RMC No. 8-2021: Circularizes Republic Act No. 11467, titled “An Act Amending Sections 109, 141, 142, 143, 144, 147, 152, 263, 263-A, 265, and 288-A, and Adding a New Section 290-A to Republic Act No. 8424, as Amended, Otherwise Known as the National Internal Revenue Code of 1997, and for Other Purposes”

Key points

1. VAT exemption for drugs. Section 109 exempts sale or importation of prescription drugs for diabetes, high cholesterol and hypertension beginning January 1, 2020, and for cancer, mental illness, tuberculosis and kidney diseases beginning January 1, 2023. The DOH issues a list of approved drugs within sixty (60) days from effectivity.
2. Distilled spirits and wines. Distilled spirits carry an ad valorem tax of twenty-two percent (22%) of the net retail price plus a specific tax per proof liter: ₱ 42.00 in 2020, ₱47.00 in 2021, ₱52.00 in 2022, ₱59.00 in 2023 and ₱66.00 in 2024, then up 6% yearly from January 1, 2025. Wines are taxed ₱ 50.00 per liter from January 1, 2020, up 6% yearly from January 1, 2021.
3. Fermented liquors. The excise tax is ₱ 35.00 per liter from January 1, 2020, ₱ 37.00 in 2021, ₱ 39.00 in 2022, ₱ 41.00 in 2023 and ₱ 43.00 in 2024, then up 6% yearly from January 1, 2025. Tuba, basi, tapuy and similar fermented liquors are excepted.
4. Heated tobacco and vapor products. Heated tobacco is taxed ₱ 25.00 per pack of twenty (20) in 2020, rising to ₱ 27.50, ₱ 30.00 and ₱ 32.50 in 2021 to 2023, then up 5% yearly from January 1, 2024. Nicotine salt liquids are ₱ 37.00 per milliliter in 2020 up to ₱ 52.00 in 2023, and freebase nicotine is ₱ 45.00 per ten (10) milliliters in 2020 up to ₱ 60.00 in 2023, both up 5% yearly from January 1, 2024.
5. Age limit, flavors and compliance period. Selling heated tobacco or vapor products to persons below twenty-one (21) years old is prohibited, with a fine of Ten thousand pesos (₱ 10,000.00) and imprisonment of thirty (30) days. Flavorings other than plain tobacco or plain menthol are prohibited for vapor products. Manufacturers, distributors, importers and sellers have eighteen (18) months from effectivity of the IRR to comply, and the BIR must issue a revenue regulation setting a floor price.
6. Penalties, revenue use and oversight. Selling heated tobacco or vapor products below the combined excise and VAT carries a fine of not less than ten (10) times the tax due, within ₱ 200,000.00 to ₱ 500,000.00, and imprisonment of four (4) to six (6) years. Excise revenues from alcohol, heated tobacco and vapor products go 60% to Universal Health Care, 20% to medical assistance and the Health Facilities Enhancement Program, and 20% to the Sustainable Development Goals. New Section 290-A creates a Joint Congressional Oversight Committee on Illicit Trade on Excisable Products. Section 5 of RA No. 11467, amending Section 152, was vetoed by the President.

Who is affected

• Manufacturers and importers of distilled spirits, wines, fermented liquors, heated tobacco and vapor products
• Sellers of heated tobacco and vapor products
• Sellers and importers of prescription drugs for the listed diseases

Deadlines and effectivity

• Drug VAT exemption: January 1, 2020 for diabetes, high cholesterol and hypertension; January 1, 2023 for cancer, mental illness, tuberculosis and kidney diseases
• Distilled spirits specific tax steps from January 1, 2020; 6% yearly increase from January 1, 2025
• Heated tobacco and vapor products: 5% yearly increase from January 1, 2024
• 18 months from effectivity of the IRR to comply