RR No. 7-2021 — Pre cribe the rule and regulation to implement the provi ion of RA No . 11346 and 11467 relative to Exci e Tax on alcohol product , tobacco product , heated tobacco product , vapor product and di po ition of Exci e Tax collection (Publi hed in Malaya Bu ine In ight on May 19, 2021) Dige t | Full Text

BUREAUTjFTNTEffiE;NUE t nl r/\-l REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE ls HAY 2021 BUREAU OF INTERNAL REVENUE D I l: 0o e^r Quezon City RECOROS UGI. OIVISION ? May tB, zozt j rl- ao:,\ I REVENUE REGULATIONS NO. SUBJECT Rules and Regulations lmplementing the Provisions of Republic Act Nos. tg46 and tt467, Relative to the Excise Tax on Alcohol Products, Tobacco Products, Heated Tobacco Products, vapor Products and Disposition of Excise Tax Collection TO All lnternal Revenue Officials and Others Concerned SECTION T.SCOPE. Pursuant to the provisions of Section 244 of NIRC, as amended, the following Regulations are hereby promulgated to implement the amendment of excise tax on alcohol and tobacco products, and the imposition of excise tax on heated tobacco products and vaPor products as provided under Republic Act (RA) No. t:1.46 otherwise known as "An Act lncreasing the Excise T.ax on Tobacco Products, lmposing Excise Tax on Heated Tobacco Products and Vapor Products, lncreasing the Penalties for Viotations of Provisions on Articles Subject to Excise Tax, and Earmarking a Portion of the Total Excise Tax Collection from Sugar-Sweetened Beverages,.Alcohol, Tobacco, Heated Tobacco and Vapor Products for Universal Health Care, Amendin g for this Purpose Sections 144, 145, t46, t47, t52, t64, 26o, z6z,263,265,288, and 289, Repealing Sections 288(B) and 288(C), and Creating New Sections 263-A, 265-8, and z8B-A of the National lnternal Revenue Code of ry97, as Amended by Republic Act No. r 0961,, and for other Purposes", as further amended by RA No. 11467 also known as "An Act Amending Sections t4t, t4z, 14i,, 144, 147,152,26), 263-A,265, and zB8-A, and Adding a New Section z9o-A to Republic Act No. 8424, as Amended, Otherwise Known as the National lnternal Revenue Code of 't9g7, and For other Purposes", on Sections relevant to excise taxes. SECTION z. DEFINITION OF TERMS. 1. ALCOHOL PRODUCTS shall refer to fermented liquors, proof spirits, wines, and/or spirits or distilled spirits, as defined in these Regutations. 2. CIGARETTES - shall mean all rolls of finely-cut leaf tobacco, or any substitute therefor, wrapped in paper or in any other materiat that are consumed via combustion of the tobacco. 3, CIGARS. - shall mean all rolls of tobacco or any substitute thereof, wrapped in teaf tobacco that aie consumed via combustion of the tobacco. 4. CIGARETTES PACKED BY HAND shall refer to the manner of packaging of cigarette sticks using an individual person's hands and not through any other means such as a mechanical device or equipment. d- \f ' pase 1 or 1T

j. CONTAINER - means any object used for or capable of holding one or more vapor products or heated tobaSco.products packaging or wrapping. 6. DISTRIBUTOR - refers to any person or entity that distributes or supplies vapor products or heated tobacco products to retailers and/or other persons and entities who are not end-users or consumers of vapor products or heated tobacco products. l. EXACT REPLICA - refers to the sample printed visual depiction of vapor products or heated tobacco products packaging submitted by manufacturers and importers to the Bureau of lnternal Revenue (BlR) pursuant to an application for registration of new brands or variants of existing brands or new brands in accordance with Revenue Regulations (RR) No. 3-zoo6 and its amendatory issuances, which contain the graphic and textual health warnings and other additional information as required under RA No. t 0643. 8. FERMENTED LIqUORS - such as beer, lager beer, ale, porter and other fermented liquors regardless if manufactured in factories or sold and brewed at micro- breweries or small estublishrnents such as pubs.and restaurants, except tuba, basi, tapuy and similar fermented liquors. 9. GRAPHIC HEALTH WARNING - refers to the photographic image printed on the packaging of vapor products or heated tobacco products, which accurately depicts the hazards of such use and is accompanied by a textual warning related to the picture as prescribed by the Department of Health ("DOH"). 10. GRAPHIC HEALTH WARNTNGS LAW - refers to RA No. t 0643, otherwise known as "An Act to Effectively lnstill Health Consciousness Through Graphic Health Warnings on Tobacco Products". 11. HEATED TOBACCO PRODUCTS - shall 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. Heated tobacco products include liquid solution and gels that are part of the product and are heated to generate an aerosol. 12, IMPORTATION shatl reier to the introduction of alcohot products, tobacco products, heated tobacco products, or vapor products from a foreign country into the Philippine territory, including duly chartered economic and freeport zones and duty-free shops, whether for sale or not. lt commences when the carrying vessel or aircraft enters the Philippine jurisdiction with the intention to unload or keep for storage therein such product. lt is deemed terminated upon payment of duties, taxes and other charges due upon the articles, or secured to be paid, at a port of entry and the legal permit for withdrawal shall have been granted, or in case said articles are free of duties, laxes and other charges, until they have legally left the jurisdiction of the Bureau of Customs. For purposes of these Regulations, any alcohol product, tobacco product, heated tobacco product and vapor product entering the Philippines through the freeport and special economic zones shall be deemed to have entered the Philippine customs'territory upon unloading thereof from the carrying vessel. Bt.iREAt I 0F tt\:rERhrAL REvENl,f E j-nt iT Ir tf,' { D RECORDS MGT. DIVISION

13. IMPORTER - refers to any person or entity that is engaged in the importation of alcohol products, tobacco products, heated tobacco products, and/or vapor products. 42-/l1=C'J 14. MA)OR SUPERMARKETS - shall be those with the highest annual gross sales in _J,rn Metro Manila oi- the region, as the case may be, as determined by the BlR, and -1))l>c shall exclude retail outlets or kiosks, convenience or sari-sari stores, and others of >3 a similar nature. No two (z) supermarkets in the list to be surveyed are affiliated Jr7 ;, rztl and/or branches of each other. ln case a particular alcohol product, tobacco >zT)ll) --tj product, heated tobacco product, or vapor product is not sold in major supermarkets, the price survey can be conducted in retail outlets where said xfl4<,ronll alcohol product, tobacco product, heated tobacco product, or vapor product is sold in Metro Manila or region, as the case may be, upon the determination of the Commissioner of lnternal Revenue. 15. MANUFACTURER - refers to any person or entity that is engaged in the business of manufacturing, assembling, or processing of alcohol products, tobacco products, heated products, or vapor products. 16. MARKETING AUTHORIZATION / FDA CERTIFICATION refers to the product certification issued by the Food and Drug Administration (FDA). t7. NET RETAIL PRICE (NRP) - shall mean the price at which alcohol products ancJ tobacco products are 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 alcohol products and tobacco products which are marketed outside Metro Manila, the 'net retail price' shall mean the price at which the alcohol products, tobacco products, heated tobacco products, or vapor products are 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. This shall initially be provided by the manufacturer or importer through a sworn statement and shall be validated by the BIR through a biannual price survey under oath. t8. NON-COMPLIANT PACKAGES - refer to any vapor products or heated tobacco products packaging, labelling, including mastercases, inserts, onserts, or outside packaging and labelling, which fail to comply with packaging and/or labelling requirements and specifications under the Graphic Health Warnings Law, Joint Memorandum Circular (JMC) No. 3-zo2o, and other rules, regulations and guidelines issued to further implement the provisions of RA N a.10643. 19. PROOF SPIRITS - shall refer to liquor containing one-half (tlz) of its volume of alcohol of a specific gravity of seven thousand nine hundred and thirty-nine ten thousandths (o.lglil at fifteen degrees centigrade (rS"C). A proof liter means a liter of proof spirits. ! zo. RETAILER - rbfers to any person or entity engaged in the direct sale or offer for sale of alcohol products, tobacco products, heated tobacco products, and/or vapor products to consumers or end-users. - 21. RETAIL PRICE shall mean the amount of money or price which an ultimate consumer or end-user pays for alcohol products, cigars, or cigarettes heated and { Ut Pase 3 or 17

vapor products purchased. 22. splRlTs oR DISTILLED SplRlTs - shatl refer to the substance known as ethyl alcohol, ethanot 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. 23. sUGGESTED NET RETATL pRtCE - shall mean the net retail price (excluding the excise tax and the value-added tax) at which tocally manufactured or imported alcohol products, tobacco products, heated tobacco products, and/or vapor products are intended by the manufacturer or importer to be sold on retail in major supermarkets or retait outlets in Metro Manila for those marketed nationwide, and in other regions, for those with regional markets. 24. TOBACCO pRODUCTS shall mean products entirely or partly made of leaf tobacco as raw materiai that are manufactured to be used for smoking, sucking, chewing or snuffing, or by any other means of consumption. 25. TRANSSHIPMENT - shall refer to the transport or shipment of tobacco products' heated tobacco products, andlor vapor products from a foreign port into any port(s) of the philippines strictty for subsequent shipment to a foreign port or destination where the shipping manifest pertaining thereto specifically states that the destination thereof is for a foreign port without introducing the same into the Philippine territory. o, 6. VAPOR PRODUCTS - mean Etectronic Nicotine and Non-Nicotine Delivery systems a (EN DS/EN N DS), which are combinations of (i) a liquid solution or 8el, that rn 'o?t transforms into an aerosol without combustion through the employment of a 2 mechanicat or etectronic heating etement, battery or circuit that can be used to heat such solution or gel, and includes, but is not timited to (ii) a cartridge, (iii) a rf-nr{ tank, and (iv) the device without a cartridge or tank. lt is commonly known as 'freebase' or 'classic''nicotine, and z. nicotine salt/salt nicotine, gld conventional shall be covered regardless of its r other similar products. Al[ vapor products r7<ni rnl nicotine content. :f;l-JtZ 27. wHoLESALE pRlcE - shall mean the amount of money or price paid for cigars or cigarettes purchased for the purpose of resale, regardless of quantity. sEcTloN 3. REVISED RATES AND BASES OF EXCISE TAX. A. ALCOHOL PRODUCTS 1. DISTILLED SPIRITS Excise Tax Due = Ad valorem tax + Specific tax Date of effectivity I Ad valorem tax Specific tax (start date) I [based'on the net retail (p"t proof liter) price per proof (excluding the excise and value-added taxes January 1i2o2o Page 4 of

January 23,2o7o zz% F4z.oo January 1,2021 January 1,2022 zz% ?47.oo January 1,2023 January 1,2024 zz% F5z.oo 2oz5 Onwards zz% F59.oo zz% P66.oo specific tax rate shall be zz% increased by 6% and every year thereafter 2. WINES Date of effectivity (start date) Specific tax (per liter) January 11 2o2o Sparkling wines/champagnes where the NRP (excluding the excise and VAT) per bottle of 75o ml volume capacity, regardless of proof is: a. Php 5oo or less F328.98 ?92t.'t5 b. More than Php 5oo Flg.+B Still wines and carbonated wines containing t4% of alcohol by volume or less Still wines and carbonated wines containing more P78.96 than t4% of alcohol by volume but not more than z5% of alcohol by volume @ Fortified wines containing more than z5% of alcohol Taxed as distilled spirits D n by volume ocrn rn January 23,zozo* F5o.oo D- January 1,2021 F53.oo o,?l January 1,2022 F56.t B January 1,2023 ?sg.ss ag -;o1*@-' ' z January 1,2024 763.t2 -i zo25 Onwards specific tax rate shall o{ BC rsrr LI be increased by 6% and J rfzTrl J n rn 3D m every year thereafter Note; *Beginning January 23, 2o2o, the classification of wines wos removed pursuant to RA No. u467. All types of wines are subiectto specific'excise tax rotes per liter, 3. FERMENTED LIqUORS Specific tax (per liter) ?26.+j Date of effectivity (start date) F35.oo January 1, zo2o P37.oo January 23, zozo F39.oo January 1,2ozl F4r.oo January 1,2ozz ?43,oo January 1,2023 specific tax rate shall January 1,2024 be increased by 6% and zoz5 Onwards

B. TOBACCO PRODUCTS, HEATED TOBACCO PRODUCTS, AND VAPOR PRODUCTS 1. Heated Tobacco Products Date of Effectivity Quantity Excise Tax Rate January 1,2o2o Fr o.oo Januarv 27,2o2o Per pack of zo units or Pz5.oo Januarv 1,2021 any packaging ?27.5o Januarv 1,2c_22 P3o.oo January 1,2023 combinations of not ?32.5o more than twenty (zo) 2024 Onwards specific tax rate shall units be increased by SZ every year effective January 1,2024 lllustration A: On January 23, 2o2o, BSM Corp. removes from its tobacco plant too cases of Brand GTR heated tobacco. Note:1 case contains 5o reams while 1 ream contains to packs No. of Cases 100 Multiplied by the number of reams Per case Total Number of Reams 5o Multiplied by No. of Packs Per ream 5,ooo Total Number of Packs Multiplied by Tax Rate 10 Total Excise Tax Due 5O,OOO 25.oO Pt,z5o,oo o.oo 2. Vapor Products l-N; Date of Effectivi Quantity Excise Tax January 1, zo2o to o.ooml to to.ooml Fro.oo llImRBXl-l_tAs_F-i--z--rr,kt2t Jll+sE": January 22,2o2o Fzo.oo 1o.o1ml to zo.ooml F3o.oo aEsael;' ,i P4o.oo zo.otml to 3o.ooml F5o.oo iqEEfi 3o.o1 ml to 4o,o!I!! 4o.otml to 5o.oo ml F5o.oo plus Fto.oo for More than 5o.ooml every additional to.oo ml ZI\--,:ffi| sE:==-5HlZa a. Nicotine Salt or Salt Nicotine Excise Tax Rate P37.oo Date of Effectivity Quantity ?4z.oo P47.oo Januarv z3,2o2o F5z.oo l*""rv l, nn t Per milliliter or a rate shall be increased by SZ every year fraction thereof effective January 1, 2024 2024 Onwards D r \J{' Page 6 or 1 /

b. Conventional'Freebase' or tClassic' Nicotine Date of Effectivity Quantity Excise Tax Rate EI'-45.oo January 23, zozo Per ten (to) milliliter or a F5o.oo January 1,2021 fraction thereof F55.oo January 1,2022 P6o.oo January 1,zoz3; rate shall be increased 2024 Onwards by S% every year effective January 1, 2oz4 The rates of tax imposed herein shall apply to any liquid substance, regardless of nicotine content, including nicotine-free liquid or any similar product. lllustration B: On January 4,2021, BK Corp. removes from its finished goods facility Brand Rl Vapor Products with the following details: i. Nicotine Salt or Salt Nicotine - containing less than 1 ml. Product Type: Nicotine Salt or Salt Nicotine with container size of o.8ml 3oo packs of vapor products with z pods per pack Container Size Per Container No. of Packs o.8 ml Multiplied by nurnber of pods per pack Total number of pods 300 Multiplied by Tax Rate Total Excise Tax Due 2 6oo 42.oo Fz5,zo o. o o Conventional trFreebase" or t'Classic" Nicotine - Release of Product on January 11,2o.21containing less than toml Product Type: Conventional "Freebase" or "Classic" Nicotine with container size of 7ml. Applicable tax rate of P5o, a fraction of toml. joo packs of vapor products t small bottle/pack No. of Packs 300 Multiplied bv Tax Rate Total Excise 5o.oo Fr 5,ooo.oo iii. Conventional rrFreebase" or "Classic" Nicotine w/ container size of t5ml Product Type: Conventional "Freebase" or "Classic" Nicotine with . container size of t5ml was released on January 8, 2021. Applicable tax rate of Ptoo.oo, [to ml.(P5o.oo) plus a fraction of roml.(P5o.oo)] 3oo packs of vapor products t small bottle/pack Or rNT[- EVENUE /rY l-r i-rr(IIlR BrtiIlRE\A-iUl *ft'*,, W' Page 7 or 1t ilEc o n'o 5 t, qlq t v t s' o'l

No. of Packs 300 Multiplied bv Tax Rate 100 Total Excise Tax Due P3o,ooo.oo 3. Cigars and Cigarettes a. Cigars [Excise tax = ad valorem tax plus (+) specific tax] Date of Effectivity Ad Valorem Tax Add: Specific Tax Rate is based on the net January 1,zo2o ?o.st January 1,2021 retail price per cigar January 1,2022 (excluding the excise P6.83 January 1,2c_23 and value-added taxes) ?7.to 2oz4 Onwa,rds zo% ?t.t8 zo% zo% rate shall be increased zo% by S% every year zo% effective January 1, 2024 b. Cigarettes packed by hand F+r!-rl rT] Date of Effectivity Quantity Excise Tax Rate F45.oo n=f, >+ January 1,2o2o Per pack of zos or any P5o.oo packa ging combinations P55.oo m c+ P6o.oo 4 d.f of not more than zo co) January 1,2021 packed by hands rate shall be increased a(D, by S% every year )l d January 1,2022 3 January 1,2023 effective January 1, 2024 JG) ,t { 1 -:;-i,l il I >l 2024 Onwards a5 al rri az zITT m c. Cigarettes packed by machine Date of Effectivity Quantity Excise Tax Rate January 1, )o2o F45.oo Per pack of zos or any P5o.oo Januarv 1,2021 packaging combinations P55.oo Januarv 1,2022 F6o.oo January 1,2o2 of not more than zo packed by machine rate shall be increased 2oz4 Onwards by SZ every year effective January 1, 2024 SECTION 4. PROVISIONS ON TOBACCO PRODUCTS, HEATED TOBACCO PRODUCTS AND VAPOR PRODUCTS. A. LABELS AND PACKAGES t The tabels and/or packages of products shall comply with the following: 1. Duly registered cigarettes packed by hand, cigarettes packed by machine and heated tobacco products shall only be packed in twenties and other packaging (fcom binations of not more than twenty (zo) units. \y: 'Pas" B of 17

2. No person or legal entity shall sell or commercially distribute or display any vapor products or heated tobacco products without ensuring that the labels and packages, as well as any other container used in displaying the said products, meet the requirements under RA Nos. 11j46 and 'n467, the Graphic Health Warnings Law, and relevant rules and regulations. j. 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. 4. Manufacturers, distributors, and importers of vapor products and heated tobacco products shall submit to the BIR exact replicas of the packaging and other container or wrapping of the vapor products or heated tobacco products, duly compliant with the Graphic Health Warning Template and the relevant rules and regulations, as a requirement in applying for registration in accordance with Section t56 of the National lnternal Revenue Code (NIRC), as amended, and RR Nos. o3-zoo6 and t7-2o12, as amended, and other relevant revenue issuances. 5. No stamp taxes shall be affixed on non-compliant packages and the taxpayer shall certify under oath that the products withdrawn are compliant with the Graphic n @ Health Warnings Law and the templates approved and issued by the DOH, as well m T as under existing revenue issuances. m o(cnf) - c For standard affixing of stamps and appropriate payment of excise tax, vapor irl products shall be packed as follows: (n tsh- 2{ 6:{) cti\ a. Nicotine salt - t ml or less, z ml or less, 3 ml or less, 4 ml or less, 5 ml or less, 7 I(\=J iI-n cf Z ml or less and maximum of to ml per pod. ,.\*t ao fr b. Freebase - 1o mt or less, zo ml or less, 3o ml or less, 4o mt or less, 5o ml or less, m :H -!( : mz 7o ml or less and maximum of too ml per pack. Higher product packaging or packaging with no correspondin$ equivalent will use a combination of two stamps. B. EXPORT AND TRANSFER BOND No tobacco products, heated tobacco products, or vapor 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 thereof if sold domestically. However, tobacco products, heated tobacco products, or 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. c. TRANSSHIPMENT Tobacco products, heated tobacco products, or 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. { W Pase e of 1T

D. INSPECTION FEE For inspection/s made in accordance with this Chapter, there shall be collected a fee detailed as follows: (9a6) INSPECTION UNIT OF MEASURE PRODUCT FEE Pieces/Sticks/ Milliliter Kilo Units Cigars Fo.5o '!:ff:i'r:i :t1l:, l: 1,OOO Or Cigarettes Fo.t o ,,lo,i'::- :l::it. :,: ,,;,::i fraction Heated Fo.to thereof tobacco Po.ot 1,OOO Or :,:1,1:;.i ffi1 Vapor Products fraction ,, t .,iil ,.t''r:,' , Whole Leaf thereof Tobacco . 1".. ;,,,.:',.: IFE@fr$aa Scrap and Other . 'r:.:i,,rir.,r:,.'' , .,i Mfd. Tobacco 1,OOO r!,it;ii,i:ffi !;;I i:,,,:,:,:;i i: i,t; :, 1.OO Po.oz 1.OO Or Fo.o3 !i"i";;i'i4 fraction thereof :l: ;/l't?';:;.f:1i" W; 1.OO Or :,,. '":.)'i't fraction thereof : Yrtitl E. INFORMATION TO BE GIVEN BY MANUFACTURERS, IMPORTERS, INDENTORS AND WHOLESALERS OF ANY APPARATUS OR MECHANICAL CONTRIVANCE SPECIALLY FOR THE MANUFACTURE OF ARTICLES SUBJECT TO EXCISE TAX AND IMPORTERS' TNDENTORS, MANUFACTURERS OR SELLERS OF CIGAREfiE PAPER lN BOBBINS, CIGAREfiE TIPPING PAPER OR CIGARETTE FILTER TIPS. Manufacturers, indentors, wholesalers and importers of any apparatus of mechanical contrivance specially for the manufacture of articles subiect to tax shall, before any such apparatus or mechanical contrivance is removed from the place of manufacture or from the customs house, give written information to the Commissioner as to the nature and capacity of the same, the time when it is to be removed, and the place for which it is destined, as well as the name of the person by whom it is to be used; and such apparatus or mechanical contrivance shall not be set up nor dismantled or transferred without a permit in writing from the Commissioner and/or Authorized Representative. A written permit from the Commissioner/Authorized Representative for importin$, manufacturing or sellin g of apparatus or mechanical contrivance specially for the manufacture of artictes subject to excise tax, cigarette paper in bobbins or rolls, cigarette tipping paper or cigarette filter tips is required before any person shall .ngrge in the importation, manufacture or sale of the said articles. No permit to sell said articles shall be granted untess the name and address of the prospective buyer is first submitted to the Commissioner and approved by him/her. Records, showing the stock of the said artictes and the disposal thereof by sale of persons with their respective addresies as approved by the Commissioner/Authorized Representative, {vshall-be kept by the seller, and records, showing stock of said articles and '\f' Page 10 of 17

consumption thereof, shall be kept by the buyer, subject to inspection by internal revenue officers. F. FLOOR PRICE OR MINIMUM PRICE The minimum ftoor price of cigarette, heated and vapor tobacco products shall be the total production cost/expenses of the cheapest brand per tobacco product including the sum of excise tax and VAT. The ELTRD shall established a monthly data profile based on the required periodic manufacturer's or importer's sworn declaration for all brands per tobacco product cate gory.Provided below are illustrations for reference. 1. Cigarettes Pzo.oo Production Cost per Sworn Declaration 5o.oo Excise Tax (zozr) 8.4o VAT P78.4o TOTAL/FLOOR PRICE 2. Heated Tobacco Products Pzo.oo Production Cost per Sworn Declaration 42.oo Excise Tax (zozt) 7.44 VAT P69.44 TOTAL/FLOOR PRICE j. Vapor Products: 3.a Nicotine Salts i. Production cost of Php 1o.oo per o.1 milliliter of e-liquid content P n 7 rn ii. Production Cost of Pro.oo per o.1 ml per pod is 2.5 ml m (-) Cn) (n) iii. Production cost is Php 1o.oo per o.1 milliliter. C(nf i 3 .{ 6{) o n .a 2_ 7) 3.b Freebase Nicotine rn i. 2=c rn P'r)oFducVtioolnumceospteorftaPnhkp 5.oo per 1 milliliter of e-liquid content to 2. ii. Pr'o.ducVtioolnumceos-tz-5 Php 5.oo per ml FLOOR PRICE SAMPLE Nicotine Unit Pack/ Volume PRODUCTION COST EXCTSE FLOOR Formulation Fill Content TAX PRICE pod PER UNIT AMOUNT VAT 2021 N co ne Salts pod o.7 ml (ml) 4) 125.44 N co ne Salts pod z.s ml o.7 Pro/ o.r ml 7o tz6 13.44 Nicotine Salts pack 4 pod Pro/ o.r ml 250 84o 45.12 42',t.12 tank 4 pack 2.5 Pro/ o.r ml 1120 235.2o Freebase ro ml 2,195'2o Nicotine tank 2.8X4 Freebase z5 ml P5/ t ml 5o 5o 12.OO 112.OO Nicotine t P5l r ml 125 150 JJ.OO 3o8.oo 10 25 The above floor price shall only be used as reference for taxation purposes in the absence of other documents/proof as to the actual price of the product that is l' { W Pasell or17

higher than the identified floor price. ffi Jj|j :-t fl'i} \7 15i'! n ' '14 ) I g 20?l sgo7a!ff**lr REC.] RDS MGT. L)iVI SION j. SECTION COMMON PROVISIONS FOR ALCOHOL PRODUCTS, TOBACCO, HEATED TOBACCO, AND VAPOR PRODUCTS t. TAX CLASSIFICATION OF ALCOHOL PRODUCTS, TOBACCO PRODUCTS, HEATED TOBACCO PRoDUCTS AND VAPOR PRODUCTS. - Any alcohol products, tobacco products, heated tobacco products and vapor products that are introduced in the domestic market on or after the effectivity of any law imposing new tax rates shall be initially classified for tax purposes accorciing to their suggested net retail prices as declared in the prescribed updated manufacturer's or importer's sworn statement, subject to the initial validation and revalidation requirements prescribed under Revenue Regulations (RR) No. 3-zoo6, as amended. ln case of aLohol products, heated tobacco products and vapor products that were duly registered with the BIR before the effectivity of any law imposing new tax rates but were no tonger classified under the new law shall be deemed as newly introduced products in the domestic market. The tax ctassification thereof shall be based on the suggested net retail price declared in the aforesaid sworn statement, subiect to the initial validation and revalidation requirements. II. WILLFUL UNDERSTATEMENT OF SUGGESTED NET RETAIL PRICE. ThC understatement of the suggested net retait price by as much as fifteen percent (15%) of the actual net retail price as determined using the survey price net of excise and value added taxes declared per manufacturer/importer's sworn statement, shall render the manufacturer or importer of covered products per RA No. t 1346 and t 1467 liable for additionai excise and'value added ta'xes 'equivalent to the difference rbeettawiteepnricteheanredctohmepduetecdlar(eedxceisxeciasnedavnadluvealaudedaeddd) etadxteasxebsaspeedrosnutbhmeitatendnusawl onrent statement. - III. SUBMISSION OF SWORN STATEMENT OF THE VOLUME OF SALES AND BEMOVALS' Within 3o days from the effectivity of RA No. tt467, and within the first five (5) days of every month thereafter, manufacturers, brewers, distillers, distributors, and importers of alcohol products, and tobacco products, heated tobacco products and vapor products shall submit to the Commissioner a sworn statement of the volume of sales and removals for each particular brand sold for the three-month period immediately preceding. Any manufacturer, brewer, distiller, distributor, or importer who misdeclares or misrepresents in his or its sworn statement herein required any pertinent data or information shatl, upon final findings by the Commissioner that the violation was committed, be penatized by a summary- cancellation or withdrawal of permit to engage in business as manufacturer, brewer, distiller, distributor, or importer of alclnol products, and/or tobacco, heatgd tobacco products and vapor products. IV. EXTENT OF SUPERVISION OVER ESTABLISHMENTS PRODUCING TAXABLE OUTPUT. The BIR shall supervise estabtishments where articles subiect to excise tax are made or kept. The Secretary of Finance shalt prescribe rules and regulations in which the gprocess of production shall be conducted insofar as may be necessary to secure a sanitary output and to safeguard revenue, such rutes and regulations to safeguard Pase 12 of 17 \y'

revenue may allow the appointment of third parties to rnonitor production and removal processes and volumes, and the exclusion of excisable goods from duty-free barter transactions. v. coMMoN PENALTY PROVISIONS. - Any corporation, association or paftnership liable for any of the acts or omissions in violation of Sections 141, 142, 143, 144 or 145 of the NIRC, as amended, shall be fined treble the aggregate amount of deficiency taxes, surcharges and interest which may be assessed. Any person liabte for any of the acts or omissions prohibited under Sections 141, 142, 14i,,144 or 145 of the NIRC, as amended, shall be criminally liable and penalized under Section 254 of the NIRC, as amended. 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. lf the offender is not a citizen of the Philippines, he/she shall be deported immediately after serving the sentence, without further proceedings for deportation. VI. STATUTORY OFFENSES AND PENALTIES - A. UNLAWFUL POSSESSTON OF CIGARETTE PAPER lN BOBBINS OR ROLLS, ETC. lt shalt be unlawfut for any person to have in his possession cigarette paper in bobbins or rotls, cigarette tipping paper or cigarette filter tips, without the corresponding authority therefor issued by the Commissioner. Any person, importer, manufacturer of cigar and cigarettes, who has been found guilty, shall, upon conviction for each act or omission, be punished by a fine of not less than One Million Five Hundred Thousand pesos (Pt,5oo,ooo.oo) but not more than Fifteen Million pesos (Pr5,ooo,ooo.oo) and imprisonment for a term of not less than six (6) years and one (r) day but not more than twelve (tz) years. B. VTOLATTONS COMMTTTED BY MANUFACTURERS, IMPORTERS, INDENTORS, AND WHOLESALERS OF ANY APPARATUS OR MECHANICAL CONTRIVANCE SPECIALLY D lI@Cn FOR THE MANUFACTURE OF ARTTCLES SUBJECT TO EXCISE TAX AND IMPORTERS, ))TI rn TNDENTORS, MANUFACTURERS OR SELLERS OF CIGARETTE PAPER lN BOBBINS, C CTGARETTE TIPPING PAPER OR CIGARETTE FILTER TIPS. - Any violation of Section o 164 of the NIRC, as anrended, including me!'e possession of any apparatus or D) - I -"1 n w==6r.-r m<tT>inzZ{-nlllIlllll mechanical contrivance for the manufacture of cigarettes, cigarette paper, or L 3s cigarette tipping paper, for which no permit was obtained from the Commissioner ;{) C- N-.,- shatl be punishable with a fine of not less than Fifteen Million pesos ) .(Pr5,ooo,ooo.oo) but not more than Fifty Million pesos (P5o,ooo,ooo.oo) and ; imprisonment of not tess than twelve (rz) years but not more than twenty (zo) 5 Cm2Ill years. Z , SELLING OF TOBACCO PRODUqTS AT A PRICE LOWER THAN THE COMBINED EXCISE AND VALUE-ADDED TAXES. - Any person who sells tobacco products including heated tobacco products and vapor products at a price lower than the combined excise and value-added taxes shall be punished with a fine of not less than ten (ro) times the amount of excise tax plus value-added tax due but not less than Two htrndred thousand pesos (Pzoo,ooo.oo) nor more than Five hundred thousand pesos (P5oo,ooo.oo), and imprisonment of not less than four (4) years L Page 13 of 17 {

but not more than six (6) Years. D. sHtpMENT OR REMOVAL OF LtqUOR OR TOBACCO PRODUCTS UNDER FALSE OR AS AN IMITATION OF ANY EXISTING OR OTHERWISE NAME OR BRAND KNowN pRoDUcr NAME oR BRAND RELATTvE To RA No. 11346 - Any person who ships, transports or removes spirituous, compounded or fermented liquors, of tobacco under any other than the proper wines or any manufactured products as designating the kind and quality name of the or brand known to the trade contents of the package containing the same or as an imitation of any existing or otherwise known product name ortrand or causes such act to be done, shall upon conviction for each act or omission, be punished by a fine of not less than one Million Five Hundred Thousand pesos (pr,5oo,ooo.oo) but not more than Fifteen Million pesos (pr5,ooo,ooo.co) and imprisonment of not less than six (6) years and one (t) duy but not more than twelve (rz) years' E. UNLAWFUL POSSESSION OR REMOVAL OF ARTICLES SUBJECT TO EXCISE TAX WITHOUT PAYMENT OF THE TAX - Any person who owns and/or is found in possession of imported articles subiect to excise tax, the tax on which has not who owns and/or is found in been paid in accordance with law, or any person than those they are possession of imported tax-exempt articles other to whom legally issued shall be punished by: 1. A fine of not tess than One Hundred Thousand pesos (Ptoo,ooo.oo) but not more than Two Hundred Thousand pesos (pzoo,oooo.oo) and imprisonment of not tess than sixty (6o) days but not more than one hundred (roo) days if the appraised value, to be determined in the manner prescribed in Republic Act No' rog63, otherwise known as the'Customs Modernization and Tariff Act (CMTA)', inctuding duties and taxes, of the articles does not exceed Two Hundred Fifty Thousand Pesos (Pz5o,oo9.oo); 2. A fine of not less than one Million pesos (pr,ooo,ooo.oo) but not more than (pz,ooo,ooo.oo) and imprisonment of not less than two (z) Two Million pesos years but not more than four (4) years if the appraised value, to be determined Republic Act No. to863, otherwise known as the in the manner prescribed in Tariff Act (CMTA)', including duties and taxes, of ,Customs Modernization and the articles exceeds Two Hundred Fifty Thousand pesos (Pz50,ooo.oo) but does not exceed Five Hundred Thousand pesos (P5oo,ooo'oo); 7 i2 3. AFofuinreMoilflionnotpleessossth(apn4,oTohore,oeoMo.iolloio)napnedsiomsp(rpis3o,onomoe,onot oo.of on)otbuletssnothtamnofroeutrh(a4n) m irt years but not more than six (6) years, if the appraised value, to be determined in the manner prescribed in Republic Act No. to863, otherwise known as the onC) -k ,Customs Modernization and Tariff Act (CMTA)', inctuding duties and taxes of ca, 'a3-l ts 2 the artictes is more than Five Hupdred Thousand pesos (P5oo,ooo.oo) but does .-t G:{) @ EITT not exceed One Million pesos (Pt,ooo,ooo'oo); el\tr' Z (f FrI, A fine of not less than Ten Million pesos (Pto,ooo,ooo.oo) but not more than .J, 7 npoest omso(rpezoth,oaono,towoeolv.oeo)(razn) dyeimarpsr,isifonthmeeanpt porfainsoetdlevsasluteh,atnotebne 9=o rn Twenty Million rn (ro) years b.ut :E -'.1-r- ^ determined in the manner prescribed in Republic Act No. to863, otherwise {

known as the'Customs Modernization and Tariff Act (CMTA), including duties and taxes, of the articles exceeds One Million pesos (Pt,ooo,ooo.oo); Any person who is found in possession of locally manufactured articles subiect to excise tax, the tax on which has not been paid in accordance with law, or any person who is found in possession of such articles which are exempt from excise tax other than those to whom the same is lawfully issued shall be punished with a fine of not less than ten (ro) times the amount of excise tax due on the articles found but not less than One Million pesos (Pt,ooo,ooo.oo) and imprisonment of not less than five (5) years but not more than eight (8) years. v PI Any manufacturer, importer, owner or person in charge of any articles subiect m m-lz.l llI to excise tax who removes or allows or causes the unlawful removal of any such artictes from the place of production or bonded warehouse, upon which Co) ;l the excise tax has not been paid at the time and in the manner required, and ;* - ll any person who knowingly aids or abets in the removal of such articles as g' aforesaid, or conceats the same after illegal removal shall, for the first offense, ut1 be punished with a fine of not less than ten (ro) times the amount of excise tax I Eg o=:{ tIl-{(t\tte.4-,> 3*ll ll=aoz 21 ,-n due on the articles but not less than Fifty Million pesos (P5o,ooo,ooo.oo) and imprisonment of not less than five (5) years but not more than eight (8) years. Irl-HZ The mere unexplained possession of articles subject to excise tax, the tax on rn which has not been paid in accordance with law, shall be punishable under this Section. - sEcTtoN 6. OFFENSES RELATTNG TO STAMPS, LABELS, TAGS, AND OTHERS. Any person who commits any of the acts enumerated hereunder shall, upon conviction thereof, be punished by a fine of not less than Ten Million pesos (Rro,ooo,ooo.oo) but not more than Five Hundred Million pesos (P5oo,ooo,ooo.oo) and imprisonment of not less than five (5) years but not more than eight (8) years: l. Making, importing, selling, using or possessing without express authority from the Commissioner, any dye for printing or making stamps, labels, tags or playing cards; ll. Reusing previously affixed stamps, erasing the cancellation marks of any stamp previously used, or altering the written figures or letters or cancellation marks on internal revenue stamps; lll. Possessing false, counterfeit, restored or altered stamps, labels or tags or causing the commission,of any such offense by another; lV. Selling or offering for sale any box or package containing articles subiect to excise tax with false, spurious or counterfeit stamps or labels or selling from any such fraudulent box, package or container as aforementioned; or V. Giving away or accepting from another, or selling, buying or using containers on which the stamps are not completely destroyed. The cumulative possession of false/counterfeit/recycled tax stamps in excess of the amount of Fifty Mitlion pesos (P5o,ooo,ooo.oo) shall be punishable by a fine of Five V. Pase 15 of 17

Hundred Million pesos (p5oo,ooo,ooo.oo) or up to ten (ro) times the value of the illegal stamps seized, whichever is higher, and imprisonment of not less than ten (ro) years but not more than fifteen (t5) Years. SECTION 7. TRANSITORY pRovlstoNs. upon the effectivity of RA No. tt467' the following transitory provisions shall be strictly observed by all concerned: l. Distilled spirits introduced in the domestic market after the effectivity of RA No. y467 shall be initially taxed according to their suggested net retail prices. il. At the end of three (3) months from the product launch, the BlR, through the EL.l RD, shall validate the suggested net retail price of the new brand against the net retail price as defined herein. After the end of nine (9) months from such validation, the EL'TRD 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. ilt. Manufacturers qnd importer.s of distilled spirits and wines, and every brewer, manufacturer or importer of fermented liquor shall, within thirty (lo) days from the effectivity of RA No. 1467, and within the first five (5) days of every third month thereafter, submit to the Commissioner, through the Large Taxpayers performance Monitoring & Programs Division, a sworn statement of the volume particular brand of distilled spirits, wines and of sales and removals for each t establishment for the three-month period fermented tiquor sold at his immediately preceding. tv. A. Manufacturers and importers of cigars and cigarettes shall within thirty (fo) days from the effectivity of RA No. rr346 which is JanuarY 1,j02o and within five (5) days of every month thereafter, submit to the Commissioner through Excise LT Field operations Division (ELTFOD) copy furnished LT Per{ormance Monitoring and programs Division (lfennPD) a sworn statement of the volume of sales and removals for cigars and/or cigarettes for the three-'inonth period immediately Preceding. 4CD B. Manufacturers, distributors and importers of heated tobacco and vapor J,/ n products shall register with the BIR through Excise LT Regulatory Division rlm (ELTRD), within tliirty (lo) days from effectivity of RA No. tB+6h1467 and/or ltl--aDr< rz= from the issuance of the FDA Marketing Authorization and within five (5) days [s ol of every month thereafter, submit to the Commissioner through ELTFOD and $par-' ,/1"'tl LTPMpD a sworn statement of the votume of sales for each particular brand of t(-sGt\n,rr :it3l heated/vapor products sold for the three-month period immediately ,-1 gl preceding. iil During the eighteen (r8) months period from effectivity of the IRR of RA No. ilHl 1346 and ,n467, taxpayers shall first secure a certification from the FDA C. ,El rellecting details/descriptions of the product before registration of taxpayer and product variant by the BIR through ELTRD. The BIR shall register the taxpayer based on the receipt of FDA Certification and necessary registration requirements. V. M anufacturers, distributors, importers and sellsrs of heated tobacco products and \)f Pase 16 or 17 {

vapor products are given a period of eighteen (t8) months from the effectivity of the lmplementing Rules and Regulations (lRR) of RA Nos. t946 and t't467 to comply with the requirements of . the Graphic Health Warnings Law, its lmplementing Rules and Regulations, and all other relevant rules and regulations in relation to the implementation of the Graphic Health Warnings Law. Vl. Eighteen (r8) months after the effectivity of the IRR of RA Nos. tt346 and tt467, no person or legal entity shall sell or commercially distribute or display any heated tobacco products and vapor products which are not compliant with the labelling, packaginE, ds well as any other container used in displaying the said products, under appropriate revenue issuances by the Bureau. SECTION 8. DISPOSITION OF REVENUES FROM EXCISE TAX ON SUGAR-SWEETENED BEVERAGES, ALCOHOL, TOBACCO PRODUCTS, HEATED TOBACCO PRODUCTS AND VAPOR PRODUCTS. Revenues from sugar sweetened beverages, alcohol, tobacco, heated tobacco and vapor products shall be allocated in accordance with RA No. tt346 for revenues collected from January 1 to 22,2ozo and RA No. tt467 from January 23,2o2o onwards. SECTION g. CONGRESSIONAL OVERSIGHT COMMITTEE. - 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 RA No. 824o. SECTION ro. REPEALING CLAUSE. - This Revenue Regulations specifically repeals Section 4 and 6 of RR No. 17-zo1z and Revenue Memorandum Circular (RMC) No.9o-2o12. Any other laws, decrees, executive orders, rules and regulations or parts thereof which are contrary to or inconsistent with-tlrese Regulations are hereby repealed, amended, or modified accordingly. SECTION tt. SEPARABILITY CLAUSE. - lf any provisions of these Regulations shall be held unconstitutional or invalid, the other provisions not otherwise affected shall remain in full force and effect. SECTION 12. EFFECTIVITY. - These Regulations shall take effect immediately fifteen (t5) days after publication thereof in a leading newspaper of general circulation. Recommend ing Approval: OS G. DOMINGUEZ Secretory of Finance j/t5q/.'t{%-r1l CAESAR R. DULAY V ilAY 1 0 2021 Commissioner of lnternal Revenue BtiRENU CIF IIdTERNAL REVENUE 042537 t'lAY 1S 2UZl D- RECORDS MGT. DIVISION I HREA, LT S-Exci se I b sm I gtr