payment

If goods are removed in their place or production without payment of the excise tax, the
owner or person having possession thereof shall be liable to the tax. (Sec. 131(A), NIRC).

For imported excisable article

General rule: The The excise tax shall be paid by the owner-importer of the imported goods.
importer
Exception rule: The When good are exempted by an exempt person is subsequently sold to another non-
non-exempt buyer exempt buyer, the latter shall pay for the excise tax otherwise due thereon on the
importation.

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Note:

Persons Subject to Excise Tax

1. Domestic Products
a. Generally, the manufacturer or producer of the
domestic products shall file the return and pay
the excise taxes before the removal of the domestic
products from the place of production; or
b. Owner or person having possession of
domestic products which were removed from
place of production without payment of the excise
tax; or
c. The first buyer, purchaser, or transferee for
local sale or transfer in the case of indigenous
petroleum, natural gas, or liquefied natural gas;

2. Imported Products
a. The importer shall file the return and pay the tax
before removal of the imposed goods from the
customhouse custody; or
b. The person who is found in possession of articles
which are exempt from excise taxes other than
those legally entitled to exemption.

Credit for Excise Taxes on Goods Actually Exported

 Excise taxes paid on goods actually exported shall be credited or refunded upon submission of proof of actual
exportation and upon receipt of the foreign exchange payment.
 Provided, Excise tax on mineral products (except coal and coke) shall not be creditable nor refundable
even if the mineral products are actually exported.

BIR Form Description Filing date

This return is filed by an individual or The return is filed and the excise tax
BIR Form No. 2200-A (Excise Tax non-individual in paying the excise paid by the manufacturer or
Return for Alcoholic products) tax of exciseable articles such as producer before removal of domestic
minerals and mineral products, products from place of production,
BIR Form No. 2200-AN (Excise liquor/alcohol and tobacco before except on the following:
Tax Return for Automobiles and Non- removal from the place of
essential goods) production/ mining site/bonded 1. Locally manufactured petroleum
warehouse. products and indigenous petroleum
BIR Form No. 2200-M (Excise Tax removed shall be paid before
Return for Mineral products) removal from place of production of
such.
BIR Form No. 2200-P (Excise Tax
Return for Petroleum products) 2. Non-metallic mineral or mineral
products or quarry resources shall be
BIR Form No. 2200-T (Excise Tax paid upon removal from the locality
Return for Tobacco products) where mined or extracted

BIR Form No. 2200-S (Excise Tax 3. Locally produced or extracted

Return for Sweetened Beverages) metallic mineral or mineral products
shall be paid within fifteen (15)
BIR Form No. 2200-C (Excise Tax days after the end of the taxable
Return on Invasive Cosmetic quarter when such products were
Procedure) removed provided a surety bond was
posted by the mining company.

4. The tax return (BIR Form 2200-

C) shall be filed and the excise tax
due, if any, shall be paid at the same
time within ten (10) days
following the close of the month.

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WHEN TO FILE AND PAY EXCISE TAX?

For domestically produced excisable article

General rule: Before The excise tax is payable before removal of the domestic goods from the place of
removal production. (Sec. 130 (A)(2), NIRC)
Exception rule: The excise tax on locally produced or extracted mineral or mineral products is payable
Mineral or mineral within 15 days after the end of the calendar quarter when such products were removed.
products
The taxpayer shall file a bond in an amount which approximates the amount of excise tax
on the removal for the said quarter.

Imported excisable products

The excise tax on imported excisable products shall be paid before their removal from customs custody. This rule
applies even for imported metallic or non-metallic mineral products.

Note:
For excisable products that is
Domestically produced Imported
Who is the taxpayer? Producer Importer
When to pay? Before removal from production Before removal from customs

EXCISE TAX-FREE The importation of products into tax and duty-free shops, Freeport zones, and special
IMPORTATION BY economic zones shall not be subject to excise taxes, since they are considered foreign
EXEMPT PERSONS territories. Consumption of persons inside these places are considered foreign consumption;
hence, exempt.

Exception:
Exemption does not apply to sin products such as cigars, cigarettes, distilled spirits, fermented
liquors and wines. A surety bond, however, may be required in some cases to protect the
interest of the government.

Introduction of tax-free articles into the customs territory

Introduction into the customs territory refers to the sale or transfer of tax-free articles to
persons outside tax and duty-free shops, Freeport zones and special economic zones.

When tax-free articles are subsequently introduced into the customs territory, this is a
technical importation subject to excise tax.

Example:

DDD Industries, an ecozone locator, imported and subsequently sold the following excisable
goods:

Value of import Portion sold Portion sold

within the outside the
ecozone ecozone
Cigarettes P400,000 P200,000 P100,000
Wines 500,000 200,000 100,000
Automobiles 12,000,000 3,000,000 4,000,000

Importation
The importation inside special economic zone is normally exempt except sin products; hence,
the import of P400,000 cigarettes and P500,000 wines shall be subject to excise tax.

The importation of the automobiles shall be exempt from excise tax if exclusively used within
ecozones. (Sec. 149, NIRC)

Subsequent sale
The subsequent sale of the cigarettes and wines either within or outside of the ecozone shall

P a g e | 10
 be exempt from excise tax as the tax is already paid at the point of importation.

The subsequent sale of the P3,000,0000 automobile within the ecozone is exempt as this is a
foreign consumption but the sale of the P4,000,000 automobile outside the ecozone is an
introduction to the custom’s territory subject to excise tax.

The sin tax is punitive tax hence it applies in disregard of the legal fiction that duty-free ports,
ecozones or Freeport zones are foreign countries. The legal fiction holds only for purposes of
VAT and custom duties. Import of sin products would be exempt from VAT and customs
duties.
EXPORT OF When goods locally produced or manufactured are removed and actually exported without
EXCISABLE GOODS returning to the Philippines, any excise tax paid thereon may be claimed as:
a. Tax refund, or
b. Tax credit

This applies whether the goods are exported in their original state or as ingredients or parts of
any manufactured goods or products. Note that the excise tax is levied only on domestic
consumption. (Sec. 130(D), NIRC).

Exception: Mineral products

The excise tax on mineral products, except coal and coke, shall not be creditable or refundable
even if the mineral products are actually exported.

Excise tax on minerals is apparently imposed to compensate the environmental destruction

arising from their or extraction or production, as such the excise tax applies even if the goods
are for foreign consumption.

ALCOHOL PRODUCTS

1. Alcohol Products (Sections 141-143)

a. Distilled Spirits (Section 141)

b. Wines (Section 142)

c. Fermented Liquors (Section 143)

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P a g e | 12
EXCISE TAX ON ALCOHOL PRODUCTS

Alcohol products Excise tax rates for 2019 *

Distilled spirits Per proof liter P23.40
NRP 20%
Sparkling wines/Champagnes NRP per 750ml bottle; P500 or less 316.33
More than P500 885.73
Still wines and carbonated wines 14% alcohol by volume or less 37.96/L
More than 14% but not more than 75.92/L
25%
Fermented liquors If brewed and sold at pub and 35.43/L
restaurant
Others 25.42/L

*The specific tax rates are subject to 4% annual adjustment every January 1 of each year.

Net retail price Shall mean the price at which the distilled spirits is sold on retail in at least 5
major supermarkets in Metro Manila. For distilled spirits marketed outside
Metro Manila, NRP shall mean the price at which the distilled spirit is sold in at
least 5 major supermarkets in the region.

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 Proof liter Shall mean a liter of proof spirits. A proof means 50% of alcohol content.
Thus, 70 proof means 70/2 or 35% alcohol content.

Distilled spirits

 Distilled spirits is the substance known as

ethyl alcohol, ethanol or spirits of wine,
including dilutions, purification and
mixtures thereof, from whatever source,
by whatever process produced, and shall
include whisky, brandy, rum, gin and
vodka, and other similar products or
mixtures.
 Distilled spirits have an additional ad
valorem tax of 20% of the NRP, excluding
the value added tax and excise tax. The
specific tax per proof liter is subject to 4%
adjustment every year.

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 REVIEW QUESTIONS

Problem 1: (Distilled spirits) EEE Brewery produces its famous Sarap Whisky of 60 proof 750ml-bottle sold at net retail
price of P100/bottle. During the period (2019), it produced a total of 15,000 bottles.

Required: Compute the total excise tax.

Alcohol content in a 60 proof (60/2) 30%

Total alcohol content in liters (30% x .75L x 15,000 bottles) 3,375
Total proof liters = 3,375 alcohol x 2 6,750

Specific tax (6,750 proof liter x P23.40) 157,950

Ad valorem tax (15,000 bottles x P100/bottle) x 20% 300,000
Total excise tax 457,950

Note:

P a g e | 15
1. 60 proof = 30% alcohol content
2. 1,000 ml = 1 liter

Problem 2: (Distilled spirits) FFF Distillers, Inc. produces its branded a Royal Gin. The 90-proof Royal Gin is sold in 1-
liter bottles and packed in 12 bottles. A small bottle of 500-ml Royal Gin, called “Ginebra Pilak” is packed in 24 bottles. A
bottle of Royal Gin and Ginebra Pilak is packed in 24 bottles. A bottle of Royal Gin and Ginebra Pilak sell at net retail
prices of P120 and P65 each. During the period During the period (2019),, a total of 500 packs of Royal Gin and 800
packs of Ginebra Pilak is produced.

Required: Compute the total excise tax.

Alcohol content in a 90 proof (90/2) 45%

Total alcohol of Royal Gin in liters (45% x 1L x 12 x 500) 2,700
Total alcohol of Ginebra Pilak in liters (45% x 0.50L x 24 x 800) 4,320
Total alcohol in liters 7,020
Multiply by: 2
Total proof liters 14,040
Multiply by: 23.40
Total specific tax 328,536

Royal Gin (12 x 500 x P120) x 20% 144,000

Ginebra Pilak (24 x 800 x P65) x 20% 249,600
Total ad valorem tax 393,600
Total excise tax 722,136

Wines

 Wines normally have carbon dioxide ( CO2 ) on them due to the fermentation process.
 CO2 is normally released when yeast and sugar mix making the wine bubbly, sparkling or fizzy, thus the term
“sparkling” wines.
 Sparking wines have sugar and yeast on them which makes them bubbly due to continuous fermentation even
after bottling. Wines with CO2 removed are not bubbly or fizzy, thus the term “still” wines. A carbonated
wine is one which is artificially added with carbon dioxide to influence character or taste of the wine.
 Fortified wines mean natural wines to which distilled spirits are added to increase their alcohol strength.
Fortified wines containing more than 25% of alcohol shall be taxed as distilled spirits. Fortified wines means
natural wines to which distilled spirits are added to increase their alcohol strength.

REVIEW QUESTIONS

Problem 1 : (Wines) CCC Winery produces various wines packed in cases of 12 bottles. It produced the following
during a month in 2019:

Class Bottle SRP Total case produced

Champagne 750 ml P1,600 20 cases
Carbonated wine – 50 proof 750 ml 200 150 cases
Fortified wine – 60 proof 1L 120 80 cases

Required: Compute the total excise tax.

Champagnes (20 cases x 12 bottles/case x P885.73) 212,575.20

Carbonated wines (150 x 12 x 750/1,000) x P75.92 102,492.00
Fortified wine
Specific tax (30% x 80 x 12) x P23.40 6,739.20
Ad valorem (P120 x 80 x 12) x 20% 23,040.00 29,779.20
Total excise tax 344,846.40

Note:
1. The excise tax on champagne applies for 750ml bottle regardless of proof.
2. The champagne’s net retail price is higher than P500, computed as follows:
Ultimate retail price P1,600
Divide by: VAT inclusive rate 112%
Selling price net of VAT P1,428.57

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Less: Excise tax 885.73
Indicated net retail price P542.84

Fermented liquors

 Fermented liquors includes beer, lager beer, ale, porter and similar products, except tuba, tapuy and similar
products.

REVIEW QUESTIONS

Problem 1: (Fermented liquors) Beer Serbesa ferments beer from imported malt or ale and sells them in 500-ml
bottles at P32/bottle final retail price. The beers are sold in cases containing 24 bottles each. 300 cases of beers are
produced in March 2019.

Required: Compute the excise tax.

Total cases produced 300

Multiply by: bottles per case 24
Total bottles 7,200
Multiply by: ml/bottle 500
Total ml produced 3,600,000
Divide by: ml/L 1,000
Total liters produced 3,600
Multiply by: Excise tax per liter 25.42
Total excise tax 91,512

Problem 2: (Fermented liquors) DDD ferments liquors from sugar cane which it ages in antique Guzi jars. The product
called “bas” is branded as “Yummy Basi” and is marketed at P500/gallon.

Required: Compute the total excise tax.

Basi is not subject to excise tax.

Conditional Tax -free Removal of 1. Removal of wines and distilled spirits for treatment of tobacco leaf
Alcohol Products 2. Removal of spirits for rectification
3. Removal of fermented liquor to bonded warehouses
4. Removal of damaged liquors

Denaturation of alcohol When wines and distilled spirits are to be used for the treatment of tobacco leaf
by manufacturers of cigars and cigarettes, this is not human consumption;
hence, tax free, but such wines and distilled spirits must first be suitable
denatured.

Denatured alcohol of not less than 1800 proof (90% absolute alcohol) when
suitably denatured and rendered unfit for oral intake is exempt from excise tax.
Denatured alcohol used for motive power shall be taxed as petroleum
products.

Alcohol rendered unfit for oral intake after denaturation but restored fit for oral
intake after undergoing fermentation, dilution, purification, mixture or any other
similar processes shall be subject to tax as alcohol products.

Rectification of spirits Spirit requiring rectification may be removed from the place of production to
another establishment for purposes of rectification without prepayment of taxes
but this requires submission of a joint bond by the distiller and the rectifier
conditioned on the rectifier’s payment of the excise tax on the rectified alcohol.
No loss for rectification and handling shall be allowed. The rectifier shall pay the
excise tax on such losses. Rectifiers using spirits with unpaid excise taxes shall
be liable for the payment of the excise tax thereon.

Removal of fermented liquors to Fermented liquors may be removed or transported from the brewery or other

P a g e | 17
bonded warehouses place of manufacture to a bonded warehouse used by him exclusively for
storage or sale in bulk of fermented liquor, not less than 1,000 liters at one
removal without prepayment of the tax under a permit which shall be granted
by the CIR.

Removal of damaged liquors When fermented liquor has become sour or otherwise damaged so as to be unfit
for use as such, brewers may sell and after securing a special permit from the
CIR, remove the same without the payment of tax thereon, in cask or other
packages, distinct from those ordinarily used for fermented liquors, each
containing not less than 175 liters with a note of their contents permanently
affixed thereon.

TOBACCO PRODUCTS

2. Tobacco Products (Sections 144-146)

a. Tobacco Products (Section 144)

b. Cigars & Cigarettes (Section 145)

c. Inspection Fee (Section 146)

EXCISE TAX ON TOBACCO PRODUCTS

Tobacco products Tax rates

a. Tobacco twisted by hand or reduced into a condition to be consumed in P2.20/kg as of January 1, 2019*
any manner other than the ordinary mode of drying and cutting
b. Tobacco prepared or partially prepared with or without the use of any
machine or instruments or without being pressed or sweetened
c. Fine-cut shorts and refuse, scripts, clippings, cuttings, stems and
sweepings of tobacco
d. On tobacco specially prepared for chewing so as to be unsuitable for use P1.89/kg as of January 1, 2019*
in any other manner

*Subject to 4% yearly increase thereafter.

Cigar and cigarettes

Cigars, per cigar Excise tax
 Ad valorem tax 20% on net retail price
 Specific tax P6.32 / cigar as of January 1, 2019*
Cigarettes, per pack Packed by hand Packed by machine
 July 1, 2018 to Dec. 31, 2019 P35 / pack P35 / pack
 January 1, 2020 to Dec. 31, P37.50 / pack P37.50 / pack
2021
 January 1, 2022 to Dec. 31, P40 / pack* P40 / pack*
2023

*Subject to 4% yearly increase thereafter starting January 1, 2024.

INSPECTION FEE - There shall be collected inspection fees on leaf tobacco, scrap, cigars, Cigarettes and other
manufactured tobacco and tobacco products as follows:
PRODUCT TYPE INSPECTION FEE
(1) Cigars P 0.50 per thousand pieces or fraction thereof
(2) Cigarettes P 0.10 per thousand sticks or fraction thereof
(3) Leaf Tobacco P 0.02 per kilogram or fraction thereof
(4) Scrap and other manufactured tobacco P 0.03 per kilogram or fraction thereof

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P a g e | 19
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P a g e | 22
 Tax

Tax

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 Tax

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Cigar and Cigarettes

 Cigars means all rolls of tobacco or any substitute thereof, wrapped in a leaf tobacco.
 Cigarettes means all rolls of finely-cut leaf tobacco, or any substitute thereof, wrapped in paper or in any other
materials.
 Duly registered cigarettes packed by machines shall only be packed in twenties and other packaging
combinations of not more than twenty.

Removal of tobacco products Tobacco products entirely unfit for chewing or smoking may be removed tax-free for
without prepayment agricultural or industrial use. Stemmed leaf tobacco, fine-cut shorts, refuse of fine-
cut chewing tobacco, scraps, cuttings, clippings, stems or midribs, and sweepings of
tobacco may be sold in bulk as raw material by one manufacturer directly to another
without payment of the tax.

Stemmed leaf tobacco means leaf tobacco which has the stem or midrib removed
and does not include broken leaf tobacco.

No tobacco products manufactured in the Philippines and produced for export shall
be removed from their place of manufacture or exported without posting a bond of
an export bond equivalent to the amount of the excise tax thereon if sold
domestically. Tobacco products for export may be transferred from the place of
manufacture to a bonded facility, upon posting of a transfer bond, prior to export.

Tobacco products imported into the Philippines and destined for foreign countries
shall not be allowed entry without posting a bond equivalent to the amount of
custom duty, excise tax and VAT due thereon if sold domestically.

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 REVIEW QUESTIONS

Problem 1: (Cigar and Cigarettes) In May 2019, GGG Company produced a total of 8,000 kilos of dried tobacco
leaves from its plantation and processed the same into cigarettes.

The processing resulted to the following:

Product Packs Pieces / pack Net retail price
Cigar 1,000 10 P200 / pack
Cigarette 6,000 20 P100 / pack

1,000 kilos of the dried leaves failed strict quality control and are discarded to be sold as loose leaf tobacco to consumers
for P100/kilo.

All of the products will be withdrawn for sale in domestic supermarkets except for 1,500 cigarette packs which are ordered
exported by a foreign customer.

Required: Compute the total excise tax.

Cigar:
-Ad valorem tax = 1,000 packs x P200/pack x 20% 40,000
-Specific tax = 1,000 packs x 10 pcs x P6.32 / pcs 63,200
Cigarette: 6,000 packs x P35/pack 210,000
Loose tobacco: 1,000 kgs x P2.20/ kg 2,200
Total excise tax 315,400

Note:
1. The sale of loose tobacco to end users is subject to excise tax.
2. Loose tobacco leaf is exempt when the same is used in the manufacturing of tobacco products which will
ultimately be subject to the excise tax.
3. GGG Company shall pay excise tax for the withdrawal of the 1,500 cigarettes pack for export. It shall claim tax
refund or tax credit upon showing proof of actual exportation.

PETROLEUM PRODUCTS

3. Petroleum Products (Section 148)

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EXCISE TAX ON PETROLEUM PRODUCTS

Tax Rate Unit of measure

Petroleum product 2019 2020
Lubricating oils and greases including but not limited to base P9.00 P10.00 Liter and kilogram
stocks for lube oils and greases, and additives
Processed gas 9.00 10.00 Liter of volume
Waxes and petroleum 9.00 10.00 Kilogram
Denatured alcohol for motive power 9.00 10.00 Liter of volume
Naphtha, regular gasoline, pyrolysis gasoline and other similar 9.00 10.00 Liter of volume
products of distillations
 If used as raw materials in the production of 0.00 0.00
petrochemicals or as a replacement fuels for power
plants
Unleaded gasoline 9.00 10.00 Liter of volume
Aviation turbo jet and aviation gas 4.00 4.00 Liter of volume
Kerosene 4.00 5.00 Liter of volume
Diesel fuel oil and similar fuel oils 4.50 6.00 Liter of volume
Liquefied petroleum gas 2.00 3.00 Kilogram
 If used for motive power Tax as diesel oil
 If used for production of petrochemical products 0.00 0.00
Asphalts 9.00 10.00 Kilogram
Bunker fuel oil and similar fuel oils 4.50 6.00 Liter of volume
Petroleum coke 4.50 6.00 Metric ton
 If used as feed stocks to power generation facilities 0.00 0.00

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Petroleum products to be used as raw materials

 Petroleum products used as raw materials in the manufacture of other petroleum products or as fuel for power
plants are not taxable.
 Examples:
1. Naphtha and pyrolysis gasoline used as raw materials in the manufacture of petrochemicals or as
replacement fuels for power plants
2. Liquefied petroleum gas used in the production of petrochemicals
3. Petroleum coke used as feed stocks to power generation facilities
 Biothenal products to be subject to the excise tax herein must be denatured before the release thereof from
Customs in the case of importation or before removal from the place of production if domestically produced.

Creditable excise tax The excise tax paid on the purchase of base stock (bunker) in the manufacture of
excisable articles and forming part thereof shall be credited against the excise tax
due thereon. Any excess of excise tax paid on raw materials resulting from
manufacturing, blending, processing, storage and handling losses shall not give
rise to a tax refund or credit.

Note:
Used in production or Used as replacement
processing of fuels for power plants
products subject to
excise tax
Naphtha, gasoline and Exempt Exempt
other similar products
Liquefied petroleum gas Exempt Exempt
Petroleum coke - Exempt
Bunker fuel Taxable but creditable -

Mandatory marking of all Imported or locally manufactured petroleum products such as but not limited to
petroleum products unleaded premium gasoline, kerosene, and diesel fuel oil are required to be
marked after the taxes and duties thereon have been paid.

Products found in the domestic market which do not contain the marker or which
contain markets but are diluted beyond the acceptable percentage approved by the
Secretary of Finance shall be presumed that the same were withdrawn with the
intention to evade the payment of taxes and duties due thereon.

Random field test will be periodically conducted in the warehouses, storage

tanks, gas stations and other retail outlets to inspect the quality and quantity of
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 fuel to check incidence of fuel trafficking. Field testing are required to be properly
filmed and video-taped and documented.

A confirmatory test will be rendered on tested unmarked, adultered, or diluted

fuel to validate the findings of the field test. Confirmatory fuel test certificates
issued by fuel testing facilities shall be valid for any legal purposes from the date of
issue and shall continue admissible and conclusive evidence before any court.

Sale of Petroleum Products to Petroleum products sold to the following are exempt from excise tax:
Exempt Entities 1. International carriers
2. Entities exempted under tax treaties, conditional on reciprocal tax
exemption treatment
3. Entities which are exempt form direct and indirect tax

Petroleum products sold to international carriers must be stored in bonded storage

tank and may be disposed of only in accordance with the regulations by the
Secretary of Finance upon recommendation of the CIR.

REVIEW QUESTIONS

Problem 1: (Petroleum) CCC pumps crude oil from its oilfield and feed them to its oil refinery which transform the
crude oil into various petroleum products.

The following were produced by the plant from a batch of crude oil in 2019:
Gasoline 45,000 liters
Aviation gas; 5,000 liters is kept in bonded storage tanks for sale to international carriers 9,000 liters
Diesel fuel 25,000 liters
Bunker fuel 3,000 liters
Asphalt 5,000 kilos
Naphtha; 200 liters used in refining of petroleum products 500 used in producing plastic 1,200 liters
products; the lance is sold

Required: Compute the total excise tax.

Gasoline (45,000 liters x P10/liter) 450,000

Aviation gas (9,000 - 5,000) x P4 /liter 16,000
Diesel (25,000 liters x P4.5/liter) 112,500
Bunker fuel (3,000 liters x P4.5/liter) 13,500
Asphalt (5,000 kilos x P9/kilo) 45,000
Naphtha (1,200 - 200 - 500) x P9 4,500
Total excise tax 641,500

Note:
1. Petroleum products sold to international carriers is exempt subject to the requirement that they must be stored
in bonded storage tank and will be disposed only to accordance with rules and regulations.
2. Naphtha used in refining or in the production of other petrochemical products or used as fuel of power plants
shall not be subject to excise tax.

Problem 2: Assume further that CCC used the 3,000 liter of the bunker fuel to produce 4,000 grease oil by mixing it with
several additives.

The 4,000 grease oil is no longer subject to excise tax since it is produced from a base stock (bunker fuel) on which excise
tax is already paid. (Sec. 148 (a), NIRC)

Problem 3: Assume CCC subsequently exported 21,000 liters of the gasoline and 10,000 of the diesel fuel.

The proportionate excise tax paid on these items shall be claimed as tax credit or tax refund upon showing proof of their
actual importation.

MINERAL PRODUCTS

4. Mineral Products (Sections 151)

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EXCISE TAX MINERALS

Minerals, mineral products and quarry resources shall be taxed as follows:

Mineral product Domestically produced Imported
Coal and coke P50 /MT effective January 1, 2018
P100 /MT effective January 1, 2019
P150 /MT effective January 1, 2020
Non-metallic minerals and quarry resources 4% 4%
Copper, gold, chromite and other metallic minerals 4% 4%
Indigenous petroleum 6%
Natural gas and liquefied natural gas Exempt

Indigenous petroleum shall include locally extracted mineral oil,

hydrocarbon gas, bitumen, crude asphalt, mineral gas and all other similar or
naturally associated substances with the exception of coal, peat, bituminous
shale and/or stratified mineral deposits.

Minerals mean all naturally

occurring inorganic substances
(found in nature) whether in solid,
liquid, gaseous or any intermediate
state.

Mineral products mean things produced and prepared in a marketable state

by simple treatment processes such as washing or drying, but without
undergoing any chemical change or process or manufacturing by the lessee,
concessionaire or owner of the mineral lands.

Hydrocarbon based fuel such as petroleum, coal or natural gas are derived from living matters of past geologic times.
While hydrocarbon fuels are organic while mineral is inorganic.

Quarry resources shall mean any common stone or other common mineral
substances as the Director of the Bureau of Mines and Geo-Science may
declare to be quarry resources such as but not restricted to mal, marble,
granite, volcanic cinders, basalt, tuff and rock phosphate; provided, that
they contain no metal or metals or other valuable minerals in economically
workable quantities.

Coke is a fuel with high carbon content derived from the anaerobic
distillation of coil and oil. It may also be formed by natural geologic processes. It is used in iron smelting or fuel in
stoves and forges. It should be differentiated with a related product called petroleum coke which is obtained from crude
oil as a by-product of oil refineries. Petroleum coke is taxed at much lower tax.

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P a g e | 31
Ad valorem tax on mineral products
1. Excise tax on metallic and non-metallic minerals
If domestically produced, the excise tax is based on the actual market value of the gross output upon removal. If
imported, it is based on value used by the BOC in determining tariff and customs duties, net of excise tax and VAT.

The gross output shall be interpreted as the actual market value of minerals or mineral products, or of bullion from
each mine or mineral land operated as a separate entity without any deduction from mining, milling, refining, as well
as transporting, handling, marketing or any other expenses.

2. Excise tax on indigenous petroleum

The excise tax on indigenous petroleum is based on the fair international market price on the first taxable sale, barter
or exchange of such similar transaction or the transfer of indigenous petroleum in its original state to a first taxable
transferee.

REVIEW QUESTIONS

Problem 1: (Ad valorem on mineral products) During the month, FFF Mining Company mined a total of 500 tons of
gold-copper concentrates. The concentrates were assayed to contain 0.008% gold and 18% copper. FFF Mining Company
usually exports its concentrates.

The market value of the following in the London Metals Exchange (LME) were:
Gold price $1,493 / troy ounce
Copper $5,700 / ton

Each troy ounce is 31.10348 grams. Each ton is 1,000,000 grams. The US Dollar is trading P52/P1

Required: Compute the excise tax.

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 Gold:
Total concentrates in tons 500
Multiply by: Gold content 0.008%
Gold in tons 0.04
Multiply by: 1,000,000 grams/ton 1,000,000
Gold in grams 40,000
Multiply by : Gold price/grams ($1,492 / 31.10348) $48
$1,920,000
Multiply by: Peso-Dollar exchange rate 52
Gold price in Peso ₱99,840,000

Copper:
Total concentrate in tons 500
Multiply by: 18%
Copper in tons 90
Multiply by: $/ton $5,700
Copper price in dollar $513,000
Multiply by: Peso-Dollar exchange rate 52
Copper price in Peso ₱26,676,000
₱126,516,000
Multiply by: Excise tax rate 4%
Excise tax 5,060,640

Problem 2: Assume the same data in Problem 1 except that FFF Mining sells its concentrate to its subsidiary company,
GGG Refinery. GGG Refinery smelted and refined the concentrate yielding 3,100 troy ounce of pure gold and 96 tons of
refined copper.

FFF Mining Company shall pay the same tax as computed in Problem 1. Being a separate taxable person, GGG Refinery
shall be separately imposed the following excise tax on the refined minerals:

Gold:
Refined gold in troy ounce 1,300
Multiply by : Dollar price / troy ounce $1,493
Dollar price of the goold $1,940,900
Multiply by: Peso-Dollar exchange rate 52
Gold price in Peso ₱100,926,800

Copper:
Refined copper in tons 96
Multiply by: $/ton $5,700
Copper price in dollar $547,200
Multiply by : Peso - Dollar rate 52
Copper price in eso 28,454,400
Market value of gross output 129,381,200
Multiply by: Excise tax rate 4%
Excise tax 5,175,248

Note: What is the minerals were refined by FFF Mining Company itself?
Only one tax shall be imposed. FFF Mining Company shall only pay P5,175,248.

Small Scale Miners

 RA 11256 exempts registered small scale miners and accredited traders who are selling gold to the Bangko
Sentral ng Pilipinas (BSP) from paying income tax and excise tax. Note also that the sale of gold to the BSP is
also exempt from business tax.
 Pursuant to RA 11256, gold which is sold, or eventually sold to the BSP, shall be exempt from the payment of
excise tax. If the excise tax due thereon is paid prior to the sale of the gold to the BSP, the taxpayer may file a
claim for refund with the Commissioner of Internal Revenue.

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  All gold sold to the BSP by accredited traders shall be presumed to have been purchased by said traders from
small-scale miners. (Sec. 4, RA 11256)

REVIEW QUESTIONS

Problem 1: Mr. Allan is an operator of a small-scale mining claim. His groups produced a total of 3,400 grams of gold
nuggets and discs with specific gravity of 17.5 (roughly 90% purity). He sold the gold production to the BSP. Upon final
assay, the BSP made a final settlement as follows:
Gold P6,900,000
Silver 200,000
Total P7,100,000

Required: Compute the total excise tax.

The sale of gold is exempt but the sale of silver is taxable. The excise tax shall be computed as follows:
Sale of silver P200,000
Multiply by: 4%
Excise tax P8,000

Problem 2: Mr. Allan is a BSP-registered gold trader. He bought several kilos of gold and sold them as follows:
Buyer Amount
Bangko Sentral ng Pilipinas P8,100,000
Jewelers 2,400,000
Gold collectors 1,200,000

Required: Compute the total excise tax.

Sale of gold to jewelers 2,400,000

Sale of gold to collectors 1,200,000
Total taxable sales 3,600,000
Multiply by: Excise tax rate 4%
Excise tax 144,000

Import of minerals Note that imported minerals is exceptionally subject to excise tax upon the
basis used by the Bureau of Customs in computing customs duties (i.e.
dutiable value).

MISCELLANEOUS ARTICLES

5. Miscellaneous Articles (Section 149-150)

a. Automobiles (Section 149)

b. Non-essential Goods (Section 150)

c. Non-essential Service (Section 150-A) - RA 10963 [TRAIN Law))

d. Sweetened Beverages (Section 150-B)-(RA 10963 [TRAIN Law])

AUTOMOBILES

 Automobiles refer to any four or more

wheeled motor vehicle regardless of
seating capacity which is propelled by
gasoline, diesel, electricity or other motive
power.
 Utility vehicles such as buses, trucks, cargo
vans, jeepneys or jeepney substitutes,
single cab chassis and special purpose

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 vehicles such as cement mixer, fire truck, boom truck, ambulance, and or medical unit and off-road vehicles for
heavy industries shall not be considered automobiles.

Ad valorem tax on manufactured or imported automobiles

NET MANUFACTURER'S PRICE/IMPORTER'S SELLING TAX RATES (RA 10963 (TRAIN Law)
PRICE*
OVER UP TO RATE
0 Php600,000 4%
Php600,000 Php1,000,000 10%
Php1,000,000 Php4,000,000 20%
Php4,000,000 50%

*Net of excise tax and VAT.

Exception to the excise tax rates:

1. Hybrid vehicles shall be subject to 50% of the
applicable excise tax.
2. Purely electric vehicles and shall be exempt on
excise tax on automobiles.
3. Pick-ups

Hybrid vehicle means a motor vehicle powered by

electric energy, with or without provision for charging, in combination with gasoline, diesel or any other motive power.

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P a g e | 36
 REVIEW QUESTIONS

Problem 1: GGG Cars manufactures various automobile models. It completed the following units:
Model Class Wholesale price Produced Sold
A SUV – gasoline P800,000 8 6
B Pick-up truck – diesel 1,200,000 7 5
C Electric car 3,000,000 5 4
D Bus – diesel 5,000,000 4 2
E Sports car - hybrid 7,000,000 4 3

Required: Compute the excise tax

Model Price Qty Total wholesale Tax rate Excise Tax

A 800,000 8 6,400,000 10% 640,000
B 1,200,000 7 8,400,000 0% -
C 3,000,000 5 15,000,000 0% -
D 5,000,000 4 20,000,000 0% -
E 7,000,000 4 28,000,000 50%/2 8,000,000
Total 8,640,000

Note:
1. The excise is based on units produced not on the units sold. The VAT on the sale shall be based on the units sold.
2. Electric vehicles and pick-up are exempt. Hybrid vehicles are subject to half-tax.

Problem 2: BBB Company manufactures cars and motorbikes powered solar energy or by a combined gasoline and
hydrogen generated from hydrolysis. During the month, BBB Company completed a unit each of its car and motorbike
model.
Wholesale
Hybrid water car P2,000,000
Hybrid water bikes 800,000
Solar car 4,000,000

Required: Compute the total excise tax

Hybrid water car P2,000,000

Multiply by: Excise tax rate 20%
Excise tax P400,000

The solar car is electrical powered vehicle and hence exempt. The water bike does not fit into the definition of automobile
being a two-wheeled vehicle. Sad to say, the water car does not fit into the current definition of a “hybrid car”.

Net manufacturer’s or This refers to the price, net of excise tax and VAT at which locally
Importer’s selling price manufactured/assembled or imported automobiles are offered for sale to
dealers, or the public directly or through their sales agents, as reflected in the
manufacturer’s or importer’s sworn declaration or in their sales invoice,
whichever is higher.
Minimum prices The net manufacturer’s or importer’s selling price shall include the value of air
conditioning unit, radio and mag wheels including the installation cost thereof
whether or not the same is actually installed in the automobile.

The net manufacturer’s selling price shall not be less than:

1. 80% x (Suggested retail price – excise tax – VAT); and
2. 110% x (Cost of manufacture or import + selling expenses)

The suggested retail price shall not be less than the actual selling price of the
automobile when sold in the market.

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 REVIEW QUESTIONS

Problem 1: AAA manufacturers mid-size SUV’s which is exclusively sold through accredited dealers or resellers. AAA
declared the cars with a manufacturer’s wholesale price of P900,000 and paid tax of 10% or P90,000 per car. The car is
offered by resellers to the public at a suggested final retail price of P1,545,600. The standard cost to produce the unit is
P700,000 while cost to sell is 20% of cost.

Required: Compute the deficiency excise tax.

Declared manufacturer's selling price 900,000

Suggested retail price of dealers or resellers 1,545,600

Divided by: 112%
Selling price inclusive of excise tax but after VAT 1,380,000
Less: Excise tax paid (90,000)
Suggested retail price, net of excise tax and VAT 1,290,000
Multiply by: 80%
80% Price Limit 1,032,000

Unit cost to produce 700,000

Cost to sell (P700,000 x 20%) 140,000
Total cost 840,000
Mark-up rate 110%
Cost plus limit 924,000

The manufacturer’s net selling price shall be based on the higher the 80% price limit, thus the correct excise tax shall be
established as follows:

Manufacturer's presumed selling price 1,032,000

Multiply by: Tax rate at price 20%
Excise tax 206,400
Less: Excise tax paid (90,000)
Deficiency excise tax 116,400

Problem 2: Assume the same information in the above problem, except that AAA declared the car at P1,010,000 and
paid 20% excise tax of P202,000.

Required: Compute the deficiency excise tax.

Declared manufacturer's selling price 1,010,000

Suggested retail price of dealers or resellers 1,545,600

Divided by: 112%
Selling price inclusive of excise tax but after VAT 1,380,000
Less: Excise tax paid (202,000)
Suggested retail price, net of excise tax and VAT 1,178,000
Multiply by: 80%
80% Price Limit 942,400

Unit cost to produce 700,000

Cost to sell (P700,000 x 20%) 140,000
Total cost 840,000
Mark-up rate 110%
Cost plus limit 924,000

Manufacturer's presumed selling price 942,400

Multiply by: Tax rate at price 20%
Excise tax 188,480
Less: Excise tax paid (202,000)
Overpayment (13,520)

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The P1,010,000 manufacturer’s declared price shall be used since it is higher. No assessment for deficiency excise
tax shall be imposed.

Imported vehicle not for sale Imported vehicles not for sale shall be subject to the excise tax on the total
landed value, including transaction value, customs duty and all other charges.

REVIEW QUESTIONS

Problem 1: BBB imported an automobile for personal use which had the following costs:
Purchase price P2,000,000
Other cost to bring goods in the Philippines 300,000
Other inland costs, other than customs duties 200,000

The importation is subject to 30% custom duties and 20% excise tax.

Required:
1. Compute the custom duties.
2. Compute the excise tax.
3. Compute the VAT importation.

Purchase price 2,000,000

Other cost to bring goods in the Philippines 300,000
Transaction value 2,300,000
Multiply by: 30%
Custom duties 690,000

Purchase price 2,000,000

Other cost to bring goods in the Philippines 300,000
Other in-land costs 200,000
Custom duties 690,000
Total landed value 3,190,000
Multiply by: 20%
Excise tax 638,000

Purchase price 2,000,000

Other cost to bring goods in the Philippines 300,000
Other in-land costs 200,000
Custom duties 690,000
Excise tax 638,000
Landed cost 3,828,000
Multiply by: 12%
VAT on importation 459,360

Technical Importation Automobiles imported by exempt persons such as ecozone locators, the
same is not subject to excise tax. When the same is subsequently sold to
taxable persons, the same shall be subject to excise tax at the higher of the
consideration paid and the depreciated cost.

A 10% depreciation expense shall be provided but not in excess of 50% of

the original cost or value.

REVIEW QUESTIONS

Problem 1: BBB, an ecozone locator, sold 2 company cars to Olongapo Company for P900,000 each. Details about the
two cars were as follows:
Car model Landed cost Years in service

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Mazda 3 P1,400,000 4 years
Ford Expedition P3,000,000 6 years

Required:
1. Compute the total excise tax.
2. Compute the VAT importation.

The presumptive import costs for purposes of the excise tax on the importation to be paid by Olongapo Company shall be:
Minimum Selling price Tax basis
Mazda 3 1,400,000 60% 840,000 900,000 900,000
Ford Expedition 3,000,000 50% 1,500,000 900,000 1,500,000

The excise tax shall be computed as follows:

Mazda 3 900,000 10% 90,000

Ford Expedition 1,500,000 20% 300,000
Total excise tax 390,000

The VAT on importation to be paid:

Mazda 3 900,000
Ford Expedition 1,500,000
Total 2,400,000
Excise tax 390,000
Presumed landed cost 2,790,000
Multiply by: VAT rate 12%
VAT on importation 334,800

Tax Exempt Removals of 1. Removal for export

Automobiles 2. Delivery to tax-exempt persons or entities
3. Removals for delivery and exclusively within the Freeport zone
4. Removal of automobiles for test run

Removal for export No excise tax shall be imposed on vehicles removed for export, subject to the following
conditions:
1. Permit to export – to be applied in writing from the CIR immediately before
removal
2. Direct delivery to vessel – automobiles for export must be loaded directly to
the vessels or means of transportation carrying them outside the Philippines
3. Proof of exportation – to be submitted within 30 days from the date of
removal
4. Exporter’s bond – may be required when deemed necessary by the BIR.

Delivery to tax-exempt Tax-exempt persons or entities include:

persons or entities 1. Embassies of foreign government, subject to the principle of reciprocity
2. Tax exempt organizations, such as the ADB and IRRI
3. Other tax-exempt entities covered by tax treaties, conventions or international
agreements to which the Philippines is a signatory, subject to the principle of
reciprocity.

Manufacture’s assemblers or importers of automobiles are allowed to sell to persons or

entities without prepayment of ad valorem tax, subject to the following conditions:
1. Application by the tax-exempt customer or importer in writing for the approval of
exemption
2. Favorable indorsement from the concerned government agency such as the
Department of Foreign Affairs (DFA) for embassies
3. Written approval of the CIR
4. Authenticated true copy of the purchase order indicating the description of the
automobiles to be purchased, the chassis and engine number, and the place and
location of the point of delivery.
5. The approval shall be on a per-transaction basis.

Tax credit or tax refunds If tax exempt persons purchased automobiles in which the excise tax thereon is paid or
where the ad valorem tax is erroneously or illegally collected, such tax exempt person
P a g e | 40
 may file a tax refund or tax credit with the CIR.

Removal for delivery and Automobiles imported directly into the legislated freeport zones from abroad or purchased
exclusively within the from establishments located within the customs territory for use exclusively within the
Freeport zone freeport zone shall be exempt from the imposition of the excise tax.

Removal of automobiles Should an automobile be removed for test run, prior notice of the test should be given to
for test run the appropriate BIR Office that may allow the test run; provided, that the unit under the
test run shall be returned to the plant on the same day.

In the event that the manufacturer/assembler failed to return the said unit to the
manufacturing/assembly plant within the prescribed period, the ad valorem tax otherwise
due thereon shall be immediately due and demandable.

NON-ESSENTIAL GOODS

A 20% Ad valorem tax is imposed upon the following non-essential goods:

1. Jewelry
2. Perfume and toilet waters
3. Yachts and other vessels intended for pleasure or sports.

All goods commonly and commercially known as jewelry, whether

real or imitation, pearls, precious, semi-precious stones and
imitations thereof; goods made of, or ornamented, mounted or
fitted with, precious metals or imitations thereof or ivory, opera
glasses and lorgnettes.

Precious metals include platinum, gold, silver and other metals of

similar or greater value. Imitation include platings
and alloys of such metals.

The following are not jewelry and hence exempt:

1. Surgical and dental instruments
2. Silver-plated wares
3. Frames or mountings for spectacles or eyeglasses
4. Dental golds or gold alloys and other precious
metals used in filling, mounting or fitting of the
teeth.

P a g e | 41
 REVIEW QUESTIONS

Problem 1: AAA Inc. manufactures perfumes, precious jewelry, fashion bags and clothes. It produced the following
during the month:
Wholesale price Suggested retail price
Perfumes P6,000,000 P12,000,000
Jewelry 8,000,000 15,000,000
Fashion bags 1,500,000 4,000,000
Designer 4,000,000 11,000,000

Required: Compute the excise tax.

Perfumes 6,000,000 20% 1,200,000

Jewelry 8,000,000 20% 1,600,000
Total excise tax 2,800,000

Note: That fashion bags and designer clothes though pricy are not currently subjected to excise tax.

Problem 2: BBB Enterprise imported the following luxury vehicles and vessels:
Landed cost Selling price
Hybrid yacht P12,000,000 P21,000,000
Hybrid sports car 5,000,000 12,000,000

Required: Compute the excise tax.

P a g e | 42
 Yacht 12,000,000 20% 2,400,000
Sports car 12,000,000 50% 50% 3,000,000
Total excise tax 5,400,000

Yacht is taxed as non-essential goods whereas the sports car is taxable as an automobile. Imported yacht are taxable on
landed costs whereas imported vehicles are taxable on importer’s selling price. There is no half-tax rule on non-essential
goods.

NON-ESSENTIAL SERVICES

A tax of 5% on gross receipts derived from the

performance of services, net of excise tax and VAT, on
invasive cosmetic procedure, surgeries, and body
enhancement directed solely towards improving, altering
or enhancing the patient’s appearance and do not
meaningfully promote the proper function of the body or
prevent or treat illness or disease.

Invasive Cosmetic Procedure shall refer to a

cosmetic surgery that is carried out by entering the
body through the skin or through a body cavity or
anatomical opening, but with the smallest damage
possible to these structures. Invasive Cosmetic
Procedures shall include, but not be limited to the
following: (Examples of taxable invasive cosmetic
procedures)
1. Liposuction
2. Mammoplasty
3. Breastlift
4. Buccal Fat Removal
5. Buttocks Augmentation
6. Chin Augmentation
7. Facelift/Necklift
8. Thread Lift
9. Embedded Protein Threads
10. Hair Restoration/Transplantation
11. Eyelid Surgery
12. Vaginal Plastic Surgery
13. Abdominoplasty or Tummy Tuck
14. Auto Grafting
15. Rhinoplasty/Alar Trimming
16. Otoplasty

Non-Invasive Cosmetic Procedure shall refer to a

conservative treatment that does not require incision
into the body or the removal of tissue, or when no break
in the skin is created and there is no contact with
mucosa, or skin break, or internal body cavity beyond a
natural or artificial body orifice. Non- Invasive Cosmetic
Procedures shall include, but not be limited to the
following: (Examples of exempt non-invasive
cosmetic procedures)
1. Acupuncture Rejuvenation Therapy
2. Air Dissector
3. Botulinum Toxin Injection/ Treatment
4. Collagen Induction Therapy
5. Dermal Fillers (Crosslinked and non-
crosslinked)
6. Non-surgical facelifting and skin tightening
using radio frequency, ultrasound, infrared
7. Carbon dioxide (CO2) fractional laser
resurfacing
8. Laser and light treatments
9. Body Treatments and Contouring Procedures
10. Cleanings and Facials
P a g e | 43
11. Peelings (Face and Body)
12. Injectables and Weight Management Treatment

P a g e | 44
Persons Liable to File a Return. –

Any person, whether natural or juridical, performing invasive cosmetic procedures, surgeries, and body enhancements
directed solely towards improving, altering, or enhancing the patient’s appearance and do not meaningfully promote
the proper functions of the body or prevent or treat illness or disease and liable to pay excise tax imposed under
Section 150-A of the NIRC, as amended, shall file a return of its monthly gross receipts using BIR Form No. 2200-C
(Excise Tax Return on Invasive Cosmetic Procedures), together with the Monthly Summary of Cosmetic Procedures
Performed.

Time for Filing of the Return and Payment of the Tax

The tax return (BIR Form 2200-C) shall be filed and

the excise tax due, if any, shall be paid at the same
time within ten (10) days following the close of
the month.

Place of Filing of the Return and Payment of the Tax. –

Except as the Commissioner otherwise permits, the return shall be filed with and the excise tax remitted to any
Authorized Agent Bank (AAB) under the jurisdiction of the Large Taxpayers Service/Revenue District Office where the
taxpayer (Head Office of the business establishment) is registered.

For taxpayers located outside the National Capital Region (NCR) and there are no duly accredited agent banks within
the municipality or city, the BIR Form 2200-C shall be filed and payments made to the Collection Agent where such
taxpayer (head office of the business establishment) is registered.

In cases where no invasive cosmetic procedures were performed during the return period, hence no excise tax due, BIR
Form 2200-C shall still be filed with the Excise Large Taxpayers Field Operations Division (ELTFOD) for Large Taxpayers
or the concerned Revenue District Office for taxpayers in the National Capital Region (NCR) or Excise Tax Area (EXTA)
in Regional Offices for taxpayers outside NCR.

Taxpayers filing via electronic filing and payment system (eFPS) shall comply with the provisions of the eFPS
Regulations.

Invoicing and Accounting Requirements. –

P a g e | 45
 Invoicing Requirements. – Every person subject to
excise tax herein imposed shall issue an Official Receipt
(OR) for services performed whether invasive/noninvasive
with the following information shown:
1. The total amount which the patient/client pays or is
obligated to pay to the service provider including the excise
tax and value added tax, if applicable: Provided, that:
2. The amount of value added tax shall be shown as a
separate item in the OR (the VAT base is inclusive of the
5% excise tax);
3. Discounts given shall be indicated in the OR, otherwise
the same shall not be allowed as deduction from gross
receipts;
4. If the procedure performed is non-invasive and/ or
invasive but considered exempt from excise tax, the term
Exempt from Excise Tax shall be shown on the OR;
5. If the services performed involves both invasive
(whether excisable or exempt from excise tax) and non-invasive (not excisable) procedures, a separate OR may be
used for the excisable and non-excisable services rendered

Accounting Requirements. – Notwithstanding the provisions of Section 233, all persons subject to excise tax under
Section 150-A of the Tax Code shall, in addition to the regular accounting records required, maintain a subsidiary
ledger on which every service rendered/performed on any given day is recorded. The subsidiary ledger shall contain the
following information:
1. Name of Patient;
2. Taxpayers Identification Number;
3. Official Receipts number and date of issue;
4. Invasive Cosmetic Procedures Performed (Indicate whether excisable or not) If not excisable, provide Remarks
column to explain why non-excisable.
5. Non-Invasive Cosmetic Procedures Performed;
6. Gross Receipts for non-invasive (net of VAT);
7. Gross Receipts for invasive procedures
 Excisable (net of VAT and Excise)
 Excisable (VAT exempt)
 Non-Excisable (net of VAT)
8. 5% Excise Tax Due
9. 12% VAT Due
10. Total Amount Collected from client-customer

REVIEW QUESTIONS

Problem 1: Dr. Bec Bec Belo conducted several operational procedures and treatment on Betay Zander, an interest
sensation idol.

The following amounts were agreed before any VAT and Excise Taxes:
Orthognathic surgery P800,000
Breastlift 200,000
Cataract surgery 100,000
Liposuction 140,000
Ultraviolet skin tanning 60,000
Teeth brace for underbites correction 40,000

The orthognathic surgery was intended to correct her facial deformity. The skin tanning procedure was intended to give
her the hot “Morena” looks.

Required: Compute the excise tax

P a g e | 46
 Breastlift 200,000
Liposuction 140,000
Total 340,000
Multiply by: 5%
Total excise tax 17,000

Problem 2: Ms. A decided to undergo a liposuction procedure and sought the services of Doc V. Doc V charges Ms. A
P50,000 for the services rendered.

Scenario 1: The procedure is conducted in a clinic outside a hospital

Required:
1. Prepare the necessary journal entry if the P50,000 fee is agreed inclusive of VAT but exclusive of excise tax.
2. Prepare the necessary journal entry if the P50,000 fee is agreed inclusive of both VAT and excise tax.

Case 1: The P50,000 fee is agreed inclusive of VAT but exclusive of excise tax.
Orginal price, inclusive of VAT 50,000
Divide by: 112%
Gross receipts 44,642.86
Add: 5% Excise tax (P44,642.85 x 5%) 2,232.14
12% VAT (P44,642.86 + P2,232.14) x 12% 5,625.00
Total amount to be collected from Miss A 52,500.00

Doc V shall record the following in his book:

Cash 52,500.00
Excise tax expense 2,232.14
Excise tax payable 2,232.14
Output VAT 5,625.00
Service income 46,875.00

Note: The service income is inclusive of the excise tax

Case 2: The P50,000 fee is agreed inclusive of both VAT and excise tax
Orginal price, inclusive of VAT 50,000
Divide by: 112%
Gross receipts 44,642.86
Divide by: 105%
Gross receipts, net of VAT and excise tax 42,517.01
Add: 5% Excise tax (P42,517.01 x 5%) 2,125.85
12% VAT (P42,517 + P2,125.85) x 12% 5,357.14
Total amount to be collected from Miss A 50,000.00

Doc V shall record the following in his book:

Cash 50,000.00
Excise tax expense 2,125.85
Excise tax payable 2,125.85
Output VAT 5,357.14
Service income 46,768.71

Scenario 2: The procedure is conducted in a hospital.

Assume that the liposuction procedure is done by Doc V, an individual practitioner operating a clinic inside a hospital.
Assume that the hospital charged P20,000 for hospital supplies, and the use of the facilities and operating room aside
from the P50,000 professional fee of Doc V which is agreed to be inclusive of VAT but exclusive of excise tax.

Required:
1. Journal entry of the hospital.
2. Journal entry of Doc V.

P a g e | 47
 The total billing for Miss A shall be computed as follows:

Hospital fees:
Billings by hospital 20,000.00
Add: 5% excise tax 20,000 5% 1,000.00
Total 21,000.00

Professional fees:
Gross receipts 50,000.00 112% 44,642.86
Excise tax 44,642.86 5% 2,232.14
12% VAT 46,875.00 12% 5,625.00
Total charges of Doc V 52,500.00

Total amount to be collected from Miss A 73,500.00

Remember that hospital services are exempt from VAT, except those rendered by professionals.

The hospital shall record the following in its books:

Cash 21,000.00
Excise tax expense 1,000.00
Excise tax payable 1,000.00
Service income - non-VAT 21,000.00

Cash 52,500.00
Payable to Doc V 45,803.58
Excise tax payable for Doc V 2,232.14
Expanded withholding tax payable 4,464.28

The amount to be released from Doc V is computed as:

Doc V shall record the same in his books:

Accounts receivable 45,803.58

Excise tax expense 2,232.14
Prepaid tax expense 4,464.28
Service fee 46,875.00
Output VAT 5,625.00

P a g e | 48
SWEETENED BEVERAGES

SWEETENED BEVERAGES (SBs) - refer to non-alcoholic

beverages of any constitution (liquid, powder, or
concentrates) that are pre-packaged and sealed in
accordance with the Food and Drug Administration (FDA)
standards, that contain caloric and/or non-caloric
sweeteners added by the manufacturers. SBs includes:

1. Sweetened juice drinks; 5. Energy and sports drinks;

2. Sweetened tea; 6. Flavored water;
3. All carbonated beverages; 7. Cereal and grain beverages; and
4. Other powdered drinks not classified as milk, juice, tea, and 8. Other non-alcoholic beverages that contain added
coffee; sugar.

CALORIC SWEETENER - refers to a substance that is sweet and includes

sucrose, fructose, and glucose that produces a certain sweetness.

NON-CALORIC SWEETENER - refers to a substance that is artificially or

chemically processed that produces a certain sweetness. These are substances
which can be directly added to beverages, such as aspartame, sucralose, saccharin,
acesulfame potassium, neotame, cyclamates and other non-nutritive sweeteners
approved by the Codex Alimentarius and adopted by the FDA.

HIGH FRUCTOSE CORN SYRUP (HFCS) – refers to a sweet saccharide mixture

containing fructose and glucose which is derived from corn and added to provide
sweetness to beverages, and which includes other similar fructose syrup
preparations.

SWEETENED BEVERAGES (RA 10963-TRAIN Law)

PRODUCT TAX RATE
Per Liter of Volume Capacity
Using purely caloric sweeteners, and purely non- Php6.00
caloric sweeteners, or a mix of caloric and non-
caloric sweeteners
Using purely high fructose corn syrup or in Php12.00
combination with any caloric or non-caloric
sweetener
Using purely coconut sap sugar and purely steviol Exempt
glycosides

P a g e | 49
Excise Taxes on Export of Sweetened Beverages

The Bureau of Internal Revenue has issued RR 10-2021

which mandates that the removal of sweetened beverage
products intended for export shall be subject to the
payment of excise tax by the manufacturer due on every
removal thereof from the place of product.

After payment of tax, the taxpayer at its option may:

 File a claim for excise tax credit/refunds; or
 Avail a claim for product replenishment scheme

Under Section 6 of RR 3-2008, claims under the product

replenishment scheme shall be subject to the following
terms and conditions:
 A permit shall be per shipment secured from the
BIR Office where the manufacturer is registered or
required to be registered as an excise taxpayer
before the product is removed from the place of
production.
 Products removed from the place of production
shall be directly transported, loaded abroad the
international shipping vessel or carrier, and
shipped directly to the foreign country of
destination without returning to the Philippines.
 Proof of exportation shall be submitted within 30
days from the date of actual exportation.
However, the concerned BIR Office may grant a one-time extension of a maximum of 30 days upon written

P a g e | 50
 request of the taxpayer-exporter.

REVENUE REGULATIONS NO. 10-2021 issued on June 17,

2021 amends pertinent provisions of Section 10 under Revenue
Regulations No. 20-2018 relative to the outright exemption
granted to the exportation of Sweetened Beverages products.

Section 10 of RR 20-2018 is amended and shall read as follows:

SECTION 10. IMPOSITION OF EXCISE TAX ON REMOVAL OF

SWEETENED BEVERAGES PRODUCTS FOR EXPORT.

Removal of Sweetened Beverages products intended for export

shall be subject to the payment of the Excise Tax by the
manufacturer due on every removal thereof from the place of
production. After payment of the tax, the manufacturers at its
option may file a claim for excise tax credit/refund pursuant to
Sections 204 and 229 of the NIRC; or may avail of a claim for
product replenishment scheme in accordance to the prescribed
provisions under Sec. 6 of Revenue Regulations No. 3-2008 dated
January 22, 2008, subject to the following terms and conditions:

a. A permit shall be per shipment secured from the BIR

Office where the manufacturer is registered or required to
be registered as an excise taxpayer before the product is
removed from the place of production;
b. The products removed from the place of production
shall be directly transported, loaded aboard the
international shipping vessel or carrier, and shipped
directly to the foreign country of destination without
returning to the Philippines;
c. Proof of exportation such as, but not limited to, the
documents enumerated below, shall be submitted
within thirty (30) days from the date of actual date of
exportation. However, the concerned BIR Office may,
upon written request by the taxpayer-exporter, grant a
maximum of 30 days, one-time extension for the
submission of such documents for meritorious reasons.
1. Export Entry Declaration duly filed with the Bureau of
Customs
2. Commercial Invoice
3. Packing list
4. Bill of Lading
5. Cargo Manifest, if applicable
6. Inward bank remittance in foreign currency acceptable
to the Bangko Sentral ng Pilipinas
7. Any document showing proof that the products
exported have actually arrived and unloaded in the
foreign port of destination (e.g., certificate of
discharge, import entry declaration duly received by the
foreign port of entry, etc.)
8. Other necessary documents as may be reasonably
required; and

d. The prescribed phrase "EXPORTED FROM THE

PHILIPPINES" is printed on each label that is
attached/affixed on the primary container in a
recognizable and readable manner.

Failure to submit proof of exportation within the prescribed period

shall be construed as non-exportation of the particular articles;
and therefore, the same shall be subjected to the corresponding
applicable tax, inclusive of penalties. Relative thereto, subsequent
issuance of export permits shall not be allowed unless the
assessed applicable tax due on such unliquidated export, including

P a g e | 51
 the applicable penalties, shall have been paid. For this purpose, proof of payment of the aforesaid assessment shall
accompany the subsequent application permit.

Sweetened beverages

Subject to excise tax:

a. Sweetened tea;
b. All carbonated beverages;
c. Flavored water;
d. Energy and sports drinks;
e. Sweetened juice drinks;
f. Other powdered drinks not classified as milk, juice, tea, and coffee;
g. Cereal and grain beverages; and
h. Other non-alcoholic beverages that contain added sugar

Exempt from excise tax:

a. All milk products including infant & formula milk, soymilk, flavored milk, etc.
b. One Hundred Percent (100%) natural fruit juices w/o added sugar/ caloric sweetener
c. One Hundred Percent (100%) natural vegetable juices w/o added sugar/ caloric sweetener
d. Meal replacement and medically indicated beverages for oral nutritional therapy
e. Ground, instant soluble and pre-packaged powdered coffee products (3 in 1 coffee)

REVIEW QUESTIONS

Problem 1: (Excise tax on sweetened beverages – Carbonated Beverages) Dodo Manufacturing Corporation will
remove from the place of production 100 cases of Super Cola using HFCS and non-caloric sweetener. Each case contains
6 bottles of 1.5 liters each.

Required: Compute the excise tax to be paid before removal.

No. of cases 100

Multiplied by Number of bottles per case x 6
Total Number of bottles 600
Multiplied by content per bottle x 1.5L
Total Volume in Liters 900 L
Multiplied by Specific Tax Rate P12.00
Total Excise Tax to be paid before removal P10,800

Problem 2: (Excise tax on sweetened beverages – Powdered Juice) Sweety Import Corp. will remove from
customs custody 50 cases of Four Seasons Powdered Juice using caloric and non-caloric sweetener containing 144 packs
by 25 grams. Each 25 grams pack can make 1 Liter (per serving suggestion appearing on the label).

Required: Compute the excise tax to be paid before removal.

No. of Cases 50
Multiplied by no. of packs per case X 144
Total no. of packs 7,200
Multiplied by serving suggestion per pack in liters of volume X 1L
Total Volume in Liters 7,200 L
Multiplied by Specific Tax Rate X P6.00
Total Excise Tax to be paid before removal P43,200.00

Exempt products from The following shall not be subject to the excise tax on sweetened beverages:
Excise Tax 1. All milk products, including plain milk, infant formula milk, follow-on milk, growing
up milk, powdered milk, ready-to-drink milk, flavored milk, and fermented milk
2. Soymilk and flavored soymilk
3. 100% natural fruit juices
4. 100% natural vegetable fruit juices

P a g e | 52
 5. Meal replacement and medically indicated beverages
6. Gourd coffee, instant soluble coffee, and pre-packed powdered coffee products.

Milk products refers to products obtained by processing of milk, which may contain food
additives, and other ingredients functionally necessary for the processing. Dairy products
are not synonymous with products and hence taxable.

Transfer of raw Manufacturers of sweetened beverages subject to tax shall not be allowed to transfer or
materials remove raw materials from place of production, except when the transfer or removal thereof
is intended for further processing to its other registered production or toll-manufacturing
plants and shall be accompanied by an Excise Tax Removal Declaration (ETRD).

Raw materials shall refer to chief substance or ingredients of any constitution such as liquids,
syrups, powder, concentrates for the production of sweetened beverages but shall not
include packaging materials and supplies.

Transfer of semi- The transfer of semi-processed goods such as syrups, puree, concentrates sold to fast food
processed goods chains where they are mixed with carbonated water and dispensed through soda vending
machines shall be considered as finished goods subject to excise tax.

Beverages consumed Sweetened beverages that are produced or manufactured and are subsequently consumed
within the place of within the place of production shall be subject to the payment of excise tax by the
production manufacturer.
Export of sweetened Sweetened beverages intended for export may be removed from the place of production
beverages without the prepayment of excise tax, subject to the following conditions:

1. Shipment permit - A permit per shipment shall be secured from the BIR office where the
taxpayer is required to be registered as an excise taxpayer.

2. Surety bond
3. Direct transport and loading to the international shipping vessel or carrier for direct
shipment abroad
4. Proof of exportation
5. Marking of the primary container with “Exported from the Philippines”

Note:

BIR Form No. Excise Tax Return for Alcohol Products

2200-A Description
This return shall be filed in triplicate by the following:
1. Manufacturer or producer of locally manufactured or produced alcohol products; and
2. Owner or person having possession of the alocohol products which were removed from the place
of production without the payment of excise tax.
Filing Date
For each place of production, a separate return shall be filed and the excise tax shall be paid before
removal of the alcohol products from the place of production.
For EFPS Taxpayers,
The filing of return and payment of excise tax due thereon shall be in accordance with the
provisions of existing applicable revenue issuances.

BIR Form No. Excise Tax Return for Automobiles and Non-Essential Goods
2200-AN Description
This return shall be filed in triplicate by the following:
1. Manufacturer, producer or assembler of locally manufactured/produced/assembled automobiles;
2. Manufacturer or producer of locally manufactured or produced non-essential goods such as
jewelries, perfumes, toilet water, yachts and other vessels intended for pleasure or sports;
3. Buyer or transferee of automobile not previously taxed and subsequently sold or transferred by
the tax-exempted seller; and
4. Owner or person having possession of the above articles which were removed from the place of
production without the payment of excise tax.
Filing Date
For each place of production, a separate return shall be filed and the excise tax shall be paid before
removal of the abovementioned products from the place of production.
For EFPS Taxpayers,
The filing of return and payment of excise tax due thereon shall be in accordance with the

P a g e | 53
 provisions of existing applicable revenue issuances.

BIR Form No. Excise Tax Return for Cosmetic Procedure

2200-C Description
This return shall be filed in triplicate by any person, whether natural or juridical, performing
invasive cosmetic procedures, surgeries, and body enhancements directed solely towards
improving, altering, or enhancing the patient’s appearance and do not meaningfully promote the
proper functions of the body or prevent or treat illness or disease and liable to pay excise tax.
Filing Date
This excise return shall be filed and the excise tax due, if any, shall be paid at the same time within
ten (10) days following the close of the month.
For eFPS Taxpayers
The filing of return and payment of excise tax due thereon shall be in accordance with the
provisions of existing applicable revenue issuances.

BIR Form No. Excise Tax Return for Mineral Products

2200-M Description
This return shall be filed in triplicate by the following:
1. Owner, lessee, concessionaire or operator of the mining claim;
2. First buyer, purchaser or transferee for local sale, barter, transfer or exchange of indigenous
petroleum, natural gas or liquefied natural gas; and
3. Owner or person having possession of the minerals and mineral products which were mined,
extracted or quarried without the payment of excise tax.
Filing Date
For each place of production, a separate return shall be filed and the excise tax shall be paid upon
removal of the mineral products from the place of production. In the case of locally produced or
extracted minerals or quarry resources where the mine site or place of extraction is not the same
as the place of processing or production, the return shall be filed and the excise tax paid to the
Revenue District Office having jurisdiction over the locality where the same are mined, extracted or
quarried.
On locally produced or extracted metallic mineral or mineral products, the person liable shall file a
return and pay the tax within fifteen (15) days after the end of the calendar quarter when such
products were removed, subject to the filing of a bond in an amount which approximates the
amount of excise tax due on the removals for the said quarter.
For EFPS Taxpayers,
The filing of return and payment of excise tax due thereon shall be in accordance with the
provisions of existing applicable revenue issuances.

BIR Form No. Excise Tax Return for Petroleum Products

2200-P Description
This return shall be filed in triplicate by the following:
1. Manufacturer, or producer of locally manufactured, produced or refined petroleum products;
2. Any person engaged in blending, reprocessing, re-refining or recycling of previously taxed
petroleum products;
3. Importer or purchaser who resells or uses kerosene as aviation fuel;
4. Any person using denatured alcohol for motive power; and
5. Owner or person having possession of petroleum products, which were removed, from the place
of production without the payment of excise tax.
Filing Date
For each place of production, a separate return shall be filed and the excise tax shall be paid before
removal of the petroleum products from the place of production.
For EFPS Taxpayers,
The filing of return and payment of excise tax due thereon shall be in accordance with the
provisions of existing applicable revenue issuances.

BIR Form No. Excise Tax Return for Tobacco Products

2200-T Description
This return shall be filed in triplicate by the following:
1. Manufacturer or producer of locally manufactured or produced tobacco products;
2. Wholesaler, manufacturer, producer, owner or operator of the redrying plant, as the case may
be, with respect to the payment of inspection fee on leaf tobacco, scrap, cigars, cigarettes and
other tobacco products; and
3. Owner or person having possession of tobacco products which were removed from the place of
production without the payment of excise tax.
Filing Date

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 For each place of production, a separate return shall be filed and the excise tax due shall be paid
before removal of the tobacco products from the place of production.
For EFPS Taxpayers
The filing of return and payment of excise tax due thereon shall be in accordance with the
provisions of existing applicable revenue issuances.

BIR Form No. Excise Tax Return for Sweetened Beverages

2200-S Description
This return shall be filed in triplicate by the following:
1. Manufacturer or producer of locally manufactured or produced sweetened beverages; and
2. Owner or person having possession of sweetened beverages which were removed from the place
of production without the payment of excise tax.
Filing Date
For each place of production, a separate return shall be filed and the excise tax due shall be paid
before removal of the sweetened beverages from the place of production.
For EFPS Taxpayers
The filing of return and payment of excise tax due thereon shall be in accordance with the
provisions of existing applicable revenue issuances.

Note:

Changes under the TRAIN LAW

 Cigarettes packed by hand, and packed by machines follow the same schedule of specific excise taxes.
 Excise taxes on the following products were increased
 Excise taxes on the following products were increased:
a. Cigarettes packed by hand, and cigarettes packed by machine;
b. Manufactured oils and other fuel oils;
c. Locally manufactured and imported automobiles;
d. Domestic or imported coal and coke;
e. Non-metallic and metallic minerals;
f. Indigenous petroleum.
 The following are exempt from excise tax:
a. Naptha and pyrolysis gasoline used as raw materials in the production of petrochemical products or in the
refining of petroleum products, or as replacement fuel for natural gas-fired-combined cycle power plant;
b. Production of petroleum products, whether or not they are classified as products of distillation, and for use
solely for production of gasoline;
c. Liquefied petroleum gas when used as a raw materials in the production of petrochemical products;
d. Petroleum coke, when used as feedstock to any power generating facility;
e. Purely electric vehicles, and pick-ups;
 The Secretary of Finance shall require the use of an official fuel marking or similar technology on petroleum
products refined, manufactured, or imported in the Philippines, and that are subject to the payment of taxes and
duties.

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Excise taxes

Excise taxes apply to services and to goods manufactured or produced in the Philippines for domestic sales, consumption,
or for any other disposition and to things imported.
Below is the new excise tax schedule under the TRAIN law:

Manufactured oils and other fuels

Description Units 2018 (PHP) 2019 (PHP) 2020 (PHP)

Lubricating oils and greases Per litre 8.00 9.00 10.00

Processed gas Per litre 8.00 9.00 10.00

Waxes and petrolatum Per kilo 8.00 9.00 10.00

Denatured alcohol Per litre 8.00 9.00 10.00

Naphtha Per litre 7.00 9.00 10.00

Unleaded premium gasoline Per litre 7.00 9.00 10.00

Aviation turbo jet fuel Per litre 4.00 4.00 4.00

Kerosene Per litre 3.00 4.00 5.00

Diesel fuel oil Per litre 2.50 4.50 6.00

Liquefied petroleum gas Per kilo 1.00 2.00 3.00

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 Asphalts Per kilo 8.00 9.00 10.00

Bunker fuel oil Per litre 2.50 4.50 6.00

Petroleum coke Per ton 2.50 4.50 6.00

Automobiles

Automobile (PHP)
Excise tax rate (%)
Over Up to

0 600,000 4

600,000 1,000,000 10

1,000,000 4,000,000 20

4,000,000 50

Hybrid vehicles are subject to 50% of the applicable excise tax rates.
Purely electric vehicles and pick-ups are exempt from excise tax.
Sweetened beverages

Description Excise tax (PHP/litre)

Using purely caloric sweetener, purely non-caloric sweetener, or mixture of both 6

Using purely high-fructose corn syrup 12

Using purely coconut sap sugar / purely steviol glycosides Exempt

Cigars and cigarettes

Effective date Excise tax (PHP/pack)

1 January 2020 45

1 January 2021 50

1 January 2022 55

1 January 2023 60

Effective 1 January 2024, the specific tax rate shall be increased by 5% every year thereafter, pursuant to Republic Act

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No. 11346.
Vapor products

Effective date Excise tax (PHP/milliliter)

1 January 2020 37.00

1 January 2021 42.00

1 January 2022 47.00

1 January 2023 52.00

Effective 1 January 2024, the specific tax rate shall be increased by 5% every year thereafter, pursuant to Republic Act
No. 11467.
Heated tobacco products

Effective date Excise tax (PHP/pack of 20 units)

1 January 2020 25.00

1 January 2021 27.50

1 January 2022 30.00

1 January 2023 32.50

Effective 1 January 2024, the specific tax rate shall be increased by 5% every year thereafter, pursuant to Republic Act
No. 11467.

Cosmetic procedures
5% excise tax is imposed on gross receipts from invasive cosmetic procedures and surgeries directed solely towards
altering or enhancing the patient’s appearance for aesthetic purposes. However, this will not cover procedures necessary
to ameliorate a deformity arising from, or directly related to, a congenital or developmental defect or abnormality, a
personal injury resulting from an accident or trauma, or disfiguring disease, tumour, virus or infection.

SWEETENED BEVERAGES (RA 10963-TRAIN Law)

PRODUCT TAX RATE
Per Liter of Volume
Capacity
Using purely caloric sweeteners, and purely non-caloric sweeteners, or a mix of caloric and Php6.00
non-caloric sweeteners
Using purely high fructose corn syrup or in combination with any caloric or non-caloric Php12.00
sweetener
Using purely coconut sap sugar and purely steviol glycosides Exempt

Excise Tax – Basic Concepts

Characteristic of Excise Tax

1. National
2. Indirect
3. Ad valorem and specific
4. Proportional and progressive
5. Privilege/Transactional

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Tax Base
 The tax base is gross selling price
 Unless otherwise provided, the price, excluding the VAT, at which the goods are sold at wholesale in the place
of production or through their sales agents to the public shall constitute the gross selling price
 Should such gross selling price be less than the cost of manufacture plus expenses incurred until the goods are
finally sold, then a proportionate margin of profit, not less than 10% of such manufacturing cost and expenses,
shall be added to constitute the gross selling price. (Section 130 B, National Internal Revenue Code)

BIR’s Power of Supervision

 The BIR has authority to supervise establishments where articles subject to excise tax are made or
kept. The SOF shall prescribe rules and regulations in which the process of production shall be conducted insofar
as may be necessary to safeguard revenue, such rules and regulations may allow the appointment of third
parties to monitor production and removal processes and volumes, and the exclusion of exciseable goods from
duty-free barter transactions. (Sec. 152, NIRC, as amended by RA No. 10963 and 11346)

Excise Tax Credit

 When goods locally produced or manufactured are removed and actually exported whether so exported in their
original state or as ingredients or parts of any manufactured goods or products, any excise tax paid thereon shall
be credited or refunded upon
1. Submission of the proof of actual exportation and
2. Receipt of the corresponding foreign exchange payment. (Section 130 D, National Internal Revenue Code)

Tax-Free Importation
 In the case of tax-free articles brought or imported into PH by persons or entities exempt from tax which are
subsequently sold, transferred or exchange in PH to non-exempt persons or entities, the purchasers or
recipients shall be considered the importers thereof, and shall be liable for the duty and internal revenue tax
due on such importation.

Time, in general
 If locally manufactured: Place of production
 If imported: BOC

Excise Tax – Petroleum Products

Petroleum – It refers to the naturally occurring mixture of compounds of hydrogen and carbon with small proportion
of impurities and shall include any mineral oil, petroleum gas, hydrogen gas, bitumen, asphalt, mineral wax, and all other
similar or naturally-associated substances, with the exception of coal, peat, bituminous shale and/ or other stratified
mineral fuel deposits.

Petroleum Products – It refers to products formed in the case of refining crude petroleum through distillation,
cracking, solvent refining and chemical treatment coming out as primary stocks from the refinery.

Payment
 The VAT and Excise taxes which are due on all petroleum and petroleum products that are imported and/or
brought directly from abroad to the Philippines, including Freeport and Economic Zones, shall be paid by the
importer thereof to the BOC.
Other Matters
 All storage facilities shall be registered with the BIR (Section 4, RR No. 2-2012)

Rates of Excise Tax

 All rates are rates beginning 2020.
Selling Price Tax per L
Unleaded premium gasoline P10
Asphalts P10/kg
Liquefied petroleum gas P3/kg
Aviation turbo jet fuel, aviation gas P4
Kerosene P5
Diesel fuel oil P6
Bunker fuel oil P6
Petroleum coke P6

Excise Tax – Automobile

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Automoblle – It shall refer to any four (4) or more-wheeled motor vehicle regardless of seating capacity, which is
propelled by gasoline, diesel, electricity or any other motive power.

Exemptions
 1. Bus
 2. Jeepney
 3. Truck
 4. Special purpose vehicles
 5. Single cab chassis and pick-ups
 6. Purely electric vehicle

Note that hybrid vehicles are 50% exempt from excise taxes on automobliles.

Other Exemptions
 1. Removals for export
 2. Delivery to tax-exempt persons or entities (e.g., embassies, ADB)
 3. Removals for delivery and use exclusively within the Freeport Zone
 4. Removals for test run

Rates of Excise Tax

Selling price Tax rate
Up to P600,000 4%
Over P600,000 to P1,000,000 10%
Over P1,000,000 to P4,000,000 20%
Over P4,000,000 50%

Computational Notes
 1. Selling price is net of VAT.
 2. In no case shall the SP be less than the amount computed as follows: 80% x (SRP – Excise Tax – VAT)
Sec. 5, RR No. 25-2003
 3. SP shall always include the value of car air conditioner, radio and mag wheels including the cost of installation
thereof whether or not the same were actually installed in the automobile.

Excise Tax on Mineral Products

Three Taxable Goods

 1. Minerals
 2. Mineral products
 3. Quarry resources

Minerals – They shall mean all naturally occurring inorganic substances (found in nature) whether in solid, liquid,
gaseous, or any intermediate state.

Mineral products – They shall mean things produced and prepared in a marketable state by simple treatment
processes such as washing or drying, but without undergoing any chemical change or process or manufacturing by
the lessee, concessionaire or owner of mineral lands.

Quarry Resources – They mean any common stone or other common mineral substances as the Director of the Bureau
of Mines and Geo-Sciences may declare to be quarry resources.

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 1. Marl 8. Conglomerate 15. Limestone
2. Marble 9. Coral 16. Red burning clays for pottery and bricks
3. Granite 10. Sand 17. Rhyolite
4. Volcanic cinders 11. Diatomaceous earth 18. Sandstone
5. Basalt 12. Diorite 19. Serpentine
6. Tuff and rock phosphate 13. Decorative stones 20. Shale and
7. Andesite 14. Gabbro 21. Volcanic glass

Note: They contain no metal or metals or other valuable minerals in economically workable quantities.

Persons Liable
 1. Lessees, concessionaires, owners or operators of mines, processors of minerals, licensees or permittees of
quarry/mines, producers or
 2. Should minerals, mineral products, or quarry resources be removed from the minesite and/or place of
production without the payment of the tax, the owner or person having possession thereof shall be liable.

Rates of Excise Tax

 All rates are rates beginning 2020.
Selling price Tax
Coal and coke P150/metric ton
Nonmetallic minerals and quarry resources
Copper and other metallic minerals 4% of MV or dutiable value
Gold and chromite
Indigenous petroleum 6% of market price

Note: RR No. 6-2012, which imposes a 2% excise tax rate on metallic minerals, is no longer applicable.

Exemption
 Locally extracted natural gas and liquefied natural gas

Excise Tax Credit

 When goods locally produced or manufactured are removed and actually exported, whether so exported in their
original state or as ingredients or parts of any manufactured goods or products, any excise tax paid thereon shall
be credited or refunded upon
 1. Submission of the proof of actual exploration and
 2. Receipt of the corresponding foreign exchange payment
 Note: This does not apply to mineral products.

Timing of ET for Minerals

 Before removal (Section 130 (A)(2), NIRC; Section 5 (C)(1), RR No. 13-1994)
 20 days after the end of the quarter (Section 130 (A)(2), NIRC; Section 5 (C), RR No. 13-1994)

Excise Tax on Cosmetic Surgery

Cosmetic Surgery – It refers to a type of plastic surgery that aims to improve a person’s appearance, through invasive
cosmetic procedures, surgeries, and body enhancements directed solely on improving, altering, or enhancing the
person’s appearance and do not necessarily promote the proper functions of the body or prevent or treat illness or
disease.

Invasive Cosmetic Surgery – It refers to a cosmetic surgery that is carried out by entering the body through the skin
or through a body cavity or anatomical opening, but with the smallest damage possible to these structures.

Note: Only invasive cosmetic surgery are subject to excise tax. Non-invasive procedures are exempt.
Invasive Cosmetic Surgery Non-invasive Cosmetic Surgery
Facelift Air Dissector
Necklift Laser/Light Treatment
Injectables

A tax of 5% on gross receipts derived from the performance of services, net of excise tax and VAT, on invasive
cosmetic procedure, surgeries, and body enhancement directed solely towards improving, altering or enhancing the
patient’s appearance and do not meaningfully promote the proper function of the body or prevent or treat illness or
disease

Exemptions
 1. Procedures necessary to ameliorate

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  1.1 a deformity arising from or directly related to a congenital or developmental defect or abnormality
 1.2 a personal injury resulting from an accident or trauma, or
 1.3 disfiguring disease, tumor, virus or infection.
 2. Cases and treatments covered by the National Health Insurance Program
 3. Non-Invasive Cosmetic Procedures are excluded from the coverage.

Timing of ET for CPs

 10 days following the close of the month (Section 5.2, RR No. 2-2019)

Compliance Requirements
 1. Submission of Monthly Summary of Cosmetic Procedures Performed
 2. Separate OR may be issued if professional performed both invasive or non-invasive cosmetic procedure

Excise Tax on Jewelry

Excisable Articles
 1. Fine Jewelry
 2. Imitation Jewelry

Fine jewelry
 1. Articles of personal adornment made on precious metals, stones, pearls or combinations thereof: (e.g.,
rings, bracelets, necklaces, brooches, earrings, watch-chains, fobs, pendants, tie, pins, cuff links, combs, tiaras,
dress-studs, religious or other medals or insignia).
 2. Articles made of precious metals, with or without stones for personal use of a kind normally carried in the
pocket, handbag or (in one’s person: e.g., cigarette cases, powder boxes, chain purses, cachou boxes).

Imitation jewelry – Articles falling under fine jewelry but made of base metals and/or materials other than precious
metals; of imitations of gemstones, of natural materials; and/or combination thereof. Base metals refer to iron and
steel, copper nickel, aluminum, lead, zinc, tin and articles thereof, and other base metals and their articles.

Rate of excise tax

 20% based on the wholesale price or the value of importation used by the BOC.

Exception
 A “Qualified Jewelry Enterprise” is exempt
 1. Production and sale of jewelry
 2. Importation of raw materials and supplies, such as but not limited to gemstone and precious metals, or
imitations thereof, for use in its manufacture or production of fine or imitation jewelry, or for disposition to
another Qualified Jewelry Enterprise for the latter’s use in the manufacture or production of fine or imitation
jewelry.

Qualified Jewelry Enterprise

 Accredited by the BOI
 Entitled to additional 50% deduction on training expense based on a training scheme approved by TESDA.

Excise Tax on Other Non-Essential Goods

Excisable articles
 1. Perfumes
 2. Toilet waters
 3. Yachts
 4. Other vessels intended for pleasure or sports

Rate of excise tax

 20% based on the wholesale price or the value of importation used by the BOC.

Excise Tax on Tobacco Products

Five Excisable Articles

 1. Tobacco Products
 2. Heated Tobacco Products
 3. Vapor Products

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  4. Cigars
 5. Cigarettes

Tobacco Products
 1. Tobacco twisted by hand or reduced into a condition to be consumed in any manner other than the ordinary
mode of drying and curing;
 2. Tobacco prepared or partially prepared with or without the use of any machine or instruments or without being
pressed or sweetened except as otherwise provided hereunder; and
 3. Fine-cut shorts and refuse, scraps, clippings cuttings, stems and sweepings of tobacco except as otherwise
provided hereunder.

Heated Tobacco Products

 1. These refer to tobacco products that may be consumed through other means sufficiently to release an aerosol
that can be inhaled, without burning or any combustion of the tobacco.
 2. Heated tobacco products include liquid solutions and gels that are part of the product and are heated to
generate an aerosol.
 3. These refer to tobacco products that may be consumed through heating tobacco, either electrically or
through other means sufficiently to release an aerosol that can be inhaled, without burning or any combustion of
the tobacco.

Vapor Products
 Vapor products also includes electronic nicotine and non-nicotine delivery systems (ENDS/ENNDS) which are
combinations of non-tobacco containing e-liquids or refills which contain up to 65mg/ml of nicotine in the e-
liquid or refill and an electronic delivery device to produce an aerosol, mist or vapor that users inhale by
mimicking the act of smoking.

Cigars
 “Cigars” mean all rolls of tobacco or any substitute thereof, wrapped in leaf tobacco that are consumed via
combustion of the tobacco.

Cigarettes
 “Cigarettes” mean all rolls of finely-cut leaf tobacco, or any substitute therefor, wrapped in paper or in any
other material that are consumed via combustion of the tobacco.

Rates of Excise Tax

Tobacco Products
Tobacco P2.95/kg
Cigar 20% of net retail price + P5.85/piece
Heated tobacco products P10 per pack of 20 units or packaging combinations of not
more than 20 units.

Cigarettes (packed by hand or machine)

Year Tax
2020 P45
2021 P50
2022 P55
2023 P69
2024 Shall be increased by 6% through RRs

Vapor Products
Quantity Tax
0.00 mL to 10.00 mL P10
10.01 to 20.00 mL P20
20.01 mL to 30.00 mL P30
30.01 mL to 40.00 mL P40
40.01 mL to 50.00 mL P50
More than 50.00 mL P50 + P10 for every additional 10.00 mL

Importation to Freeport Zones

 GR: Exempt
 XPN: Cigarettes, cigar, alcoholic products. Even if destined for tax and duty – free shops: still subject to excise
taxes.
 XPN to XPN: Government-owned and operated duty-free shops.

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Excise Tax on Alcoholic Products

Three Excisable Articles

 1. Wines
 2. Fermented Liquor
 3. Distilled Spirits

Wines – These are all alcoholic beverages produced by fermentation without distillation, from the juice of any kind of
fruit. Fermentation is a process by which enzymatic changes are brought about.

Distilled Spirits - These refer to the substance known as ethyl alcohol, ethanol or spirits or wine, including all
dilution’s, purifications and mixtures thereof, from whatever source by whatever process produced and shall include
whisky, brandy, rum, gin and vodka, and other similar products or mixtures.

Fermented Liquor – These refers to beer, lager beer, ale, porter, and other fermented liquor such as draft beer, and
other similar products.

Exemptions
 1. Tuba
 2. Basi
 3. Tapuy

Rates of Excise Tax

Wines
Year Tax per liter
2020 P50
2021 Shall be increased by 6% through RRs

Fermented Liquor
Year Tax per liter
2020 P35
2021 P37
2022 P39
2023 P41
2024 P43
2025 Shall be increased by 6% through RRs

Distilled Spirits
Year % of net retail price + Tax per proof liter
2020 22% + P42
2021 22% + P47
2022 22% + P52
2023 22% + P59
2024 22% + P66
2025 22% + Shall be increased by 6%
through RRs

Net Retail Price

 Net retail price shall mean
 - for brands marketed nationally: the price at which the fermented liquor is sold on retail in at least 5 major
supermarkets in Metro Manila
 - for brands marketed outside NCR: the price at which the liquor is sold in at least 5 major supermarkets in the
region.
 Note: excluding the amount intended to cover excise tax and VAT.

Major Supermarkets
 Major supermarkets shall be those with the highest annual gross sales in NCR or the region, as the case may
be, as determined by the (PSA), and shall exclude retail outlets or kiosks, convenience or sari-sari stores, and
others of a similar nature.

Understatement of GSP
 Understatement of the suggested net retail price by as much as 15% of he actual net retail price shall render

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 the manufacturer or importer liable for additional excise tax equivalent to the tax due and difference between the
understated suggested net retail price and the actual net retail price.

Other matters
 Micro-breweries and micro-brew pubs are required to register with the BIR and provide for a non-resettable
counter or metering device to monitor the volume of sales (Sec. 6, RR no. 2-1997)
 Only distilled spirits and wines shall be covered by the rules of affixtures of internal revenue official labels.
 The regular official labels shall contain the following information to be printed “ Regular Official Label”, “Importer
No.__,’ “ Republic of the Philippines” “Tax paid Spirits”; the seal of the Republic, the serial number of the regular
official label. (Sec. 7, RR No. 2-1997)

Timing of ET for Alcohol

 Before removal (Section 130 (A) (2), NIRC; Section 11.1 (2) (1), RR No. 2-1997)
 Advanced payment (Section 130 (A) (2), NIRC; Section 11.1 (2) (1), RR No. 2-1997)

Compliance Requirements
 Submission of Sworn Statement of Volume of Sales – within first 5 days of every month.

Importation to Freeport Zones

 GR: Exempt
 XPN: Cigarettes, cigar, alcoholic products. Even if destined for tax and duty – free shops: still subject to excise
taxes.
 XPN to XPN: Government-owned and operated duty-free shops.

Excise Tax on Sweetened Beverages

Sweetened Beverage – refers to non-alcoholic beverages of any constitution (Liquid, powder, or concentrates) that
are pre-packaged and sealed in accordance with the Food and Drug Administration (FDA) standards, that contain caloric
and/or non-caloric sweeteners added by the manufacturers.

Excisable Beverages
 Sweetened juice drink
 Sweetened tea
 Carbonated beverages
 Flavored water
 Energy and sports drinks
 Other powdered drinks
 Cereal and grain beverages
 Other non-alcoholic beverages with added sugar

Non-excisable Beverages
 All milk products
 100% natural fruit juice
 100% natural vegetable juice
 Meal replacement and medically indicated beverages
 Coffee

Excise Tax Rate

 Caloric sweetener – P6L
 Non-caloric sweetener – P6L
 Hight fructose corn syrup – P12L

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