RR No. 17-2012: Prescribes the implementing guidelines on the revised tax rates on alcohol and tobacco products pursuant to the provisions of Republic Act No. 10351 and clarifies certain provisions of existing Revenue Regulations

Key points

1. Tax classification. New products are classified by the suggested net retail price in the manufacturer’s or importer’s sworn statement, subject to validation and revalidation under RR No. 3-2006, as amended. Products taxed by brand name, label, packaging or container size are taxed differently, and tax classification of fermented liquors and tobacco products is determined every two (2) years from the Act’s effectivity.
2. Rates and reclassification. Downward reclassification of registered fermented liquor products that would reduce the tax is prohibited. Starting January 1, 2014, the applicable rate rises by 4% annually, but not lower than the rates in Section 3.
3. Sworn statements. Initial registration needs a notarized sworn statement, updated on or before the end of June and December. An update is also due at least five (5) days before removal when costs or actual selling price change. Understating the suggested net retail price by as much as 15% of the actual net retail price makes the manufacturer or importer liable for additional Excise Tax.
4. Imports, exports and packing. Imports are subject to Excise Tax even if destined for duty-free shops or freeport zones. Tobacco products for export need an export bond, and cigarettes are packed in 20s or in packs of not more than 20 sticks.
5. Transitory provisions. Existing products are initially classified by the BIR 2010 price survey, or by the latest sworn statement for products introduced after that survey but before the Act took effect. The BIR conducts actual stocktaking of locally manufactured stocks as of the Act’s effectivity.
6. Penalties. Misdeclaring in the sworn statement is penalized by summary cancellation of the permit. A corporation, association or partnership is fined treble the aggregate deficiency taxes, surcharges and interest, and individuals are criminally liable under Section 254 of the NIRC, with deportation for non-citizens after serving sentence.

Who is affected

• Local manufacturers and importers of alcohol and tobacco products

Deadlines and effectivity

• Updated sworn statements: on or before the end of June and December
• Rate increase of 4% annually: starting January 1, 2014
• Revalidation of suggested net retail price: after the end of nine (9) months from initial validation
• Tax classification review: every two (2) years from the Act’s effectivity