Chapter 4

Excise Tax

 Excise Tax
Sometimes referred to as “sin taxes”, are imposed on certain articles (and now services)
either
▪ to promote health (e.g., excise tax on tobacco and alcohol) or
▪ to discourage purchase of certain articles (e.g., automobiles, petroleum products
and non-essential goods, sugar-sweetened beverages, non-essential invasive
procedures) or
▪ to protect the environment (e.g., excise tax on minerals).

It is a business tax in addition to VAT or the Percentage tax. In fact, under sec.106, excise
tax is part of the Gross Selling Price in determining the basis for the 12% VAT. Also, it is
part of the “landed cost” upon which the VAT on importation based.

Goods Subject to Excise Taxes

Excise taxes apply to
1. Good manufactured or produced in the Philippines for domestic sales or
consumption or for any other disposition; and
2. To things imported.
3. Non-essential services (added by TRAIN law)

Kinds as to amount
1. Specific tax - if based on weight or volume capacity or any other physical unit of
measurement;
2. Ad Valorem tax - if based on selling price or other specified value.

 Articles Subject to Excise Tax

1. Alcohol, including wines, distilled spirits and fermented liquor
2. Tobacco Products, i.e., cigar and cigarettes (now including heated tobacco and vapor
products)
3. Automobiles
4. Petroleum Products
5. Non-Essential Goods
6. Mineral Products
7. Sugar Sweetened Beverages
8. Non-Essential Services

 Manufactured or Produce Articles Payment of Tax

The duty to pay excise tax begins at the moment the excisable articles exist. The return shall
be filed, and the excise tax paid by the manufacturer or producer before removal from the
place of production.

Excise Tax Return

Every person liable to pay excise tax imposed shall file a separate return for each place of
production.

Contents of return:
1. The description of products to be removed
2. Quantity or volume of products to be removed
3. The applicable tax base
4. The amount of tax due thereon

Except: That in the case of indigenous petroleum, natural gas or liquefied Natural gas, the
excise tax shall be paid by the first buyer, purchaser or transferee for local sale, barter or
transfer, while the excise tax on exported products shall be paid by the owner, lessee,
concessionaire or operator of the mining claim.

Removal without payment of tax: Should domestic products be removed from the place
of production without the payment of the tax, the owner or person having possession
thereof shall be liable for the tax due thereon.

Tax Base
Gross Selling Price of Goods Subject to Ad Valorem tax
1. The price at which the goods are sold at wholesale in the place of production or
through their sales agents to the public shall constitute the gross selling price.

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2. Excluding the value-added tax.

3. If the manufacturer also sells or allows such goods to be sold at wholesale in
another establishment of which he is the owner or in the profits of which he has an
interest, the wholesale price in such establishment shall constitute the gross selling
price.
4. Should such price be less than the cost of manufacturer plus expenses incurred until
the goods are finally sold, then a proportionate margin of profit, not less than ten
percent (10%) of such manufacturing cost and expenses, shall be added to
constitute the gross selling price.

Manufacturer’s or Producer’s Sworn Statement

Every Manufacturer or producer of goods or products subject to excise tax shall file with the
Commissioner on the date or dates designated by the latter, and as often as may be
required, a sworn statement showing, among other information, the different goods or
products manufactured or produced and their:
1. Gross selling price or market value
2. The cost of manufacturer or production
3. Expenses incurred or to be incurred until the goods or products are finally sold.

Credit for Excise Tax on Goods Actually Exported

When goods locally produced or manufactured are removed and actually exported without
returning to the Philippines, whether so exported in their original state or as ingredients or
parts of any manufactured goods or products, any excise tax paid thereon shall be credited
or refunded upon submission of the proof of actual exportation and upon receipt of the
corresponding foreign exchange payment.

Not applicable to the excise tax on mineral products except coal and coke.

 Imported Articles Payment of Tax

Excise taxes on imported articles shall be paid to the Customs Officers, conformably with
the regulations of the Department of Finance, before the release of such articles from the
customs house.

Persons liable for the tax:

1. The owner or importer
2. The person who is found in possession of articles which are exempt from excise
taxes other than those legally entitled to exemption.

In the case of tax-free articles brought or imported into the Philippines by person, entities,
or agencies exempt from tax which are subsequently sold, transferred or exchanged in
the Philippines to non-exempt persons or entities, the purchasers or recipients shall be
considered the importers thereof, and shall be liable for the duty and internal revenue tax
due on such importation.

Tax Base
Similar rules apply as that of manufactured/produced articles.

Mode of Computing Contents of Cask or Package:

1. Every fractional part of a proof liter equal to or greater than a half liter in a cask or
package containing more than one liter shall be taxed as a liter; and
2. Any smaller fractional part shall be exempt; but any package of spirits, the total
contents of which are less than a proof liter, shall be taxed as one liter.

 Excise Tax on Alcohol Products

Distilled Spirits
Under RA No. 11467, implemented by RR No. 7-2021, the excise tax rates shall be as
follows:
Effectivity Ad valorem* Specific (per
proof liter)
January 1, 2020 20% ₱24.34
January 23, 2020 22% ₱42.00
January 1, 2021 22% ₱47.00
January 1, 2022 22% ₱52.00

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January 1, 2023 22% ₱59.00

January 1, 2024 22% ₱66.00
2025 onwards 22% Specific tax rate shall be increased
by 6% and every year thereafter
*based on net retail price per proof, excluding excise tax and VAT

Excise Tax Due

Shall be the ad valorem tax plus the specific tax.

Spirits or distilled spirits is the substance known as ethyl alcohol, ethanol 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 of mixtures.

Proof Spirits is liquor containing 1/2 of its volume of alcohol of a specific gravity of seven
thousand nine hundred and thirty-nine ten thousandths (0.7939) at fifteen degree centigrade
(15℃).

A ’proof liter’ means a liter of proof spirits.

Wines
Under RA No. 11467, as implemented by RR No. 7-2021, the excise tax rates shall be as
follows, beginning Jan. 1, 2020:
Specific Tax (per
liter)
Sparkling wines/champagnes regardless of proof, if the net
retail price per bottle of ₱750ml volume capacity, regardless
of proof is:

₱500 or less ₱328.98

More than ₱500 ₱921.15
Still wines containing fourteen percent (14%) of alcohol by
volume or less ₱39.49
Still wines containing more than fourteen percent (14%) but
not more than twenty-five percent (25%) of alcohol by volume ₱78.96
Fortified wines containing more than twenty-five percent (25%) Tax as distilled
of alcohol by volume spirits

Beginning January 23, 2020, however, the classification of wines was removed pursuant to
RA No.11467. All types of wines are subject to specific excise tax rates per litter, as follows:
January 23, 2020 ₱50.00
January 1, 2021 ₱53.00
January 1, 2022 ₱56.18
January 1, 2023 ₱59.55
January 1, 2024 ₱63.12
2025 onwards Specific tax rate shall be increased
by 6% and every year thereafter

Fermented Liquors
There shall be levied, assessed and collected an excise tax on beer, lager beer, ale, porter,
and other fermented liquors except tuba, basi, tapuy and similar fermented liquors in
accordance with the following schedule provided under RA No. 11467, as implemented by
RR No. 7-2021:
Specific tax (per liter)
January 1, 2020 ₱26.43
January 23, 2020 ₱35.00
January 1, 2021 ₱37.00
January 1, 2022 ₱39.00
January 1, 2023 ₱41.00
January 1, 2024 ₱43.00

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2025 onwards Specific tax rate shall be increased

by 6% and every year thereafter

 Excise Tax on Tobacco Products

Heated Tobacco Products
Under RA No. 11467 as implemented by RR No. 7-2021, there shall be collected excise
taxes on Heated Tobacco Products per pack of 20 units or any packaging combinations of
not more than 20 units, as follows:

Date of Effectivity Excise Tax Rate

January 1, 2020 ₱10.00
January 23, 2020 ₱25.00
January 1, 2021 ₱27.50
January 1, 2022 ₱30.00
January 1, 2023 ₱32.50
2024 onwards Specific tax rate shall be increased by
5% every year effective Jan. 1, 2024

Illustration (RR No. 7-2021)

On January 23, 2020, BSM Corp. removes from its tobacco plant 100 cases of Brand GTR
Heated Tobacco. How much is the excise tax due if one (1) case contains fifty (50) reams
while one (1) ream contains ten (10) packs?

No. of cases 100

X by the number of reams per case 50
Total number of reams 5,000
X by number of packs per ream 10
Total number of packs 50,000
Multiplied by tax rate ₱25.00
Total Excise Tax Due ₱1,250,000

Vapor Products
Under RR No. 7-2021, implementing RA No. 11467, Vapor Products shall now be subject
to excise tax in accordance with the following schedule:

Date of Effectivity Quantity Excise

January 1 2020 to 0.00 ml to 10.00 ml ₱10.00
January 22 2020 10.01 ml to 20.00 ml ₱20.00
20.01 ml to 30.00 ml ₱30.00
30.01 ml to 40.00 ml ₱40.00
40.01 ml to 50.00 ml ₱50.00
More than 50.00 ml ₱50.00 plus ₱10.00 for every
additional 10.00 ml

1. Nicotine Salt or Salt Nicotine - containing less than 1ml.

Date of Effectivity Quantity Excise Tax Rate

January 23,2020 ₱37.00
January 1, 2021 ₱42.00
January 1, 2022 Per milliliter or a ₱47.00
January 1, 2023 fraction thereof ₱52.00
2024 onwards rate shall be increased by 5%
every year effective January 1,
2024

2. Conventional “freebase” or “Classic” Nicotine - Release of product on January 11,

2021 containing less than 10ml

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Date of Effectivity Quantity Excise Tax Rate

January 23,2020 ₱45.00
January 1, 2021 ₱50.00
January 1, 2022 Per ten (10) ₱55.00
January 1, 2023 milliliter or a ₱60.00
2024 onwards fraction thereof rate shall be increased by 5%
every year effective January 1,
2024

The rates of tax imposed herein shall apply to any liquid substance, regardless of
nicotine content, including nicotine-free liquid or any similar product.

Illustration
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 0.8 ml 300 packs
of vapor products with two (2) pods per pack.

Per Container
Container size 0.8 ml
No. of pack 300
X number of pods per pack 2
Total number of pods 600
Multiplied by tax rate ₱42.00
Total Excise Tax Due ₱25,200

ii. Conventional “Freebase" or “Classic" Nicotine - Release of Product on January

11, 2021 containing less than 10 ml.
Product Type: Conventional “freebase” or “Classic” Nicotine with container size of
7ml.

Applicable tax rate of ₱50, a fraction of 10 ml.

300 packs of vapor products
1 small bottle/pack

No. of Packs 300

Multiplied by Tax Rate ₱50

Total Excise Tax Due ₱15,000

iii. Conventional “Freebase" or "Classic" Nicotine w/ container size of 15 ml

Product Type: Conventional "Freebase" or "Classic" Nicotine with container size of
15 ml was released on January 8, 2021.

Applicable tax rate of ₱100.00, [10 ml. (₱50.00) plus a fraction of

10 ml. (₱50.00)] 300 packs of vapor products 1
small bottle/pack

No. of Packs 300

Multiplied by Tax Rate ₱100

Total Excise Tax Due ₱30,000

Cigars and Cigarettes

Under RR No.7-2021, implementing RA No. 11467 the applicable excise tax rates for cigars
will be as follows:

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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
retail price per cigar
(excluding the excise and
value-added taxes)
January 1, 2020 20% ₱6.57
January 1, 2021 20% ₱6.83
January 1, 2022 20% ₱7.10
January 1, 2023 20% ₱7.38
2024 onwards 20% Specific tax rate shall be
increased by 5% every year
effective January 1, 2024

b. Cigarettes Packed By Hand or Machine

Date of Effectivity Quantity Excise Tax Rate
January 1, 2020 ₱45.00
January 1, 2021 Per pack of 20s or ₱50.00
January 1, 2022 any packaging ₱55.00
January 1, 2023 combinations of ₱60.00
not more than 20
2024 onwards rate shall be increased by 5%
packed by hands
every year effective January 1,
2024

Inspection Fee
For inspection made, there shall be collected a fee of:
Unit of Measure
Product Inspection Fee
Pieces/Sticks/ Milliliter Kilo
Units
Cigars ₱0.50 1,000 or
fraction thereof
Cigarettes ₱0.10 1,000 or
fraction thereof
Heated ₱0.10 1,000
tobacco
Vapor ₱0.01 1.00
Products
Whole Leaf ₱0.02 1.00 or
Tobacco fraction
thereof
Scrap and ₱0.03 1.00 or
Other Mfd. fraction
Tobacco thereof

Floor Price or Minimum Price

The minimum floor 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 Excise Large Taxpayer Regulatory Division (ELRTD) shall
established a monthly data profile based on the required periodic manufacturer's or
importer’s sworn declaration for all brands per tobacco product category. Provided below
are illustrations for reference.

1. Cigarettes
Production Cost per Sworn Declaration ₱20.00
Excise Tax (2021) ₱50.00
VAT ₱8.40

Total/Floor Price ₱78.40

2. Heated Tobacco Products

Production Cost per Sworn Declaration ₱20.00

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Excise Tax (2021) ₱42.00

VAT ₱7.44

Total/Floor Price ₱69.44

3. Vapor Products: 3.a

Nicotine Salts
i. Production cost of ₱10.00 per 0.1 milliliter of e-liquid content
Volume per pod is 0.7 ml ii. Production cost of
₱10.00 per 0.1 ml per pod is 2.5 ml
iii. Production cost is ₱10.00 per 0.1 milliliter
• Volume per pod pack 2.8 ml
• 4 packs

3.b Freebase Nicotine

i. Production cost of ₱5.00 per 1 milliliter of e-liquid content
• Volume per tank 10 ii. Production cost - ₱5.00
per ml
• Volume- 25

FLOOR PRICE SAMPLE

Volume Floor
Nicotine Unit Pack/Fill Content Production Cost Excise VAT Price
Formulation (ml) Per Unit Amount Tax 2021
Nicotine Salts pod 0.7 ml 0.7 ₱10 / 0.1 ml 70 42 13.44 125.44
Nicotine Salts pod 2.5 ml 2.5 ₱10 / 0.1 ml 250 126 45.12 421.12
Nicotine Salts pod 4 pod 2.8 x 4 ₱10 / 0.1 ml 1,120 840 235.20 2,195.20
pack 4 pack
Freebase tank 10 ml 10 ₱5 / 1 ml 50 50 12.00 112.00
Nicotine
Freebase tank 25 ml 25 ₱5 / 1 ml 125 150 33.00 308.00
Nicotine

 Excise Tax on Petroleum Products

Manufactured Oils and Other Fuels
There shall be collected on refined and manufactured mineral oils and motor fuels, the
following excise taxes, which shall attach to the goods as soon as they are in existence as
such:
2018 2019 2020
Lubricating oils and greases, including but not ₱8.00 ₱9.00 ₱10.00
limited to, base stock for lube oils and greases,
high vacuum distillates, aromatic extracts and
other similar preparation, anti-additives for
lubricating oils and greases, whether such
additives are petroleum based or not,
Processed gas,
Waxes and petroleum,
On denatured alcohol to be used for motive power
Asphalts
Naphtha, regular gasoline and other similar ₱7.00 ₱9.00 ₱10.00
products of distillation
Unleaded premium gasoline
Kerosene ₱3.00 ₱4.00 ₱5.00
Aviation turbo jet fuel ₱4.00 ₱4.00 ₱4.00
Kerosene when used as aviation fuel, per liter of
volume capacity
Diesel fuel oil, and on similar fuel oils having more ₱2.50 ₱4.50 ₱6.00
or less the same generating power.
Liquefied petroleum gas used for motive power,
per kilogram
Bunker fuel oil, and on similar fuel oils having
more or less the same generating power****

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Petroleum Coke, per metric ton****

Liquefied Petroleum Gas, per kilogram ₱1.00 ₱2.00 ₱3.00

****LPG when used as raw material in the production of petrochemical products are exempt.
The same with Petroleum Coke when used as feedstock to any power generating facility.

 Excise Tax on Automobiles

Automobiles
There shall be levied, assessed and collected an ad valorem tax on automobiles based on
the manufacturer’s or importer’s selling price, net of excise and value-added taxes, in
accordance with the following schedule:

Beginning January 1, 2018

Net Manufacturer’s Price Importer’s Selling Price Rate
Over Up to
0 ₱ 600,000 4%
₱ 600,000 ₱1,000,000 10%
₱1,100,000 ₱4,000,000 20%
₱4,000,000 over 50%

Automobile shall mean any four (4) or more wheeled motor vehicle regardless of seating
capacity, which is propelled by gasoline, diesel, electricity or any other motive power. Buses,
truck, cargo, vans, jeeps, jeeps/jeepneys substitutes, single cab chassis, and special-
purpose vehicles shall not be considered as automobiles

Truck/cargo van shall mean a motor vehicle of any configuration that is exclusively designed
for the carriage of goods and with any number of wheels and axles. Pick-ups shall not be
considered as trucks.

Jeep/jeepney/jeepney substitutes shall means as “Philippine jeep or jeepney which are of

jitney type locally designed and manufactured generally from surplus parts and components.
It shall also include jeepney substitutes that manufactured from brand-new single cab
chassis or cowl chassis and locally customized rear body that has continuous sideway row
seat with open rear door and without retractable glass windows.

Bus shall mean a motor vehicle of any configuration with gross vehicle weight of 4.0 tons or
more with any number of wheels and axles, which is generally accepted and specially
designed for mass or public transformation.

Single cab chassis shall mean a motor vehicle with complete engine power train and chassis
equipped with a cab that has a maximum of two (2) doors and only one (1) row of seats.

Special purpose vehicle shall mean a motor vehicle designed for specific applications such
as cement mixer, fire truck, boom truck, ambulance and/or medical unit and off-road vehicle
for heavy industries and not for recreational activities.

Provided, that in the case of imported automobiles not for sale, the tax imposed herein shall
be based on the total landed value, including transaction value, custom duty and all other
charges. Automobiles used exclusively within the freeport zone shall be exempt from excise
tax.

 Excise Tax on Non-Essential Goods

Non-essential Goods
There shall be levied, assessed and collected a tax equivalent to twenty percent (20%)
based on the wholesale price or the value of importation used by the Bureau of Customs
in determining tariff and customs duties, net of excise tax and value-added tax, of the
following goods:
a. All goods commonly or commercially known as jewelry, whether real or imitation,
pearl, precious and semi-precious stones and imitations thereof; goods made of or
ornamented, mounted or fitted with, precious metals or imitations thereof or ivory ( not
including surgical and dental instruments, silver-plated wares, frames or mounting for

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spectacles or eyeglasses, and dental gold or gold alloys and other precious metals
used in filling, mounting or fitting of the teeth); opera glasses and lorgnettes. The term
“precious metals” shall include platinum, gold silver, and other metals of similar or
greater value. The term imitations thereof shall include platings and alloys of such
metals;
b. Perfumes and toilet water;
c. Yachts and other vessels intended for pleasure or sports

 Excise Tax on Mineral Products

Rates of tax
Product Tax Rate
Coal and Coke (Domestic and Jan. 1,2018 - ₱50.00
Imported) Jan. 1,2019 - ₱100.00
Jan. 1,2020 and onwards - ₱150.00
Nonmetallic Minerals and Quarry 4% based on the actual market value of the
Resources (Locally extracted or gross output at the time of removal
produced)
Nonmetallic Minerals and Quarry 4% based on the value used by the BoC in
Resources (Imported) determining the tariff and customs duties,
net of excise tax and VAT
Locally-extracted natural gas and Exempt
liquefied natural gas
All Metallic Minerals (locally extracted 4% based on the actual market value of the
or produced copper, gold, chromite gross output at the time of removal
and other metallic minerals)
Indigenous Petroleum 6% of the fair international market price
thereof, on the first taxable sale, barter,
exchange or such similar transaction* such
tax to be paid by the buyer or purchaser
before removal from the place of production.

*The phrase “first taxable sales, barter, exchange or similar transaction” means the transfer
of indigenous petroleum in its original, state to a first taxable transferee. The fair international
market price shall be determined in consultation with appropriate government agency.

“Indigenous petroleum” shall include locally extracted mineral oil, hydrocarbon gas, bitumen,
crude asphalt, mineral gas and all other similar or naturally associated substances with the
exception of coal, peat, bituminous shale and/or stratified mineral deposits.”

 Excise Tax on Non-Essential Services or Invasive Cosmetic Procedure

Rate and Base of Tax
There shall be levied, assessed and collected, an excise tax equivalent to five percent (5%)
based on gross receipts, net of excise tax and VAT, derived from the performance of
invasive cosmetic procedures, surgeries and body enhancements directed solely towards
improving, altering or enhancing the patient’s appearance and do not meaningfully promote
the proper functions of the body or prevent or treat illness or disease.

“Gross Receipts” shall mean the total amount of money or its equivalent representing the
contract price or service fee, including deposits applied as payments for services rendered
and advance payments actually or constructively received for services performed or to be
performed for another person, but excluding the 5% excise tax and VAT.

Exclusions
The excise tax on non-essential services shall NOT apply to:
1. Procedures necessary to ameliorate a deformity arising from or directly related to a
congenital or developmental defect or abnormality, a personal injury resulting from an
accident or trauma, or disfiguring disease, tumor, virus or infection.
2. Case and treatments covered by the National Health Insurance Program.
3. Non-Invasive Cosmetic Procedures.

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Plastic Surgery shall refer to a surgical specialty or procedure concerned with the
restoration, construction, reconstruction, or improvement in the form, function and
appearance of body structure that are missing, defective, damaged, or misshapen. It
encompasses both reconstructive and aesthetic surgery.

Cosmetic Surgery shall refer to a type of plastic surgery that aims to improve a person’s
appearance, through invasive cosmetic procedures, surgeries and body enhancements
directed solely on improving, altering or enhancing the person’s appearance and do not
necessarily promote the proper functions of the body or prevent or treat illness or disease.
Cosmetic surgery can be performed on all areas of the head, neck and body. Since the
treated areas function properly, cosmetic surgery is elective.

Invasive Cosmetic Procedure shall refer to a cosmetic surgery that is carried out by entering
the body through the skin or through a body cavity or anatomical opening, but with the
smallest damage possible to these structures. Invasive Cosmetic Procedures shall include,
but not limited to:
1. Liposuction
2. Mammoplasty
3. Breastlift
4. Buccal Fact Removal
5. Buttocks Augmentation
6. Chin Augmentation
7. Facelift/Necklift
8. Thread Lift
9. Embedded Protein Thread
10. Hair Restoration/Transplantation
11. Eyelid Surgery
12. Vaginal Plastic Surgery
13. Abdominoplasty or Tummy Tuck
14. Auto Grafting
15. Rhinoplasty/Alar Trimming
16. Otoplasty

Non-Invasive Cosmetic Procedure shall refer to a conservative treatment that does not
require incision into the body or the removal of tissue, or when no break in the skin is created
and there is no contract with mucosa, or skin break, or internal body cavity beyond a natural
or artificial body orifice. Non-Invasive Cosmetic Procedures shall include but not be limited
the following:
1. Acupuncture Rejuvenation/Treatment
2. Air Dissector
3. Botulinum Toxin Injection/Treatment
4. Collagen Induction Therapy
5. Dermal Fillers (Crosslinked and non-crosslinked)
6. Non-surgical face-lifting and skin tightening using radio frequency, ultrasound, infrared
7. Carbon dioxide fractional laser resurfacing
8. Laser and light treatments
9. Body Treatments and Contouring Procedures
10. Cleaning and Facials
11. Peelings (Face and Body )
12. Injectable and Weight Management Treatment

Illustration (RR No. 2-2019)

Where the invasive cosmetic procedure is performed in a clinic or any place outside of a hospital.

To improve her body shape, Miss X decided to undergo liposuction procedure and sought
the services of “Dok Salamat”, a clinic operated outside the hospital and owned by Melo
Medical Group, Inc. Dok Salamat charged Miss X the amount of ₱50,000, inclusive of both
12% VAT and 5% excise tax. How much will be the total amount that Miss X will pay?

Original Price (inclusive of VAT and excise) ₱50,000

Gross Receipts, net of VAT, inclusive of excise (₱50,000/112%) 44,642.86

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Gross Receipts, net Excise & VAT (₱44,642.86/105%) 42,517.01

Add: 5% excise tax (₱42,517.01 * 5%) 2,125.85
12% VAT (₱44,642.86 * 12%) 5,357.14

Total Amount to be collected from Miss X 52,500

*The excise tax is to be remitted by Melo Medical Group, Inc. A sample Official Receipt is
shown below.

Note:
1. The 5% excise tax is based on the amount of receipts, exclusive of both VAT and
excise tax.
2. The amount of VAT is based on the receipts, inclusive of the excise tax.
3. The amount of excise tax will be recorded both as an expense and a liability (for
remittance purposes).
4. Only the service income of ₱44,642.86 will be recorded as revenue.

Where the procedure is performed within a hospital

Same facts as in previous the above, except this time Miss X had another invasive cosmetic
procedure done by Doctor P, an individual practitioner operating a clinic inside a hospital.
The hospital bills of Miss X, included other fees (e.g., supplies and fees for the use of
operating room and hospital facilities) in the amount of ₱20,000 in addition to the fees
charged by Doctor P of ₱50,000 (inclusive of 12% VAT, excluding excise) for the services
performed.

Billings by Hospital (VAT exempt) ₱20,000.00

Excise Tax (5%) 1,000.00
Doctor’s Fees (₱50,000/112%) 44,642.85
Excise Tax (5%) 2,232.15
VAT (12% * (₱44,642.85 + 2,232.15) 5,625

Total Amount to be collected from Miss X 73,500

Note:
1. Medical, dental, hospital and veterinary services are exempt from value added
tax under Section 109(G) of the NIRC, as amended, except those rendered by
professionals.
2. Doctor P, is presumed to be self-employed and his annual receipts exceeded
the threshold for VAT of ₱3 Million.

In the books of Doctor P

Account Titles Debit Credit
Accounts Receivable Hospital (44,642.86 + 5,625.00 - 4,464.28) 45,803.58
Excise Tax Expense 2,232.14

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Excise Tax

Prepaid Tax (44,642.86 x 10%WT) 4,464,28

Service Fee (44,642.86 + 2,232.14) 46,875.00
Output VAT 5,625.00

Cash 45,803,58
Accounts Receivable - Hospital 45,803.58

In the books of the Hospital

Account Titles Debit Credit
Cash 21,000.00
Excise Tax Expense 1,000.00
Service Income - Non-VAT 21,000.00
Excise Tax Payable 1,000.00

Cash (44,642.85 + 2,232.15 + 5,625) 52,500.00

Payable to Doctor P 45,803.58
Excise Tax Payable for Doctor P 2,232.14
Expanded Withholding Tax Payable- Prof Fees 4,464.28
(44,642.86 x 10%)

The Hospital shall remit to the BIR the amount of ₱4,464.28 representing creditable
income tax withheld from the fees charged by Doctor P, in accordance with existing
withholding tax regulations.

In addition to this, the Hospital shall file a return of its monthly gross receipts using
BIR Form No. 2200-C and remit the 5% excise tax amounting to ₱3,232.14 based
on the gross receipts (net of 12% VAT and 5% excise) collected from the client,
together with the Monthly Summary of Cosmetic Procedures Performed as
required in Section 5.1 of this Regulation.

Excise Tax Return

Any person, whether natural or juridical, performing the non-essential service shall be liable
to pay the 5% excise tax thereon using BIR Form No. 2200-C (Excise Tax Return on
Invasive Cosmetic Procedures) together with the Monthly Summary of Cosmetic
Procedures Performed as an attachment thereto.

Deadline
10 days following the close of the month.

Invoicing Requirement
Every person subject to the 5% excise tax shall issue an Official Receipt (OR) for services
performed whether invasive/non-invasive showing the following information:
1. The total amount the patient/client pays or is obliged to pay to the service provider
including the excise tax and VAT, if applicable, provided:
a. The amount of VAT shall be a separate line item in the RR (the VAT base is
inclusive of the 5% excise tax)
b. Discounts given shall be indicated in the OR, otherwise the same shall not be
allowed as a deduction from gross receipts;
c. If the procedure performed is non-invasive and/or invasive but considered
exempt from excise tax, the term “EXEMPT FROM EXCISE TAX” shall be
shown on the OR;
d. If the services performed involves both invasive (whether excisable or exempt)
and non-invasive (not excisable) procedures, a separate OR may be used for the
excisable and non-excisable services rendered.

Penalties
1. Any violation of the provisions of this Regulations shall be subject to the corresponding
penalties under Sections 250, 251 and 255 of the NIRC, as amended, and Revenue
Memorandum Order No. 7-2015.
2. Pursuant to Section 254 of the NIRC, as amended, any person who willfully attempts
in any manner to evade or defeat any tax imposed under this Regulations or the

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payment thereof shall, in addition to other penalties provided by law, upon conviction
thereof, be punished with a fine of not less than Five hundred thousand pesos
(₱500,000) but not more than Ten million pesos (₱10,000,000), and imprisonment of
not less than six (6) years but not more than ten (10) years: Provided, That the
conviction or acquittal obtained under this Section shall not be a bar to the filing of a
civil suit for the collection of taxes.
3. If the offender is not a citizen of the Philippines, he shall be deported in accordance
with immigration laws, rules and regulations.

 Excise Tax on Sugar Sweetened Beverages

Sweetened Beverages refer to non-alcoholic beverages of any constitution (liquid, powder
or concentrates) that are pre-packaged and sealed in accordance with the Food and Drugs
Administration (FDA) standards, that contain caloric and/or non-caloric sweeteners added
by the manufacturers, and shall include, but not limited to the following as described in the
Good Category System from Codex Alimentarius Food Category Descriptions (Codex Stan
192-1995, Rev 2017 or the latest) as adopted by the FDA:
1. Sweetened juice drinks;
2. Sweetened tea;
3. All carbonated beverages;
4. Flavored water;
5. Energy and sports drinks;
6. Other powdered drinks not classified as milk, juice, tea and coffee;
7. Cereal and grain beverages; and
8. Other non-alcoholic beverages that contain added sugar

Caloric Sweetener refers to a substance that is sweet and includes sucrose, fructose, and
glucose that produces a certain sweetness.

High Fructose Corn Syrup (HFCS) refers to a sweet saccharide mixture containing fructose
and glucose which is derived from corn and added to provide sweetness to beverages, and
which includes other similar fructose syrup preparations.

Non-Caloric Sweetener refers to a substance that is artificially or chemically processed that

produces a certain sweetness. These are substances, which can be directly added to
beverages, such as aspartame, sucralose, saccharin, acesulfame potassium, neotame,
cyclamates and other non-nutritive sweeteners approved by the Codex Alimentarius and
adopted by the FDA.

Tax Rates and Bases

There shall be levied, assessed and collected, effective Jan. 1, 2018, a specific tax on
sweetened beverages, as follows:
Product Description Tax Rate (per liter of
volume capacity)
Using purely caloric sweeteners, and purely ₱6.00
noncaloric sweeteners, or a mix of caloric and
noncaloric sweeteners
Using purely High Fructose Corn Syrup (HFCS) or in ₱12.00
combination with any caloric or non-caloric
sweetener
Using purely coconut sap sugar and purely steviol Exempt
glycosides

Illustration
Carbonated Beverages
Dulce Manufacturing Corp. will remove from the place of production 100 cases of Super
Cola using HFCS and non-caloric sweetener. Each case contains six (6) bottles of 1.5
liters each.

No. of Cases 100

Multiplied by no. of bottles per case 6
No. of bottles 600
Multiplied by content per bottle 1.5 L
Total Volume in Liters 900 L

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Multiplied by Specific Tax Rate ₱12.00

Total Excise Tax to be paid before removal ₱10,800

Powdered Juice
Sweety Import Corp. will remove from customs custody 50 cases of Four Seasons
Powdered Juice using caloric and non-caloric sweetener containing 144 packs by 25
grams. Each 25 grams pack can make 1 liter (per serving suggestion appearing on the
label)

No. of Cases 50
Multiplied by No. of packs per case 144

Total no. of packs 7,200

Multiplied by serving suggestion per pack in liters of volume
1L
Total Volume in Liters 7,200 L
Multiplied by Specific Tax Rate ₱6.00
Total Excise Tax to be paid before removal ₱43,200

Persons Liable
The following persons shall be liable for the payment of excise tax on sweetened beverages:
1. For locally manufactured sweetened beverages:
a. Manufacturers
b. Persons having possession of domestically manufactured sweetened
beverages removed from the place of production without the payment of the
tax
2. For imported sweetened beverages:
a. Owners or Importers
b. Persons having possession of imported sweetened beverages removed from
customs custody without the payment of the tax

Filing of Return and Payment of Excise Tax

1. For locally manufactured: A separate return (BIR Form No. 2200-S) shall be filed for
each place of production with the concerned RDO where the Head Office is registered
before removal from place of production.
2. For imported: the importer shall apply for an Authority to Release Imported Goods
(ATRIG) with Excise Large Taxpayers Regulatory Division (ELTRD), BIR National
Office and pay the corresponding excise tax before release from customs custody.

However, for imported raw materials which will be used in production of excisable
sweetened beverages, the excise tax due thereon shall be paid before removal of the
finished goods from the production.

Exclusions
The following, products are not subject to excise tax:
1. All milk products, including plaint milk, infant formula milk, follow-on milk, growing-up
milk, powdered milk, ready-to-drink milk, flavored milk and fermented milk. Milk
products refers to products obtained by any processing of milk, which may contain food
additives, and other ingredients functionally necessary for the processing.
2. Soymilk and flavored soymilk shall refer to products, the main ingredients of which are
the soybean and/or soy derivatives (e.g. soybean flour, soybean concentrates,
soybean isolates or defatted soya) and water which are produced without fermentation
process.
3. 100% Natural Fruit Juices - original liquid resulting from the processing of fruit, the
liquid resulting from the reconstitution of natural fruit juice concentrate, or the liquid
resulting from the restoration of water or dehydrated natural juice that do not have
added sugar or caloric Sweetener. If there is sugar or sweetener added at any amount,
the product shall be considered excisable depending on the kind of sweetener added
and its corresponding rate.
4. 100% Natural Vegetable Juices
5. Meal Replacement and Medically Indicated Beverages - any liquid or powder
drink/product for oral nutritional therapy for persons who cannot absorb or metabolize
dietary nutrients from food or beverages, or as a source of necessary nutrition used
due to a medical condition and an oral electrolyte solution for infants and children
formulated to prevent dehydration due to illness; and

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6. Ground coffee, instant soluble coffee, and pre-packaged powered coffee products.

Transfer of Raw Materials

Manufacturers of sweetened beverages subject to excise tax shall not be allowed to transfer
or remove raw materials from the place of production, except when the transfer or removal
thereof is intended for further processing to its other registered production or
tollmanufacturing plants and shall be accompanied by an Excise Tax Removal Declaration
(ETRD).

Transfer of Semi-Processed Goods

Semi-processed goods, such as syrups/puree/concentrates sold to fast food chains where
such are mixed with carbonated water and dispensed through soda vending or juice
dispensing machines, shall be considered as finished goods subject to excise tax,
notwithstanding that the same are in their semi-processed state. The excise tax shall be
computed using a pre-determined formula in arriving at the equivalent yield in liters of
volume capacity submitted by the manufacturer as approved by the FDA.

REVIEW QUESTIONS
1. What are the major classifications of excisable articles?

2. What are the two main types of excise tax?

3. What are the main purposes of the imposition of excise tax?

4. Who are the agencies that carry out the collection of excise tax in the Philippines?

5. Who are the persons liable to excise tax (in general)?

6. When is the required payment (in general) of excise tax?

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