RR No. 7-2021: Prescribes the rules and regulations to implement the provisions of RA Nos. 11346 and 11467 relative to Excise Tax on alcohol products, tobacco products, heated tobacco products, vapor products and disposition of Excise Tax collection

Key points

1. Alcohol product rates. Distilled spirits pay ad valorem plus specific tax: 20% plus ₱ 24.34 per proof liter from January 1, 2020, then 22% plus ₱42.00 from January 23, 2020, rising to ₱66.00 by January 1, 2024. Wines are ₱ 50.00 and fermented liquors ₱ 35.00 from January 23, 2020, and from 2025 the specific tax rises 6% every year.
2. Tobacco and heated tobacco rates. Cigarettes packed by hand or machine pay ₱ 45.00 per pack of 20 from January 1, 2020, rising to ₱ 60.00 in 2023. Heated tobacco pays ₱ 25.00 per pack of 20 from January 23, 2020, and cigars pay 20% plus a specific tax starting at ₱ 6.57. From 2024 the rates rise 5% every year.
3. Vapor product rates. Nicotine salt pays ₱ 37.00 per milliliter or fraction from January 23, 2020, and freebase nicotine pays ₱ 45.00 per ten milliliters or fraction. Both rise each January 1 and increase 5% every year from 2024, and the rates apply to any liquid, even nicotine-free.
4. Packaging and labels. Cigarettes and heated tobacco are packed only in twenties or combinations of not more than twenty units. Vapor and heated tobacco products must follow the Graphic Health Warnings Law, vapor packages must show the actual volume in milliliters, and no stamps are affixed on non-compliant packages.
5. Export, price and classification rules. Products for export need an export bond equal to the excise tax due if sold domestically, and a transfer bond allows movement to a bonded facility. The minimum floor price is the production cost of the cheapest brand plus excise tax and VAT, and new products are classified by their declared suggested net retail price. Understating that price by as much as 15% of the actual net retail price makes the manufacturer or importer liable for additional Excise and Value-Added Taxes.
6. Reports, penalties and transition. Manufacturers and importers file a sworn statement of sales and removals within the first five (5) days of every month, and misdeclaring brings cancellation of the permit. The Regulations list fines and imprisonment for violations and give heated tobacco and vapor sellers eighteen (18) months from the IRR effectivity to comply with the Graphic Health Warnings Law. They repeal Sections 4 and 6 of RR No. 17-2012 and RMC No. 90-2012.

Who is affected

• Manufacturers, brewers, distillers, distributors and importers of alcohol, tobacco, heated tobacco and vapor products
• Sellers of heated tobacco and vapor products

Deadlines and effectivity

• Rate schedule starts January 1, 2020 and January 23, 2020
• Sworn statement due within the first five (5) days of every month
• 18 months from IRR effectivity to comply with the Graphic Health Warnings Law
• Yearly increases from 2025 (alcohol) and 2024 (tobacco and vapor)