The National Internal Revenue Code of 1997 as amended

Sec 144

[93]There shall be collected an excise tax of One peso and seventy-five centavos (P1.75) effective on January 1, 2013 on each kilogram of the following products of tobacco: (a) Tobacco twisted by hand or reduced into a condition to be consumed in any manner other than the ordinary mode of drying and curing; (b) Tobacco prepared or partially prepared with or without the use of any machine or instruments or without being pressed or sweetened except as otherwise provided hereunder; and (c) Fine-cut shorts and refuse, scraps, clippings, cuttings, stems and sweepings of tobacco except as otherwise provided hereunder. Stemmed leaf tobacco, tobacco prepared or partially prepared with or without the use of any machine or instrument or without being pressed or sweetened, fine-cut shorts and refuse, scraps, clippings, cuttings, stems, midribs, and sweepings of tobacco resulting from the handling or stripping of whole leaf tobacco shall be transferred, disposed of, or otherwise sold, without any prepayment of the excise tax herein provided for, if the same are to be exported or to be used in the manufacture of cigars, cigarettes, or other tobacco products on which the excise tax will eventually be paid on the finished product, under such conditions as may be prescribed in the rules and regulations promulgated by the Secretary of Finance, upon recommendation of the Commissioner. On tobacco specially prepared for chewing so as to be unsuitable for use in any other manner, on each kilogram, One peso and fifty centavos (P1.50) effective on January 1, 2013. The rates of tax imposed under this Section shall be increased by four percent. (4%) every year thereafter effective on January 1, 2014, through revenue regulations issued by the Secretary of Finance. No tobacco 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 thereon if sold domestically: Provided, however, That tobacco products for export may be transferred from the place of manufacture to a bonded facility, upon posting of a transfer bond, prior to export. Tobacco 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. Manufacturers and importers of tobacco products shall, within thirty (30) days from the effectivity of this Act, and within the first five (5) days of every month thereafter, submit to the Commissioner a sworn statement of the volume of sales for each particular brand of tobacco products sold for the three-month period immediately preceding. Any manufacturer or importer who, in violation of this Section, misdeclares or misrepresents hi his or its sworn statement herein required any pertinent data or information shall, upon final findings by the Commissioner that the violation was committed, be penalized by a summary cancellation or withdrawal of his or its permit to engage in business as manufacturer or importer of cigars or cigarettes. Any corporation, association or partnership liable for any of the acts or omissions in violation of this Section shall be fined treble the amount of deficiency taxes, surcharges and interest which may be assessed pursuant to this Section. Any person liable for any of the acts or omissions prohibited under this Section shall be criminally liable and penalized under Section 254 of this Code. 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. If the offender is not a citizen of the Philippines, he shall be deported immediately after serving the sentence, without further proceedings for deportation. (B) Heated Tobacco Products.— There shall be levied, assessed and collected on heated tobacco products an excise tax at the rate prescribed below: Effective on January 1, 2020, Twenty-five pesos (P25. G0) per pack of twenty (20) units or packaging combinations of not more than twenty (20) units; Effective on January 1, 2021, Twenty-seven pesos and fifty centavos (P27.50) per pack of twenty (20) units or packaging combinations of not more than twenty (20) units; Effective on January 1, 2022, Thirty pesos (P30.00) per pack of twenty (20) units or packaging combinations of not more than twenty (20) units; and Effective on January 1,2023, Thirty-two pesos and fifty centavos (P32.50) per pack of twenty (20) unite or packaging combinations of not more than twenty (20) units. The rates of tax imposed under this Subsection, shall be increased by five percent (5%) every year effective on January 1, 2024 through revenue regulations issued by the Secretary of Finance. Manufacturers, distributors, and importers of heated tobacco products shall, within thirty (30) days from the effectivity of this Act, and within the first five (5) days of every month thereafter, submit to the Commissioner a sworn statement of the volume of sales and removals for each particular brand of heated tobacco products sold for the three-month period immediately preceding. (as amended by RA No 11467) Any manufacturer, distributor, or importer who, in violation of this Section, misdeclares or misrepresents in his or its sworn statement herein required any pertinent data or information shall, upon final findings by the Commissioner that the violation was committed, be penalized by a summary cancellation or withdrawal of his/her or its permit to engage in business as manufacturer, distributor, or importer of heated tobacco products. Any corporation, association or partnership liable for any of the acts or omissions in violation of this Section shall be fined treble the amount of deficiency taxes, surcharges and interest which may be assessed pursuant to this Section. Any person liable for any of the acts or omissions prohibited under this Section shall be criminally liable and penalized under Section 254 of this Code. 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. If the offender is not a citizen of the Philippines, he/she shall be deported immediately after serving the sentence, without further proceedings for deportation. The Food and Drug Administration (FDA) shall periodically determine and regulate, consistent with evolving medical and scientific studies, the manufacture, importation, sale, packaging, advertising, and distribution of heated tobacco products, including banning the sale to nonsmokers or persons below twenty-one (21) years old. Selling heated tobacco products to persons below twenty-one (21) years old shall be prohibited, and shall be punished with a fine of Ten thousand pesos (P10,000.00) and imprisonment of thirty (30) days. Manufacturers, distributors, importers, and sellers of heated tobacco products are given a period of eighteen (18) months from the effectivity of the implementing rules and regulations (IRR) of this Act to comply with the requirements under such IRR. The Bureau of Internal Revenue is mandated to issue a revenue regulation prescribing the floor price or the minimum price of heated tobacco product taking into account the sum of the excise and value- added taxes as provided herein. (as amended by RA No 11467) (C) Vapor Products. — There shall be levied, assessed and collected on vapor products an excise tax at the rates prescribed below: Nicotine Salt or Salt Nicotine. - There shall be levied, assessed and collected on any liquid substance, regardless of nicotine content, including nicotine-free liquids or any similar product, further classified as nicotine salt or salt nicotine, an excise tax based on the following schedules: Effective on January 1, 2020, Thirty-seven pesos (P37.00) per milliliter or a fraction thereof; Effective on January 1,2021, Forty-two pesos (P42. G0) per milliliter or a fraction thereof; Effective on January 1,2022, Forty-seven pesos CP47.00) per- milliliter or a fraction thereof; and Effective on January 1,2023, Fifty-two pesos (P52.00) per milliliter or a fraction thereof. Provided, That the rates of tax imposed under this Subsection shall be increased by five percent (5%) every year effective on January 1, 2024, through revenue regulations issued by the Secretary of Finance. Conventional 'Freebase' or 'Classic' Nicotine. - There shall be levied, assessed and collected on any liquid substance, regardless of nicotine content, including nicotine-free liquid or any similar product, further classified as conventional 'freebase' or 'classic' nicotine an excise tax based on the following schedules: Effective on January 1, 2020, Forty-five pesos (P45.00) per ten (10) milliliters or a fraction thereof; Effective on January 1, 2021, Fifty pesos (P50.00) per ten (10) milliliters or a fraction thereof; Effective on. January 1, 2022, Fifty-five pesos (P55.00) per ten (10) milliliters or a fraction thereof; and Effective on January 1, 2023, Sixty pesos (P60.00) per ten (10) milliliters or a fraction thereof. Provided, That the rates of tax imposed under this Subsection shall be increased by five percent (5%) every year effective January 1, 2024, through revenue regulations to be issued by the Secretary of Finance. If the offender is not a citizen of the Philippines, he/she shall be deported immediately after serving the sentence, without further proceedings for deportation. The FDA shall periodically determine and regulate, consistent with evolving medical and scientific studies, the manufacture, importation, sale, packaging, advertising, and distribution of vapor products, including banning the sale to nonsmokers or persons below twenty-one (2i) years old, and banning of flavorings. Provided, That vapor products which exceed sixty-five milligrams of nicotine per milliliter (65mg/ml) of liquid or gel, or which does not exceed this limit but seeks to make health claims, shall be subject to additional requirements as the DOH and the FDA may impose: Provided, however, That this shall not diminish the regulatory powers of the FDA over vapor products, regardless of nicotine content. Selling vapor products to persons below twenty-one (21) years old shall be prohibited, and shall be punished with a fine of Ten thousand pesos (P10,000.00) and imprisonment of (30) days. The manufacture, importation, sale and distribution of vapor products with flavoring other than plain tobacco or plain menthol, shall be prohibited. Manufacturers, distributors, importers, and sellers of vapor products are given a period of eighteen (18) months from the effectivity of the IRR of this Act to comply with the requirements under such IRR. (as amended by RA No 11467) The sale and distribution, or transfer of vapor products by any person to minors; purchasing, or otherwise receiving vapor products from a minor; and the sale, purchase, and use of vapor products by minors, shall be prohibited. ‘Minor’ refers to any person below eighteen (18) years old. Any violation of this provision shall be punishable with the same penalties provided for in Republic Act No. 9211, otherwise known as the ‘Tobacco Regulation Act of 2003’. It shall not be a defense for the person selling or distributing that he/she did not know or was not aware of the real age of the minor. Neither shall it be a defense that he/she did not know nor had any reason to believe that the product was for the consumption of the minor to whom it was sold. Unit packets and any outside wrapping of vapor products and other similar products shall carry a health warning compliant with Republic Act No. 10643, otherwise known as ‘The Graphic Health Warnings Law’. Manufacturers and importers are given a period of one (1) year from the effectivity of this Act to comply therewith. Eighteen (18) months after the effectivity of this Act, no person or legal entity shall sell or commercially distribute or display any vapor product without ensuring that the labels and packages, as well as any other container used in displaying the said products meet the requirements under this Act. Any violation of the foregoing provisions on health warning shall be punishable with the same penalties provided for in Republic Act No. 10643, otherwise known as ‘The Graphic Health Warnings Law’. Notwithstanding the provisions of this Act on heated tobacco products and vapor products, this Act acknowledges the need for further scientific evidence on the health impact of these products. The Bureau of Internal Revenue is mandated to issue a revenue regulation prescribing the floor price or the minimum price of vapor products taking into account the sum of the excise tax and value-added tax as provided herein. (as amended by RA No 11467)

Sec 145

[94] (A) Cigars.— There shall be levied, assessed and collected on cigars an excise tax in accordance with the following schedule: Effective on January 1, 2013An ad valorem tax equivalent to twenty percent (20%) of the net retail price (excluding the excise tax and the value-added tax) per cigar; and In addition to the ad valorem tax herein imposed, a specific tax of Five pesos (₱5.00) per cigar. Effective on January 1, 2013 An ad valorem tax equivalent to twenty percent (20%) of the net retail price (excluding the excise tax and the value-added tax) per cigar; and In addition to the ad valorem tax herein imposed, a specific tax of Five pesos (₱5.00) per cigar. In addition to the ad valorem tax herein imposed, the specific tax rate of Five pesos (₱5.00) imposed under this Subsection shall be increased by five percent (5%) effective on January 1, 2024 through revenue regulations issued by the Secretary of Finance. ‘Net-retail price’ shall mean the price at which the cigar is sold on retail in at least five (5) major supermarkets in Metro Manila (for brands of cigar marketed nationally), excluding the amount intended to cover the applicable excise tax and the value-added tax. For cigars which are marketed only outside Metro Manila, the ‘net retail price’ shall mean the price at which the cigar is 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 be provided by the manufacturer or importer through a sworn statement and shall be validated by the Bureau of Internal Revenue (BIR) through a price survey. Major supermarkets, as contemplated under this Act, shall be those with the highest annual gross sales in Metro Manila or the region, as the case may be, as determined by the BIR, and snail exclude retail outlets or kiosks, convenience or sari-sari stores, and others of a similar nature: Provided, That no two (2) supermarkets in the list to be surveyed are affiliated and/or branches of each other: Provided, finally, That in case a particular cigar is not sold in major supermarkets, the price survey can be conducted in retail outlets where said cigar is sold in Metro Manila or the region, as the case may be, upon determination of the Commissioner of Internal Revenue. The net retail price shall be validated by the BIR through a biannual price survey under oath. 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 created under Republic Act No. 8240. (B) Cigarettes Packed by Hand. — There shall be levied, assessed and collected on cigarettes packed by hand an excise tax based on the following schedules: Effective on January 1, 2020, Forty-five pesos (₱45.00) per pack; Effective on January 1, 2021. Fifty pesos (₱50.00) per pack; Effective on January 1, 2022, Fifty-five pesos (₱55.00) per pack; Effective on January 1, 2023, Sixty pesos (₱60.00) per pack; The rates of tax imposed under this Subsection shall be increased by five percent (5%) every year effective on January 1, 2024, through revenue regulations issued by the Secretary of Finance. Duly registered cigarettes packed by hand shall only be packed in twenties and other packaging combinations of not more than twenty (20). 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, machine or equipment. (C) Cigarettes Packed by Machine.— There shall be levied, assessed and collected on cigarettes packed by machine a tax at the rates prescribed below: Effective on January 1, 2020, Forty-five pesos (₱45.00) per pack; Effective on January 1, 2021, Fifty pesos (₱50.00) per pack; Effective on January 1. 2022, Fifty-five pesos (₱55.00) per pack; Effective on January 1, 2023, Sixty pesos (₱60.00) per pack; The rates of tax imposed under this Subsection shall be increased by five percent (5%) every year effective on January 1, 2024, through revenue regulations issued by the Secretary of Finance. Duly registered cigarettes packed by machine shall only be packed in twenties and other packaging combinations of not more than twenty (20). Understatement of the suggested net retail price by as much as fifteen percent (15%) of the actual net retail price shall render the manufacturer or importer liable for additional excise tax equivalent to the tax due and difference between the understated suggested net retail price and the actual net retail price. No tobacco 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 thereon if sold domestically: Provided, however, That tobacco products for export may be transferred from the place of manufacture to a bonded facility, upon posting of a transfer bond, prior to export. Tobacco 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. Manufacturers and importers of cigars and cigarettes shall, within thirty (30) days from the effectivity of this Act and within the first five (5) days of every month thereafter, submit to the Commissioner a sworn statement of the volume of sales and removals for cigars and/or cigarettes for the three-month period immediately preceding. Any manufacturer or importer who, in violation of this Section, misdeclares or misrepresents in his/her or its sworn statement herein required any pertinent data or information shall, upon final findings by the Commissioner that the violation was committed, be penalized by a summary cancellation or withdrawal of his/her or its permit to engage in business as manufacturer or importer of cigars or cigarettes. Any corporation, association or partnership liable for any of the acts or omissions in violation of this Section shall be fined treble the aggregate amount of deficiency taxes, surcharges and interest which may be assessed pursuant to this Section. Selling of tobacco products at a price lower than the combined excise and value-added taxes imposed under the law shall be prohibited. The seller of such products shall be punished with a fine of not less than ten (10) times the amount of excise plus value-added taxes due but not less than Two hundred thousand pesos (₱200:000.00) nor more than Five hundred thousand pesos (500,000.00), and imprisonment of not less than four (4) years but not more than six (6) years. The BIR is mandated to issue a revenue regulation prescribing the cigarette floor price or the minimum cigarette price taking into account the sum of the excise and value-added taxes as provided herein. Any person liable for any of the acts or omissions prohibited under this Section shall be criminally liable and penalized under Section 254 of this Code. 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. If the offender is not a citizen of the Philippines, he/she shall be deported immediately after serving the sentence, without further proceedings for deportation. (as amended by RA No 10963, 11346)

Sec 146

For inspection made in accordance with this Chapter, there shall be collected a fee of Fifty centavos (₱0.50) for each thousand cigars or fraction thereof; Ten centavos (₱0.10) for each thousand cigarettes or fraction thereof; Ten centavos (₱0.10) for each thousand unit of heated tobacco products; One centavo (₱0.01) for each milliliter of liquid used in vapor products; Two centavos (₱0.02) for each kilogram of leaf tobacco or fraction thereof; and Three centavos (₱0.03) for each kilogram or fraction thereof, of scrap and other manufactured tobacco. (as amended by RA No 11346) The inspection fee on leaf tobacco, scrap, cigars, cigarettes and other tobacco products as defined in Section 147 of this Code shall be paid by the wholesaler, manufacturer, producer, owner or operator of redrying plant, as the case may be, immediately before removal thereof from the establishment of the wholesaler, manufacturer, owner or operator of the re­-drying plant. In case of imported leaf tobacco and products thereof, the inspection fee shall be paid by the importer before removal from customs' custody. Fifty percent (50%) of the tobacco inspection fee shall accrue to the Tobacco Inspection Fund created by Section 12 of Act No. 2613, as amended by Act No. 3179, and fifty percent (50%) shall accrue to the Cultural Center of the Philippines.

Sec 147

When used herein and in statements or official forms prescribed hereunder, the following terms shall have the meaning indicated: ‘Cigars’ mean all rolls of tobacco or any substitute thereof, wrapped in leaf tobacco that are consumed via combustion of the tobacco. ‘Cigarettes’ mean all rolls of finely-cut leaf tobacco, or any substitute therefor, wrapped in paper or in any other material that are consumed via combustion of the tobacco. ‘Wholesale price’ shall mean the amount of money or price paid for cigars or cigarettes purchased for the purpose of resale, regardless of quantity. ‘Retail price’ shall mean the amount of money or price which an ultimate consumer or end-user pays for cigars or cigarettes purchased. ‘Heated tobacco products’ 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 solutions and gels that are part of the product and are heated to generate an aerosol. ‘Vapor products’ shall mean electronic nicotine and non-nicotine delivery systems (ENDS/ENKDS), which are combinations of (i) a liquid solution or gel, that transforms into an aerosol without combustion through the employment of a mechanical or electronic heating element, battery or circuit that can be used to heat such solution or gel, and includes, but is not limited to (ii) a cartridge, (iii) a tank, and (iv) the device without a cartridge or tank. It is commonly known as nicotine salt/salt nicotine, and conventional 'freebase' or 'classie 'nicotine, and other similar products: Provided, That all vapor products shall be covered by this Act regardless of its nicotine content. (as further amended by RA No 11467) (as amended by RA No 11346)