Republic of the Philippines
HOUSE OF REPRESENTATIVES
Queson City

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL No, 1906

Introduced by HON. LUIS RAYMUND “LRAY” F. VILLAFUERTE, JR.

EXPLANATORY NOTE

Republic Act (RA) 10351 or the Sin Tax Reform was signed into law in December
2012. The law is a good governance measure with positive impact on both fiscal and
public health. RA 10351 corrected the long-standing weaknesses of the tobacco and
alcohol excise tax system and increased the rates to reduce the demand for these
products. The Sin Tax Law also raised much needed revenues to fund the Universal
Health Care (UHC) program of the government.

The Sin Tax Law has been an unqualified success in its health and revenue objectives.
Since its implementation in 2013, the government collected P427.6 billion pesos in
incremental revenues (CY 2013-2018), of which P132.8 billion or 31.1 percent is from
alcohol. This has increased the budget of the Department of Health (DOH) as the
incremental revenues derived from RA 10351 were largely earmarked for UHC. The
DOH budget more than tripled from P53.2 billion in 2013 to P166.7 billion in 2018 or a
growth of 213.2 percent. A large amount of the incremental revenues earmarked for
health is allocated for expanded health services and premium subsidies for the health
insurance of indigents and senior citizens not covered by the National Health
Insurance Program. As a result, Philippine Health Insurance Corporation (PhilHealth)
almost tripled the coverage of the poor and the near poor from 5.2 million in 2013 to
15.7 million indigents by the end of 2018.


However, with the passage of RA 11223 or the UHC Law, funding requirement
increased substantially. The estimated funding for its first year of implementation alone
costs P257 billion, and a total of P1.4 trillion from 2020 to 2024. The implementation
of the UHC Law will be funded by the sin tax earmarked funds through the regular
annual budget of the DOH and PhilHealth, Philippine Gaming Corporation (PAGCOR),
Philippine Charity Sweepstakes Office (PCSO), and PhilHealth premium contributions
Of the P257 billion funding requirement for 2020, only P195 billion will be funded by
these sources, incurring a funding gap of P62 billion,

In order to reduce this funding gap, Congress approved a bill increasing excise tax on
tobacco products, and imposed new taxes on heated tobacco products (HTPs) and
vapor products. The estimated revenue generated under the Congress-approved bill
is P15.7 billion in 2020, and a total of P129.9 billion from 2020 to 2024. However, this
amount is not enough to close the funding gap of the UHC Law.

This bill seeks to increase the tax on alcohol products, and HTPs and vapor products
to provide additional funding source for the UHC Law in order to further reduce the
funding gap. This additional funding will help sustain PhilHealth coverage for all
Filipino families; improve accessibility, affordability, and quality of health care; and
provide better outpatient benefit package, including check- up or consultation and
medicines.

An equally important objective of the bill is to discourage excessive consumption of
alcohol products especially among the youth. Excessive alcohol drinking leads to
diseases like cirrhosis or liver damage and pancreatitis, among others. Moreover,
alcohol drinking leads to behaviors like drunk driving and domestic violence. According
to Online National Electronic Injury Surveillance System of the DOH, there were 3,213
vehicular accidents due to alcohol intoxication or 5.9 percent of the 54,177 transport
or vehicular crash-related injury cases in 2018. This has more than doubled from 1,376
alcohol-related accidents in 2013. This reform seeks to bring us close to the DOH
target of 10.0 percent reduction in harmful alcohol consumption.

The increase in excise tax rates on HTPs is in line with the definition of cigarettes
under Republic Act (RA) No. 9211. Cigarettes are defined as any roll or tubular


construction, which contain tobacco or its derivatives, and intended to be burned or
heated under ordinary conditions of use. Further, Section 147 of the 1997 Tax Code,
as amended, defines cigarettes as rolls of finely cut leaf tobacco, or any substitute
therefor, wrapped in paper or in any other material. Since HTPs are of roll or tubular
construction that contain tobacco materials and several filter sections wrapped in
paper intended to be heated, these products should be classified as cigarettes subject
to the same excise tax rate.

The health impact and safety of using vapor products and whether it is an aid to
cigarette smoking cessation have not yet received conclusive evidence. However,
because of the established addictive effect of nicotine, we propose to increase the
excise tax rates of vapor products to discourage consumption. To prevent the children
and youth from consuming vapor products, variants with flavoring other than plain
tobacco or plain menthol, are proposed to be prohibited.

Imposing higher excise taxes is still the most effective policy tool to affect prices to
discourage consumption of sin products, in particular, among the youth and the poor

who are the most sensitive to price changes.

In light of the foregoing, the passage of this bill is earnestly sought.

[weft

LUIS R, JUND “LI F. VILLAFUERTE, JR.

we


Republic of the Philippines
HOUSE OF REPRESENTATIVES

Quezon City

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 1906

Introduced by HON. LUIS RAYMUND “LRAY” F. VILLAFUERTE, JR.

AN ACT
INCREASING THE EXCISE TAX ON ALCOHOL PRODUCTS, HEATED
TOBACCO PRODUCTS AND VAPOR PRODUCTS, AMENDING FOR THIS
PURPOSE SECTIONS 141, 142, 143, 144 (B), 144(C), 147 AND 150 OF THE
NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR
OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines
in Congress assembled:

SECTION 1. Chapter Ill of the National Internal Revenue Code of 1997 (NIRC), as
amended, is hereby amended, which shall read as follows:

CHAPTER Ill - EXCISE TAX ON ALCOHOL PRODUCTS.

SEC. 141. Distilled Spirits. - On distilled spirits, subject to the provisions of Section
133 of this Code, an excise tax shall be levied, assessed and collected based on the
following schedules:

[(@) Effective on January 1, 2013
(1) An ad valorem tax equivalent to fifteen percent (15%) of the net retail price
(excluding the excise tax and the value-added tax) per proof; and

(2) In addition to the ad valorem tax herein imposed, a specific tax of Twenty
pesos (P20.00) per proof liter.


(b) Effective on January 1, 2015
(1) An ad valorem tax equivalent to twenty percent (20%) of the net retail price
(excluding the excise tax and the value-added tax) per proof; and
(2) In addition to the ad valorem tax herein imposed, a specific tax rate of
Twenty pesos (P20.00) per proof liter.

(c) In addition to the ad valorem tax herein imposed, the specific tax rate of Twenty
pesos (P20.00) per proof liter imposed under this Section shall be increased by four
percent (4%) every year thereafter effective on January 1, 2016, through revenue
regulations issued by the Secretary of Finance.]

(A) EFFECTIVE ON JANUARY 1, 2020
(1) AN AD VALOREM TAX EQUIVALENT TO TWENTY-FIVE PERCENT
(25%) OF THE NET RETAIL PRICE (EXCLUDING THE EXCISE TAX AND
THE VALUE-ADDED TAX) PER PROOF; AND
(2) IN ADDITION TO THE AD VALOREM TAX HEREIN IMPOSED, A
SPECIFIC TAX OF FORTY PESOS (P40.00) PER PROOF LITER.

(B) EFFECTIVE ON JANUARY 1, 2021
(1) AN AD VALOREM TAX EQUIVALENT TO TWENTY-FIVE PERCENT
(25%) OF THE NET RETAIL PRICE (EXCLUDING THE EXCISE TAX AND
THE VALUE-ADDED TAX) PER PROOF; AND
(2) IN ADDITION TO THE AD VALOREM TAX HEREIN IMPOSED, A
SPECIFIC TAX OF FORTY-FIVE PESOS (P45.00) PER PROOF LITER.

(C) EFFECTIVE ON JANUARY 1, 2022
(1) AN AD VALOREM TAX EQUIVALENT TO TWENTY-FIVE PERCENT
(25%) OF THE NET RETAIL PRICE (EXCLUDING THE EXCISE TAX AND
THE VALUE-ADDED TAX) PER PROOF; AND


(2) IN ADDITION TO THE AD VALOREM TAX HEREIN IMPOSED, A
SPECIFIC TAX OF FIFTY PESOS (P50.00) PER PROOF LITER.

(D) EFFECTIVE ON JANUARY 1, 2023
(1) AN AD VALOREM TAX EQUIVALENT TO TWENTY-FIVE PERCENT
(25%) OF THE NET RETAIL PRICE (EXCLUDING THE EXCISE TAX AND
THE VALUE-ADDED TAX) PER PROOF; AND
(2) IN ADDITION TO THE AD VALOREM TAX HEREIN IMPOSED, A
SPECIFIC TAX OF FIFTY-FIVE PESOS (P55.00) PER PROOF LITER.

(E) IN ADDITION TO THE AD VALOREM TAX HEREIN IMPOSED, THE SPECIFIC
TAX IMPOSED UNDER THIS SECTION SHALL BE INCREASED BY TEN
PERCENT (10%) EVERY YEAR THEREAFTER EFFECTIVE ON JANUARY 1, 2024,
THROUGH REVENUE REGULATIONS ISSUED BY THE SECRETARY OF
FINANCE.

Medicinal preparations, flavoring extracts, and all other preparations, except toilet
preparations, of which, excluding water, distilled spirits from the chief ingredient, shall
be subject to the same tax as such chief ingredient.

This tax shall be proportionally increased for any strength of the spirits taxed over
proof spirits, and the tax shall attach to this substance as soon as it is in existence as.
such, whether it be subsequently separated as pure or impure spirits, or transformed
into any other substance either in the process of original production or by any
subsequent process.

‘Spirits or distilled spirits’ is the substance known as ethyl alcohol, ethanol or spirits of
wine, including all dilutions, 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.

“Proof spirits’ is liquor containing one-half (1/2) of its volume of alcohol of a specific
gravity of seven thousand nine hundred and thirty-nine ten thousandths (0.7939) at
fifteen degrees centigrade (15C). A ‘proof liter’ means a liter of proof spirits.


‘Net retail price’ shall mean the price at which the distilled spirits is sold on retail in at
least five (5) major supermarkets in Metro Manila, excluding the amount intended to
cover the applicable excise tax and the value-added tax. For distilled spirits which are
marketed outside Metro Manila, the ‘net retail price’ shall mean the price at which the
distilled spirits is sold in at least five (5) major supermarkets in the region excluding
the amount intended to cover the applicable excise tax and the value-added tax.
PROVIDED THAT THE NET RETAIL PRICE SHALL BE INITIALLY PROVIDED BY
THE MANUFACTURER THROUGH A SWORN STATEMENT AND SHALL BE
VALIDATED BY THE BUREAU OF INTERNAL REVENUE THROUGH A PRICE
SURVEY.

Major supermarkets, as contemplated under this Act, shall be those with the highest
annual gross sales in Metro Manila or the region, as the case may be, as determined
by the BUREAU OF INTERNAL REVENUE [National Statistics Office], and shall
exclude retail outlets or kiosks, convenience or sari-sari stores, and others of a similar
nature: Provided, That no two (2) supermarkets in the list to be surveyed are affiliated
and/or branches of each other: Provided, finally, That in case a particular distilled spirit
is not sold in major supermarkets, the price survey can be conducted in retail outlets
where said distilled spirit is sold in Metro Manila or the region, as the case may be,
upon the determination of the Commissioner of Internal Revenue.

The net retail price shall be determined by the Bureau of Internal Revenue through [a]
BIANNUAL price survey under oath.

The methodology and all pertinent documents used in the conduct of the latest price
survey shall be submitted to the Congressional Oversight Committee on the
Comprehensive Tax Reform Program (COCCTRP) created under Republic Act No.
8240.

Understatement of the suggested net retail price by as much as fifteen percent (15%)
of the actual net retail price shall render 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.


Distilled spirits introduced in the domestic market after the effectivity of this Act shall
be initially taxed according to their suggested net retail prices.

‘Suggested net retail price’ shall mean the price (excluding the value-added tax and
the excise tax) at which locally manufactured or imported distilled spirits are intended
by the manufacturer or importer to be sold on retail in major supermarkets or retail
outlets in Metro Manila for those marketed nationwide, and in other regions, for those
with regional markets. At the end of three (3) months from the product launch, the
Bureau of Internal Revenue shall validate the suggested net retail price of the new
brand against the net retail price as defined herein and initially determine the correct
tax on a newly introduced distilled spirits. After the end of nine (9) months from such
validation, the Bureau of Internal Revenue shall revalidate the initially validated net
retail price against the net retail price as of the time of revalidation in order to finally
determine the correct tax on a newly introduced distilled spirits.

[All distilled spirits existing in the market at the time of the effectivity of this Act shall
be taxed according to the tax rates provided above based on the latest price survey of
the distilled spirits conducted by the Bureau of Internal Revenue.]

The methodology and all pertinent documents used in the conduct of the latest price
survey shall be submitted to the Congressional Oversight Committee on the
Comprehensive Tax Reform Program created under Republic Act No. 8240.

Manufacturers and importers of distilled spirits shall, within thirty (30) days from the
effectivity of this Act, and within the first five (5) days of every third month thereafter,
submit to the Commissioner a sworn statement of the volume of sales AND
REMOVALS for each particular brand of distilled spirits sold at his establishment for
the three-month period immediately preceding.

Any manufacturer or importer who, in violation of this Section, misdeclares or
misrepresents in his or its sworn statement herein required any pertinent data or
information shall, upon final findings by the Commissioner that the violation was


committed, be penalized by a summary cancellation or withdrawal of his or its permit
to engage in business as manufacturer or importer of distilled spirits.

Any corporation, association or partnership liable for any of the acts or omissions in
violation of this Section shall be fined treble the amount of deficiency taxes, surcharges
and interest which may be assessed pursuant to this Section.

Any person liable for any of the acts or omissions prohibited under this Section shall
be criminally liable and penalized under Section 254 of this Code. Any person who
willfully aids or abets in the commission of any such act or omission shall be criminally
liable in the same manner as the principal.

If the offender is not a citizen of the Philippines, he shall be deported immediately after
serving the sentence, without further proceedings for deportation.

SEC. 142. Wines. - On wines, there shall be collected per liter of volume capacity
effective on [January 1, 2013] JANUARY 1, 2020, the following excise taxes:

(a) Sparkling wines/champagnes regardless of proof, if the net retail price per
bottle of seven hundred fifty milliliter (750 ml.) volume capacity (excluding the
excise tax and value-added tax) is:

(1) Five hundred pesos (P500.00) or less - [Two hundred fifty pesos
(P250.00)] THREE HUNDRED FORTY-EIGHT PESOS (P348.00); and

(2) More than Five hundred pesos (P500.00) — [Seven hundred pesos
(P700.00)] NINE HUNDRED SEVENTY-FOUR PESOS (P974.00).

(b) Still wines and carbonated wines containing fourteen percent (14%) of
alcohol by volume or less, [Thirty pesos (P30.00)] FORTY-TWO PESOS
(P42.00); and


(c) Still wines and carbonated wines containing more than fourteen percent
(14%) but not more than twenty-five percent (25%) of alcohol by volume, [Sixty
pesos (P60.00)] EIGHTY-FOUR PESOS (P84.00).

The rates of tax imposed under this Section shall be increased by [four percent (4%)]
TEN PERCENT (10%) every year thereafter effective on January 1, [2014] 2021,
through revenue regulations issued by the Secretary of Finance.

Fortified wines containing more than twenty-five percent (25%) of alcohol by volume
shall be taxed as distilled spirits. ‘Fortified wines’ shall mean natural wines to which
distilled spirits are added to increase their alcohol strength

‘Net retail price’ shall mean the price at which sparkling wine/champagne is sold on
retail in at least five (5) major supermarkets in Metro Manila, excluding the amount
intended to cover the applicable excise tax and the value-added tax. For sparkling
wines/champagnes which are marketed outside Metro Manila, the ‘net retail price’
shall mean the price at which the wine is sold in at least five (5) major supermarkets
in the region excluding the amount intended to cover the applicable excise tax and the
value-added tax. PROVIDED THAT THE NET RETAIL PRICE SHALL BE INITIALLY
PROVIDED BY THE MANUFACTURER THROUGH A SWORN STATEMENT AND
SHALL BE VALIDATED BY THE BUREAU OF INTERNAL REVENUE THROUGH A
PRICE SURVEY.

Major supermarkets, as contemplated under this Act, shall be those with the highest
annual gross sales in Metro Manila or the region, as the case may be, as determined
by the BUREAU OF INTERNAL REVENUE [National Statistics Office], and shall
exclude retail outlets or kiosks, convenience or sari-sari stores, and others of a similar
nature: Provided, That no two (2) supermarkets in the list to be surveyed are affiliated
and/or branches of each other: Provided, finally, That in case a particular sparkling
wine/champagne is not sold in major supermarkets, the price survey can be conducted
in retail outlets where said sparkling wine/champagne is sold in Metro Manila or the
region, as the case may be, upon the determination of the Commissioner of Internal
Revenue.


The net retail price shall be determined by the Bureau of Internal Revenue through [a]
BIANNUAL price survey under oath.

The methodology and all pertinent documents used in the conduct of the latest price
survey shall be submitted to the Congressional Oversight Committee on the
Comprehensive Tax Reform Program created under Republic Act No. 8240.

Understatement of the suggested net retail price by as much as fifteen percent (15%)
of the actual net retail price shall render 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.

Sparkling wines/champagnes introduced in the domestic market after the effectivity of
this Act shall be initially tax classified according to their suggested net retail prices.

“Suggested net retail price’ shall mean the price (excluding VAT and excise tax) at
which locally manufactured or imported sparkling wines/champagnes are intended by
the manufacturer or importer to be sold on retail in major supermarkets or retail outlets
in Metro Manila for those marketed nationwide, and in other regions, for those with
regional markets. At the end of three (3) months from the product launch, the Bureau
of Internal Revenue shall validate the suggested net retail price of the sparkling
wine/champagne against the net retail price as defined herein and initially determine
the correct tax bracket to which a newly introduced sparkling wine/champagne shall
be classified. After the end of nine (9) months from such validation, the Bureau of
Internal Revenue shall revalidate the initially validated net retail price against the net
retail price as of the time of revalidation in order to finally determine the correct tax
bracket to which a newly introduced sparkling wine/champagne shall be classified.

The proper tax classification of sparkling wines/champagnes, whether registered
before or after the effectivity of this Act, shall be determined every two (2) years from
the date of effectivity of this Act.

[All sparkling wines/champagnes existing in the market at the time of the effectivity of
this Act shall be taxed according to the net retail prices and the tax rates provided

WW


above based on the latest price survey of the sparkling wines/champagnes conducted
by the Bureau of Internal Revenue.]

The methodology and all pertinent documents used in the conduct of the latest price
survey shall be submitted to the Congressional Oversight Committee on the
Comprehensive Tax Reform Program created under Republic Act No. 8240.

Manufacturers and importers of wines shall, within thirty (30) days from the effectivity
of this Act, and within the first five (5) days of every month thereafter, submit to the
Commissioner a sworn statement of the volume of sales AND REMOVALS for each
particular brand of wines sold at his establishment for the three-month period
immediately preceding.

Any manufacturer or importer who, in violation of this Section, misdeclares or
misrepresents in his or its sworn statement herein required any pertinent data or
information shall, upon final findings by the Commissioner that the violation was
committed be penalized by a summary cancellation or withdrawal of his or its permit
to engage in business as manufacturer or importer of wines.

Any corporation, association or partnership liable for any of the acts or omissions in
violation of this Section shall be fined treble the amount of deficiency taxes, surcharges
and interest which may be assessed pursuant to this Section.

Any person liable for any of the acts or omissions prohibited under this Section shall
be criminally liable and penalized under Section 254 of this Code. Any person who
willfully aids or abets in the commission of any such act or omission shall be criminally
liable in the same manner as the principal. If the offender is not a citizen of the
Philippines, he shall be deported immediately after serving the sentence, without
further proceedings for deportation.

SEC. 143. ALCOPOPS AND Fermented Liquor. — There shall be levied, assessed
and collected an excise tax on ALCOPOPS, beer, lager beer, ale, porter and other
fermented liquors except tuba, basi, tapuy and similar domestic fermented liquors in
accordance with the following schedule:


[Effective on January 1, 2013

(a) If the net retail price (excluding the excise tax and the value-added tax) per
liter of volume capacity is Fifty pesos and sixty centavos (P50.60) or less, the
tax shall be Fifteen pesos (P15.00) per liter; and

(b) If the net retail price (excluding the excise tax and the value-added tax) per
liter of volume capacity is more than Fifty pesos and sixty centavos (P50.60),
the tax shall be Twenty pesos (P20.00) per liter.

Effective on January 1, 2014

(a) If the net retail price (excluding the excise tax and the value-added tax) per
liter of volume capacity is Fifty pesos and sixty centavos (P50.60) or less,
the tax shall be Seventeen pesos (P17.00) per liter; and

(b) If the net retail price (excluding the excise tax and the value-added tax) per
liter of volume capacity is more than Fifty pesos and sixty centavos
(P50.60), the tax shall be Twenty-one pesos (P21.00) per liter.

Effective on January 1, 2015
(a) If the net retail price (excluding the excise tax and the value-added tax) per
liter of volume capacity is Fifty pesos and sixty centavos (P50.60) or less,
the tax shall be Nineteen pesos (P19.00) per liter; and
(b) If the net retail price (excluding the excise tax and the value-added tax) per
liter of volume capacity is more than Fifty pesos and sixty centavos

(P50.60), the tax shall be Twenty-two pesos (P22.00) per liter.

Effective on January 1, 2016


(a) If the net retail price (excluding the excise tax and the value-added tax) per
liter of volume capacity is Fifty pesos and sixty centavos (P50.60) or less,
the tax shall be Twenty-one pesos (P21.00) per liter; and

(b) If the net retail price (excluding the excise tax and the value-added tax) per
liter of volume capacity is more than Fifty pesos and sixty centavos (P50.60),
the tax shall be Twenty-three pesos (P23.00) per liter.

Effective on January 1, 2017, the tax on all fermented liquors shall be Twenty-three
pesos and fifty centavos (P23.50) per liter.]

EFFECTIVE ON JANUARY 1, 2020, THE TAX ON ALL FERMENTED LIQUORS
REGARDLESS IF MANUFACTURED IN FACTORIES OR SOLD AND BREWED AT
MICRO-BREWERIES OR SMALL ESTABLISHMENTS SUCH AS PUBS AND
RESTAURANTS SHALL BE FORTY PESOS (P40.00) PER LITER.

EFFECTIVE ON JANUARY 1, 2021, THE TAX ON ALL FERMENTED LIQUORS
REGARDLESS IF MANUFACTURED IN FACTORIES OR SOLD AND BREWED AT
MICRO-BREWERIES OR SMALL ESTABLISHMENTS SUCH AS PUBS AND
RESTAURANTS SHALL BE FORTY-FIVE PESOS (P45.00) PER LITER.

EFFECTIVE ON JANUARY 1, 2022, THE TAX ON ALL FERMENTED LIQUORS
REGARDLESS IF MANUFACTURED IN FACTORIES OR SOLD AND BREWED AT
MICRO-BREWERIES OR SMALL ESTABLISHMENTS SUCH AS PUBS AND
RESTAURANTS SHALL BE FIFTY PESOS (P50.00) PER LITER.

EFFECTIVE ON JANUARY 1, 2023, THE TAX ON ALL FERMENTED LIQUORS
REGARDLESS IF MANUFACTURED IN FACTORIES OR SOLD AND BREWED AT
MICRO-BREWERIES OR SMALL ESTABLISHMENTS SUCH AS PUBS AND
RESTAURANTS SHALL BE FIFTY-FIVE PESOS (P55.00) PER LITER.

The rates of tax imposed under this Section shall be increased by [four percent (4%)}
TEN PERCENT (10%) every year thereafter effective on January 1, [2018] 2024,
through revenue regulations issued by the Secretary of Finance. [However, in case of

14


fermented liquors affected by the ‘no downward reclassification’ provision prescribed
under this Section, the four percent (4%) increase shall apply to their respective
applicable tax rates.]

‘ALCOPOPS’ SHALL MEAN PRE-MIXED ALCOHOLIC BEVERAGES WITH
ALCOHOL CONTENT OF LESS THAN 10% ALCOHOL BY VOLUME AND WHICH
ALCOHOL IS FROM MALT OR WINES OR A DISTILLATION PROCESS.
ALCOPOPS SHALL BE TAXED AS FERMENTED LIQUOR.

[Fermented liquors which are brewed and sold at micro-breweries or small
establishments such as pubs and restaurants shall be subject to the rate of Twenty-
eight pesos (P28.00) per liter effective on January 1, 2013: Provided, That this rate
shall be increased by four percent (4%) every year thereafter effective on January 1,
2014, through revenue regulations issued by the Secretary of Finance.]

[Fermented liquors introduced in the domestic market after the effectivity of this Act
shall be initially tax classified according to their suggested net retail prices.]

[Suggested net retail price’ shall mean the net retail price at which locally
manufactured or imported fermented liquor are intended by the manufacturer or
importer to be sold on retail in major supermarkets or retail outlets in Metro Manila for
those marketed nationwide, and in other regions, for those with regional markets. At
the end of three (3) months from the product launch, the Bureau of Internal Revenue
shall validate the suggested net retail price of the newly introduced fermented liquor
against the net retail price as defined herein and initially determine the correct tax
bracket to which a newly introduced fermented liquor, as defined above, shall be
classified. After the end of nine (9) months from such validation, the Bureau of Internal
Revenue shall revalidate the initially validated net retail price against the net retail price
as of the time of revalidation in order to finally determine the correct tax bracket to
which a newly introduced fermented liquor shall be classified.]

[Net retail price’ shall mean the price at which the fermented liquor is sold on retail in
at least five (5) major supermarkets in Metro Manila (for brands of fermented liquor
marketed nationally), excluding the amount intended to cover the applicable excise

1S


tax and the value-added tax. For brands which are marketed outside Metro Manila,
the ‘net retail price’ shall mean the price at which the fermented liquor is sold in at least
five (5) major supermarkets in the region excluding the amount intended to cover the
applicable excise tax and the value-added tax.]

[Major supermarkets, as contemplated under this Act, shall be those with the highest
annual gross sales in Metro Manila or the region, as the case may be, as determined
by the National Statistics Office, and shall exclude retail outlets or kiosks, convenience
or sari-sari stores, and others of a similar nature: Provided, That no two (2)
‘supermarkets in the list to be surveyed are affiliated and/or branches of each other:
Provided, finally, That in case a particular fermented liquor is not sold in major
supermarkets, the price survey can be conducted in retail outlets where said
fermented liquor is sold in Metro Manila or the region, as the case may be, upon the
determination of the Commissioner of Internal Revenue.]

[The net retail price shall be determined by the Bureau of Internal Revenue (BIR)
through a price survey under oath.]

[The methodology and all pertinent documents used in the conduct of the latest price
survey shall be submitted to the Congressional Oversight Committee on the
Comprehensive Tax Reform Program created under Republic Act No. 8240.]

[Understatement of the suggested net retail price by as much as fifteen percent (15%)
of the actual net retail price shall render 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.]

[Any downward reclassification of present categories, for tax purposes, of fermented
liquors duly registered at the time of the effectivity of this Act which will reduce the tax
imposed herein, or the payment thereof, shall be prohibited.]

[The proper tax classification of fermented liquors, whether registered before or after
the effectivity of this Act, shall be determined every two (2) years from the date of the
effectivity of this Act.]


[All fermented liquors existing in the market at the time of the effectivity of this Act shall
be classified according to the net retail prices and the tax rates provided above based
‘on the latest price survey of the fermented liquors conducted by the Bureau of Internal
Revenue.]

[The methodology and all pertinent documents used in the conduct of the latest price
survey shall be submitted to the Congressional Oversight Committee on the
Comprehensive Tax Reform Program created under Republic Act No. 8240.]

Every brewer or importer of ALCOPOPS ANDIOR fermented liquor shall, within thirty
(30) days from the effectivity of this Act, and within the first five (5) days of every month
thereafter, submit to the Commissioner a sworn statement of the volume of sales AND
REMOVALS for each particular brand of ALCOPOPS AND/OR fermented liquor sold
at his establishment for the three-month period immediately preceding.

Any brewer or importer who, in violation of this Section, misdeclares or misrepresents
in his or its sworn statement herein required any pertinent data or information shall,
upon final findings by the Commissioner that the violation was committed, be
penalized by a summary cancellation or withdrawal of his or its permit to engage in
business as brewer or importer of ALCOPOPS AND/OR fermented liquor.

Any corporation, association or partnership liable for any of the acts or omissions in
violation of this Section shall be fined treble the amount of deficiency taxes, surcharges
and interest which may be assessed pursuant to this Section.

Any person liable for any of the acts or omissions prohibited under this Section shall
be criminally liable and penalized under Section 254 of this Code. Any person who
willfully aids or abets in the commission of any such act or omission shall be criminally
liable in the same manner as the principal.

If the offender is not a citizen of the Philippines, he shall be deported immediately after
serving the sentence, without further proceedings for deportation.


SEC. 2. Section 144 (B) and 144 (C) of the National Internal Revenue Code of 1997,
as amended, are hereby further amended to read as follows:

Sec. 144 (B) Heated Tobacco Products. - There shall be levied, assessed and
collected on heated tobacco products an excise tax at the rate prescribed below:

“(1) [Ten pesos (P10.00)] FORTY-FIVE PESOS (P45.00) per pack of twenty
(20) units or packaging combinations of not more than twenty (20) units effective on
January 1, 2020;

“FIFTY PESOS (P50.00) per pack of twenty (20) units or packaging

combinations of not more than twenty (20) units effective on January 1, 202[0]1;

“FIFTY-FIVE PESOS (P55.00) per pack of twenty (20) units or packaging

combinations of not more than twenty (20) units effective on January 1, 202[0]2;

“SIXTY PESOS (P60.00) per pack of twenty (20) units or packaging

combinations of not more than twenty (20) units effective on January 1, 202[0]3;

“2) PROVIDED THAT t[T]he rates of tax imposed under this Subsection shall
be increased by five percent (5%) every year effective on January 1, 202[1]4, through
revenue regulations issued by the Secretary of Finance.

“Heated tobacco products shall only be packed in twenties and other packaging
combinations of not more than twenty (20) units.

“No heated tobacco products manufactured in the Philippines and produced for
export shall be removed from their place of manufacture or exported without posting
of an export bond equivalent to the amount of the excise tax due thereon if sold
domestically: Provided, however, That heated 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.

“Heated 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 customs duty, excise and value-added taxes due thereon if sold domestically.

“Manufacturers, distributors, and importers of heated tobacco products shall,
within thirty (30) days from the effectivity of this Act, and within the first five (5) days of
every month thereafter, submit to the Commissioner a sworn statement of the volume
of sales AND REMOVALS for each particular brand of heated tobacco products sold
for the three-month period immediately preceding.

“Any manufacturer, distributor, or importer who, in violation of this Section,
misdeclares, or misrepresents in his or its sworn statement herein required any

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pertinent data or information shall, upon the final findings by the Commissioner that
the violation was committed, be penalized by a summary cancellation or withdrawal of
his/her or its permit to engage in business as manufacturer, distributor, or importer of
heated tobacco products.

“Any corporation, association or partnership liable for any of the acts or
omissions in violation of this Section shall be fined treble the amount of deficiency
taxes, surcharges and interest which may be assessed pursuant to this Section.

“SELLING OF HEATED TOBACCO PRODUCTS AT A PRICE LOWER THAN
THE COMBINED EXCISE AND VALUE-ADDED TAXES IMPOSED UNDER THE
LAW SHALL BE PROHIBITED. THE SELLER OF SUCH PRODUCTS SHALL BE
PUNISHED WITH A FINE OF NOT LESS THAN TEN (10) TIMES THE AMOUNT OF
EXCISE PLUS VALUE-ADDED TAXES DUE BUT NOT LESS THAN TWO
HUNDRED THOUSAND PESOS (P200,000.00) NOR MORE THAN FIVE HUNDRED
THOUSAND PESOS (500,000.00), AND IMPRISONMENT OF NOT LESS THAN
FOUR (4) YEARS BUT NOT MORE THAN SIX (6) YEARS.

“THE BUREAU OF INTERNAL REVENUE IS MANDATED TO ISSUE A
REVENUE REGULATION PRESCRIBING THE FLOOR PRICE OR THE MINIMUM
PRICE OF HEATED TOBACCO PRODUCT TAKING INTO ACCOUNT THE SUM OF
THE EXCISE AND VALUE-ADDED TAXES AS PROVIDED HEREIN.

“Any person liable for any of the acts or omissions prohibited under this Section
shall be criminally liable and penalized under Section 254 of this Code. Any person
who willfully aids or abets in the commission of any such act or omission shall be
criminally liable in the same manner as the principal

“If the offender is not a citizen of the Philippines, he/she shall be deported
immediately after serving the sentence, without further proceedings for deportation.

“The sale and distribution, or transfer of heated tobacco products by any person
to minors; purchasing, or otherwise receiving heated tobacco products from a minor;
and the sale, purchase, and use of heated tobacco products by minors, shall be
prohibited. ‘Minor’ refers to any person below eighteen (18) years old. Any violation of
this provision shall be punishable with the same penalties provided for in Republic Act
No. 9211, otherwise known as the “Tobacco Regulation Act of 2003’.

“It shall not be a defense for the person selling or distributing that he/she did
not know nor had any reason to believe that the product was for the consumption of
the minor to whom it was sold.


“Unit packets and any outside wrapping of heated tobacco products and other
similar products shall carry a health warning compliant with the Republic Act No.
10643, otherwise known as “The Graphic Health Warnings Law’.

“Manufacturers and importers are given a period of one (1) year from the
effectivity of this Act to comply therewith.

“Eighteen (18) months after the effectivity of this Act, no person or legal entity
shall sell or commercially distribute or display any heated tobacco product without
ensuring that the labels and packages, as well as any other container used in
displaying the said products meet the requirements under this Act.

“Any violation of the foregoing provisions on health warnings shall be
punishable with the same penalties as provided for in Republic Act No. 10643,
otherwise known as “The Graphic Health Wamings Law.”

“Section 144 (C) Vapor Products. - [There shall be levied, assessed and
collected on vapor products excise tax at the rates prescribed below:] VAPOR
PRODUCT SHALL INCLUDE NICOTINE SALT/SALT NICOTINE, AND
CONVENTIONAL “FREEBASE” OR “CLASSIC” NICOTINE, AND OTHER
SIMILAR PRODUCTS AS MAY BE DETERMINED BY REVENUE REGULATION:

['(1) Effective on January 1, 2020, individual cartridge, refill, pod, or container
of vapor products containing liquid solutions or gel sold in the following quantities:

Quantity Excise tax
0.00 mi to 10.00 mi Ten pesos (P10.00)
10.01 mi to 20.00 mi ~ Twenty pesos (P20.00)
20.01 mi to 30.00 mi Thirty pesos (P30.00)
30.07 ml to 40.00 mi Forty pesos (P40.00)
40.01 ml to 50.00 mi Fifty pesos (P50.00)
More than 50.00 ml Fifty pesos (P50.00) plus Ten pesos

(P10.00) for every additional 10.00 mi]

“(1) NICOTINE SALT OR SALT NICOTINE - THERE SHALL BE LEVIED,
ASSESSED AND COLLECTED ON ANY LIQUID SUBSTANCE REGARDLESS OF
NICOTINE CONTENT, INCLUDING NICOTINE-FREE LIQUIDS OR ANY SIMILAR
PRODUCT USED IN ANY OF THE DEVICES LISTED IN SUBSECTION 150(D) OF

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THIS ACT, FURTHER CLASSIFIED AS NICOTINE SALT OR SALT NICOTINE AN
EXCISE TAX BASED ON THE FOLLOWING SCHEDULES:

EFFECTIVE ON JANUARY 1, 2020, FORTY-FIVE (P45.00) PER MILLILITER
OR A FRACTION THEREOF;

EFFECTIVE ON JANUARY 1, 2021, FIFTY PESOS (P50.00) PER
MILLILITER OR A FRACTION THEREOF;

EFFECTIVE ON JANUARY 1, 2022, FIFTY-FIVE PESOS (P55.00) PER
MILLILITER OR A FRACTION THEREOF;

EFFECTIVE ON JANUARY 1, 2023, SIXTY PESOS (P60.00) PER
MILLILITER OR A FRACTION THEREOF;

['(2)] PROVIDED THAT t[T]he rates of tax imposed under this Subsection shall
be increased by five percent (5%) every year effective on January 1, 202[1]4, through
revenue regulations issued by the Secretary of Finance.

“(2) CONVENTIONAL “FREEBASE” OR “CLASSIC” NICOTINE - THERE
SHALL BE LEVIED, ASSESSED AND COLLECTED ON ANY LIQUID
SUBSTANCE, REGARDLESS OF NICOTINE CONTENT, INCLUDING NICOTINE-
FREE LIQUID OR ANY SIMILAR PRODUCT USED IN ANY OF THE DEVICES
LISTED IN SUBSECTION 150 (D) OF THIS ACT, FURTHER CLASSIFIED AS
CONVENTIONAL “FREEBASE” OR “CLASSIC” NICOTINE AN EXCISE TAX
BASED ON THE FOLLOWING SCHEDULES:

EFFECTIVE ON JANUARY 1, 2020, FOUR PESOS AND FIFTY CENTAVOS
(P4.50) PER MILLILITER OR A FRACTION THEREOF;

EFFECTIVE ON JANUARY 1, 2021, FIVE PESOS (P5.00) PER MILLILITER
OR A FRACTION THEREOF;

EFFECTIVE ON JANUARY 1, 2022, FIVE PESOS AND FIFTY CENTAVOS
(P5.50) PER MILLILITER OR A FRACTION THEREOF;

EFFECTIVE ON JANUARY 1, 2023, SIX PESOS (P6.00) PER MILLILITER
OR A FRACTION THEREOF;

PROVIDED THAT THE RATES OF TAX IMPOSED UNDER THIS
SUBSECTION SHALL BE INCREASED BY FIVE PERCENT (5%) EVERY YEAR
EFFECTIVE JANUARY 1, 2024, THROUGH REVENUE REGULATIONS TO BE
ISSUED BY THE SECRETARY OF FINANCE.

21


“THE MANUFACTURE, IMPORTATION, SALE AND DISTRIBUTION OF
VAPOR PRODUCTS WITH FLAVORING OTHER THAN PLAIN TOBACCO OR
PLAIN MENTHOL, SHALL BE PROHIBITED.

“Manufacturers, distributors, and importers of vapor products shall be required
to indicate on the package the actual volume in milliliters of the liquid solutions and
gels.

“No vapor products manufactured in the Philippines and produced for the export
shall be removed from their place of manufacture or exported without posting of an
export bond equivalent to the amount of customs duty, excise and value-added taxes
due thereon if sold domestically. Provided, however, That vapor products for export
may be transferred from the place of manufacture to a bonded facility, upon posting of
a transfer bond prior to export.

“Vapor products imported into the Philippines and destined for foreign countries
shall not be allowed entry without posting a bond equivalent to the amount of customs
duty, excise and value-added taxes due thereon if sold domestically.

“Manufacturers, distributors, and importers of vapor products shall, within thirty
(30) days from the effectivity of this Act, and within the first five (5) days of every month
thereafter, submit to the Commissioner a sworn statement of the volume of sales for
each particular brand of vapor products sold for the three-month period immediately
preceding.

“Any manufacturer, distributor, or importer who, in violation of this Section,
misdeclares or misrepresents in his/her or its sworn statement herein required
pertinent data or information shall, upon final findings by the Commissioner that the
violation was committed, be penalized by a summary cancellation or withdrawal of
his/her or its permit to engage in business as manufacturer, distributor, or importer of
vapor products.

“Any corporation, association or partnership liable for any for any of the acts or
omissions in violation of this Section shall be fined treble the amount of deficiency
taxes, surcharges and interest which may be assessed pursuant to this Section.

“SELLING OF VAPOR PRODUCTS AT A PRICE LOWER THAN THE
COMBINED EXCISE AND VALUE-ADDED TAXES IMPOSED UNDER THE LAW
SHALL BE PROHIBITED. THE SELLER OF SUCH PRODUCTS SHALL BE
PUNISHED WITH A FINE OF NOT LESS THAN TEN (10) TIMES THE AMOUNT OF
EXCISE PLUS VALUE-ADDED TAXES DUE BUT NOT LESS THAN TWO

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HUNDRED THOUSAND PESOS (P200,000.00) NOR MORE THAN FIVE HUNDRED
THOUSAND PESOS (500,000.00), AND IMPRISONMENT OF NOT LESS THAN
FOUR (4) YEARS BUT NOT MORE THAN SIX (6) YEARS.

“THE BUREAU OF INTERNAL REVENUE IS MANDATED TO ISSUE A
REVENUE REGULATION PRESCRIBING THE FLOOR PRICE OR THE MINIMUM
PRICE OF VAPOR PRODUCTS TAKING INTO ACCOUNT THE SUM OF THE
EXCISE AND VALUE-ADDED TAXES AS PROVIDED HEREIN.

“Any person liable for any of the acts or omissions prohibited under this Section
shall be criminally liable and penalized under Section 254 of this Code. Any person
who willfully aids or abets in the commission of any such act or omission shall be
criminally liable in the same manner as the principal.

“If the offender is not a citizen of the Philippines, he/she shall be deported
immediately after serving the sentence, without further proceedings for deportation.

“The sale and distribution, or transfer of vapor products by any person to
minors; purchasing, or otherwise receiving vapor products from a minor; and the sale,
purchase, and use of vapor products by minors, shall be prohibited. ‘Minor’ refers to
any person below eighteen (18) years old. Any violation of this provision shall be
punishable with the same penalties provided for in Republic Act No. 9211, otherwise
known as the “Tobacco Regulation Act of 2003’.

“It shall not be a defense for the person selling or distributing that he/she did
not know or was not aware of the real age of the minor. Neither shall it be a defense
that he/she did not know nor had any reason to believe that the product was for the
consumption of the minor to whom it was sold

“Unit packets and any outside wrapping of vapor products and other similar
products shall carry a health warning compliant with Republic Act No. 10643,
otherwise known as “The Graphic Health Warnings Law.”

“Manufacturers and importers are given a period of one (1) year from the
effectivity of this Act to comply therewith.

“Eighteen (18) months after the effectivity of this Act, no person or legal entity
shall sell or commercially distribute or display any vapor product without ensuring that
the labels and packages, as well as any other container used in displaying the said
products meet the requirements under this Act.

23


“Any violation of the foregoing provisions on health warning shall be punishable
with the same penalties provided for in Republic Act No. 10643, otherwise known as
“The Graphic Health Warnings Law’.

“Notwithstanding the provisions of this Act on heated tobacco products and
vapor products, this Act acknowledges the need for further scientific evidence on the
health impact of these products.

SEC. 3. Section 147 of the National Internal Revenue code of 1997, as amended, is
hereby further amended to read as follows:

“SEC.147. Definition of Terms. — x x x.

XXX

(f) ‘Vapor products’ shall mean any liquid solution or gel which contains nicotine that
transforms into an aerosol without combustion through the employment of a
mechanical heating element, battery or circuit that can be used to heat such solution
or gel, and includes but is not limited to, a cartridge, a tank, and the device without a
cartridge or tank. It is commonly known as ‘e-liquids’ for ‘e-cigarettes.’ IT INCLUDES
NICOTINE SALT/SALT NICOTINE, AND CONVENTIONAL “FREEBASE” OR
“CLASSIC” NICOTINE, AND OTHER SIMILAR PRODUCTS. It 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 sixty-
five milligrams per milliliter (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.”

F(1) THE TERM “SALT NICOTINE” OR “NICOTINE SALT” SHALL REFER
TO LIQUID SUBSTANCES COMPATIBLE FOR USE WITH LOW-WATTAGE
DEVICES UNDER SECTION 150(D) OF THIS ACT, WITH A LOWER ALKALINITY
DUE TO THE ADDITION OF SUBSTANCES SUCH AS BENZOIC ACID, OR OTHER
SIMILAR SUBSTANCES.

F(2) THE TERM “CONVENTIONAL “FREEBASE” OR “CLASSIC”
NICOTINE” SHALL REFER TO LIQUID SUBSTANCES COMPATIBLE FOR USE
WITH DEVICES UNDER SECTION 150(D) OF THIS ACT NOT FALLING UNDER
THE DEFINITION OF “SALT NICOTINE” OR “NICOTINE SALT.”

SEC. 4. Section 150 of the NIRC, as amended, is hereby amended to read as follows:

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SEC. 150. Non-essential Goods. - There shall be levied, assessed and
collected a tax equivalent to twenty-percent (20%) based on the wholesale price or the
value of importation used by the Bureau of Customs in determining tariff and customs
duties, net of excise tax and value-added tax, of the following goods:
1K

(c) Yachts and other vessels intended for pleasure or sports; AND [.]

(D) TOBACCO HEATING SYSTEMS AND ELECTRONIC OR MECHANICAL
CIGARETTE DEVICES, WHICH INCLUDE BUT ARE NOT LIMITED TO
ELECTRONIC AND/OR NON-ELECTRONIC NICOTINE DELIVERY SYSTEMS, E-
CIGARETTES, VAPES, VAPORIZERS, VAPING SYSTEMS, TANK SYSTEM,
MODS, AND E-HOOKAHS, OR ANY SIMILAR PRODUCT, AS MAY BE
DETERMINED BY REVENUE REGULATION, AND ANY MANDATORY
COMPONENT THEREOF EXCLUDING BATTERIES, CHARGERS, AND
CHARGING CABLES WHEN SOLD SEPARATELY. HOWEVER, IF BATTERIES,
CHARGERS, CHARGING CORDS, AND OTHER ACCESSORIES ARE SOLD OR
PACKAGED TOGETHER WITH A TOBACCO HEATING OR ELECTRONIC OR
MECHANICAL CIGARETTE DEVICE AS ONE SALEABLE ITEM, THE VALUE
THEREOF SHALL FORM PART OF THE WHOLESALE PRICE OR THE VALUE OF
IMPORTATION.

SEC. 5. Implementing Rules and Regulations. — The Secretary of Finance shall, upon
the recommendation of the Commissioner of THE BUREAU OF Internal Revenue,
promulgate the necessary rules and regulations for the effective implementation of this
Act.

SEC. 6. Repealing Clause. — All laws, decrees, executive orders, rules and regulations
or parts thereof which are contrary to or inconsistent with this Act are hereby repealed,

amended or modified accordingly.

SEC. 7. Effectivity. - This Act shall take effect upon its publication either in the Official
Gazette or in a newspaper of general circulation.

Approved,

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