RMC No. 03-2013 — Clarifies certain provisions of RR No. 17-2012 implementing the provisions of RA No. 10351 as well as the provisions of RMC No. 90-2012 providing the initial tax classifications of alcohol and tobacco products

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BUREAU OFINTERNAL REVENUE KDEPART MENT OF FINA NOUNS UBLICOF THE PHI ** Quezon City t DUREAU OF INTERNAL REVENUE RECORDS MGT DIVISION RECEIVED JAR o 9 20f3,/+ 3:3 2M

Ta 1 nuary8, 2013

REVENUE MEMORANDUMCIR BUEAU OF INT 2RNANREVEWE Mfe

SUBJECT Implementing the Provisions of Repubiic Act No. 10351 as well as the Provisions of Revenue Memorandum Circular No. 90-2012 Providing the Initial Tax Classifications of Alcohol and Tobacco Products Clarifying Certain Provisions of Revenue Regulations No. 17-2012

TO : To All Internal Revenue Officers and Others Concerned

This Circular is hereby issued in order to clarify certain provisions of Revenue Regulations (R.R.) No. 17-2012 dated December 21, 2012, which implements the provisions of Republic Act

Republic Act No. 9334, And For Other Purposes", as follows: (R.A.) No. 10351, "An Act Restructuring The Excise Tax On Aleohol and Tobacco Products By Amending Sections 141, 142. 143, 144, 145, 8, 131 and 288 of Republic Act No. 8424 Otherwise Known As the National Internal Revenue Code (NIRC) of 1997, As Amended By

1. The provisions of R.A. No. 10351 is clear that the four percent (4%) increase in specific tax rates, effective January 1, 2014 on tobacco products under Section 144 (a) of the Tax Code of 1997, as amended, applies to all tobacco products, including chewing tobacco.

Accordingly, the line which was inadvertently placed between tobacco products and chewing tobacco under the column heading entitled "2018 Onwards" of the table provided under Section 3 of RR No. 17-2012 which prescribes the revised rates and bases of the specific tax, should be disregarded.

With respect to the four percent (4%) increase in specific tax rates, effective January 1, 2018 for cigarettes under Section 144 (b) and (c) of the Tax Code of 1997, as amended, it is, likewise, clear in the provisions of R.A. No.10351 that the increase applies to both cigarettes packed by hand and cigarettes packed by machine. Accordingly, the line that was inadvertently placed between cigarettes packed by hand and cigarettes packed by hand under the column heading entitled "2018 Onwards" of the table provided under Section 3 of RR No. 17-2012 which prescribes the revised rates and bases of the specific tax, should likewise be, disregarded.

It is well settled rule that implementing guidelines cannot prevail over the provisions of the placed separating lines should not be construed as a substantial defect in R.R. No. 17-2012. enacted iaw. Hence, formalities or technicalities such as in this case of the inadvertently

2. Taxability of distilled spirits under Section 3 of R.R. No. 17-2012

for purposes of excise taxation, 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. Section 141 of the Tax Code of 1997, as amended, defined "Spirits or distilled spirits

alcohol, ethanol or other similar products or mixtures are separate and distinct distilled spirits apart from the above-enumerated alcoholic products (i.e., whisky, brandy, rum, etc.) and, therefore, the same should be likewise subjected to the imposition of a separate and distinct excise tax prescribed under the same Section of the Tax Code. In line with the aforesaid definition of distilled spirits, all end-products, such as ethyl

Illustration:

No. 1 Swing Company, a registered distiller engaged in the production of ethyl alcohol. It sells ethyl alcohol to (a) Compounders, (b) Rectifiers and (c) Traders.

Question: Is Swing Company liable to pay the excise tax due on its rermovals to base for purposes of computing the ad valorem tax? (a) Compounders, (b) Rectifiers and (c) Traders? What will be the tax

Answer: (a) For Compounders: Yes. Swing Company is liable to pay the as a distinct and separate distilled spirits, is subject to excise tax suggested net retail price equivalent to the actual selling price of the ethyl alcohol per sales invoice, net of value-added tax and excise tax. pursuant to Section 141 of the Tax Code, as amended. The tax excise tax due on its removal to compounders since ethyl alcohol base, for purposes of computing the ad valorem tax, shall be the

(b) For Rectifiers: Yes. Swing Company is liable to pay the excise tax the respective rectifiers. Section 137 of the Tax Code of 1997, as amended, the ethyl alcohol intended for rectification may be removed without the pre- separate distilled spirits, is subject to excise tax. However, due to payment of the excise tax subject to the filing of a joint bond with due on its removal to rectifiers since ethyl alcohol, as a distinct and

(c) For Traders: Yes. Swing Company is liable to pay the excise tax separate distilled spirits, is subject to excise tax pursuant to Section computing the ad valorem tax, shall be the suggested net retail due on its removal to traders since ethyl alcohol, as a distinct and 141 of the Tax Code, as amended. The tax base, for purposes of

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price equivalent to the actual selling price of the ethyl alcohol per sales invoice, net of value-added tax and excise tax.

No. 2 Ballet Corp., a registered rectifier, rectifies alcohol bought from Swing Company, a distillery. The rectified alcohol will be sold to compounders and pharmaceutical

companies.

Question: Is Ballet Corp. Hiable to pay the excise tax due on rectified alcohol?

Answer: Yes. Since the ethyl alcohol sold by Swing Company to Ballet Corp was not subjected to excise tax in view of their joint bond duly filed on its removal of rectified alcohol including the losses, if any, with the BIR, Ballet Corp. is liable therefore to pay the excise tax due

Question: What will be the tax base to be used by Ballet Corp. in computing the

ad valorem tax?

Answer: The tax base, for purposes of computing the ad valorem tax, shall be the suggested net retail price equivalent to the actual selling price of

ethyl alcohol per sales invoice, net of value-added tax and excise tax.

No. 3 in the manufacture of compounded liquors. Gang Nam Corp., a registered compounder, imports ethyl alcohol as raw materials

Question: Is Gang Nam Corp. liable to pay the excise tax due on its importation of ethyl alcohol? If yes, what will be the tax base in computing the ad

valorem tax?

Answer: importation since ethyl alcohol, as a distinct and separate distilled Yes. Gang Nam Corp. is liable to pay the excise tax due on the

spirits, is subject to excise tax pursuant to Section 141 of the Tax

purposes of using the same as tax base in computing the ad valorem Code, as amended. The actual value used by the Bureau of Customs in determining tariff and customs duties, net of value-added tax and excise tax shall be considered as the suggested net retail price for

tax.

Question: Is Gang Nam Corp. also liable on its removal of compounded liquors?

Answer: Yes. Compounded liquors, as a separate and distinct distilled spirits, are likewise subject to excise tax pursuant to Section 141 of the Tax Code, as amended. The tax base shall be the net retail price as declared

in the sworn statement as submitted by Gang Nam Corp.

No. 4 Cha Cha Company is engaged in the importation-trading of ethyl alcohol. Its customers include compounders, pharmaceutical companies, traders, industrial

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Question: Is Cha Cha Company liable to.pay the excise tax due.on its importation of ethyl alcohol? If yes, what will be the tax base in

computing the ad valorem tax?

Answer: Yes. Cha Cha Company is liable to pay the excise tax due on the

importation since ethyl alcohol, as a distinct and separate distilled spirits, is subject to excise tax pursuant to Section 141 of the Tax Code, as amended. The tax base of computing the ad valorem shall be the actual selling price per sales invoice issued by Cha Cha Company to its buyer. However, for purposes of computing the initial payment of the ad valorem at the time of importation of the ethyl alcohol, the actual value used by the Bureau of Customs in determining tariff and customs duties, net of value-added tax and excise tax shall be used as the taxable base. Accordingly, the additional ad valorem tax resulting from the difference between the computed ad valorem tax due based on the actual selling price and the ad valorem tax actually paid to the Bureau of Customs shall be paid by Cha Cha Company to the appropriate BIR Office immediately without prior notice of assessment.

No. 5 Tanggo Corp. is engaged in the importation-trading of medicinal preparations flavoring extracts and other similar preparations with distilled spirits forming part as

chief ingredient thereof.

Question: Is Tanggo Corp. liable to pay the excise tax due on its importatior of the said preparations? If yes, what will be the tax base in computing

the ad valorem tax?

Answer: Yes. Tanggo Corp. is liable to pay the excise tax due on the importation of said preparations since the provisions of R.A. No 10351 are clear that such preparations with distilled spirits forming

part as chief ingredient thereof are likewise subject to excise tax pursuant to Section 141 of the Tax Code, as amended. The tax base of computing the ad valorem shall be the actual selling price per sales invoice issued by Tanggo Corp. to its buyer. However, for purposes of computing the initial payment of the ad valorem at the time of importation of such preparations, the actual value used by the Bureau of Customs in determining tariff and customs duties, net of value- added tax and excise tax shall be used as the taxable base. Accordingly, the additional ad valorem tax resulting from the difference between the computed ad valorem tax due based on the actual selling price and the ad valorem tax actually paid to the Bureau of Customs shall be paid by Tanggo Corp. to the appropriate BIR Office immediately without prior notice of assessment.

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No. 6 Waltz, Inc., a registered compounder, imports flavoring extracts, having distilled

spirits as chief ingredient, to be used as one of the raw materials in the manufacture of compounded liquors.

Question: Is Waltz, Inc. liable to pay the excise tax due on the importation of flavoring extracts? If yes, what will be the tax base in computing the ad valorem tax?

Answer: Yes. Waltz, Inc. is liable to pay the excise tax due on the importation

since flavoring extracts, as a distinct and separate distilled spirits, is subject to excise tax pursuant to Section 141 of the Tax Code, as amended. The actual value used by the Bureau of Customs in determining tariff and customs duties, net of value-added tax and

purposes of using the same as tax base in computing the ad valorem tax. excise tax shall be considered as the suggested net retail price for

This Circular is, likewise, issued in order to further amend and clarify the initial tax classifications of alcohol and tobacco products published under Revenue Memorandum Circular (RMC) No. 90-2012 dated December 27, 2012, as follows:

1. The fermented liquor, "Gold Eagle Beer" in 320 ml. bottle, under Annex A-l, page 2

Schedule HI, line 10 was inadvertently placed under the higher price category under "NRP is more than P50.60", considering that the reflected price was P56.25 per liter and, therefore. erroneously tax classified under the higher tax rate at P20.00. The reflected price was the suggested GROSS selling price, instead of the prescribed suggested NET retail price which should have been P39.81 per liter, falling under the lower tax classification. Accordingly the correct initial tax classification of "Gold Eagle Beer" in 320 ml. bottle should be under the tax rate of P15.00 per liter.

2. With respect to other alcohol and tobacco products that were not included in any of the

Annexes of the said RMC, their respective initial tax classification or rate shall be based on the suggested net retail price declared in the latest sworn statement filed by the manufacturer and importer, as the case maybe

All revenue officials concerned are hereby directed to give this Circular as wide a publicity as possible.

BUREAU OF INTERNAL REVENUE RECORDS MGT DIVISION JAX 0 5 2013 $3sp.M Commissiorfer of Internal Revenue KIM S.AKINTO-HENARES M 013526

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