Excise Taxes

As amended by Republic Act No. 10963

Or the Tax Reform for Acceleration and Inclusion (TRAIN)

Imposition of Excise Taxes

Section 129. Goods Subject to Excise Taxes – excise taxes apply to goods manufactured or produced in
the Philippines for domestic sales or consumption or for any other disposition and to things imported. The
excise tax imposed herein shall be in addition to the value-added tax imposed under Title IV.

Excisable articles:
 Certain goods manufactured or produced in the Philippines for domestic sales or consumption or
for any other disposition;
 Certain goods imported to the Philippines for domestic sales or consumption or for any other
disposition; or
 Non-essential services performed in the Philippines *added by the TRAIN Law

Nature of Excise Tax

 Tax on production/non-essential services
 Indirect tax

Kinds of Excise Tax

 Specific tax – refers to the excise tax imposed which is based on weight or volume capacity or
any other physical unit of measurement
 Ad valorem tax – refers to the excise tax which is based on selling price or other specified value
of the goods.

Manner of computation
 Specific tax
𝑬𝒙𝒄𝒊𝒔𝒆 𝒕𝒂𝒙 = 𝑁𝑜. 𝑜𝑓 𝑢𝑛𝑖𝑡𝑠 𝑜𝑟 𝑜𝑡ℎ𝑒𝑟 𝑚𝑒𝑎𝑠𝑢𝑟𝑒𝑚𝑒𝑛𝑡𝑠 × 𝑆𝑝𝑒𝑐𝑖𝑓𝑖𝑐 𝑇𝑎𝑥 𝑅𝑎𝑡𝑒
 Ad valorem tax
𝑬𝒙𝒄𝒊𝒔𝒆 𝒕𝒂𝒙 = 𝑁𝑜. 𝑜𝑓 𝑢𝑛𝑖𝑡𝑠 𝑜𝑟 𝑜𝑡ℎ𝑒𝑟 𝑚𝑒𝑎𝑠𝑢𝑟𝑒𝑚𝑒𝑛𝑡𝑠 × 𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑃𝑟𝑖𝑐𝑒 𝑥 𝐴𝑑 𝑉𝑎𝑙𝑜𝑟𝑒𝑚 𝑇𝑎𝑥 𝑅𝑎𝑡𝑒

Classification of Excisable Articles

 Alcohol Products (Section 141-143 of the Tax Code)
o Distilled Spirits (Section 141)
o Wines (Section 142)
o Fermented Liquors (Section 143)
 Tobacco Products (Sections 144-146 of the Tax Code)
o Tobacco Products (Section 144)
o Cigars and Cigarettes (Section 145)
o Inspection Fee (Section 146)
 Petroleum Products (Section 148 of the Tax Code)
 Miscellaneous Articles (Section 149-150 of the Tax Code)
o Automobiles (Section 149)
o Non-essential Goods (Section 150)

Reyes, Lalaine M.
 o Non-essential Service (Section 150A)*
o Sweetened Beverage (Section 150B)*
*Amended by TRAIN
 Mineral Products (Section 151 of the Tax Code)

Person Liable to Excise Tax

In general:
 On domestic or local articles
o Manufacturer
o Producer
o Owner or person having possession of articles removed from the place of production
without the payment of the tax
 On imported articles
o Importer
o Owner
o Person who is found in possession of articles which are exempt from excise taxes other
than those legally entitled to exemption

Others:
 On indigenous Petroleum
o Local sale, barter or transfer
 First buyer, purchase or transferee
o Exportation
 Owner, lessee, concessionaire or operator of the mining claim

Timing of Payment
General rule:
 On domestic products
o Before removal from the place of production
 On imported products
o Before release from the custom’s custody

Specific rules:
 Locally manufactured petroleum products and indigenous petroleum
o Before removal from the place of production of such products
 Nonmetallic mineral or mineral products or quarry resources
o Upon removal of such products from the locality where mined or extracted
 Locally produced or extracted metallic mineral or mineral products
o Paid within 15 days after the end of the calendar quarter when such products were
removed
 Imported mineral or mineral products, whether metallic or non-metallic
o Before their removal from customs custody

Place of Payment
 Excise tax return shall be filed with an tax paid to any:
o Authorized Agent Bank (AAB)

Reyes, Lalaine M.
 o Revenue Collection Officer
o Authorized City or Municipal Treasurer

Determination of Gross Selling Price of Goods Subject to Ad Valorem Tax

 Gross selling price
o The price excluding the value-added tax, at which the goods are sold at wholesale in the
place of production or through sales agents to the public
 If the manufacturer also sells or allows such goods to be sold in another establishment of which
he is the owner or in the profits of which he has an interest
o Gross selling price = wholesale price in such establishment
o If the price is less than the cost of manufacture plus expenses incurred until the goods are
finally sold
 A proportionate margin of profit, not less than 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 subject to excise taxes:
 File a sworn statement showing, among other information:
o The different goods or products manufactured or produced;
o Their corresponding gross selling price or market value;
o Cost of manufacture or production plus expenses incurred or to be incurred until the
goods or products are finally sold

Credits for Excise Tax on Goods Actually Exported

 Goods locally produced or manufactured 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
o 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
o Exception: Excise tax on mineral products, except coal and coke shall not be creditable or
refundable even if the mineral products are actually exported.

Mode of Computing Contents of Cask or Package

 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 any smaller fractional part shall be
exempt; by any package or spirits, the total content of which are less than a proof liter, shall be
taxed as one liter.

Reyes, Lalaine M.
 Exemption or Conditional Tax-Free Removal of Certain Articles

Section 133. Removal of Wines and Distilled Spirits for Treatment of Tobacco Leaf – upon issuance of
a permit from the Commissioner and subject to the rules and regulations prescribed by the Secretary of
Finance, manufacturers of cigars and cigarettes may withdraw from bond, free of excise local and
imported wines, and distilled spirits in specific quantities and grades for use in the treatment of tobacco
leaf to be used in the manufacture of cigars and cigarettes; but such wines and distilled spirits must first
be suitably denatured.

Section 134. Domestic Denatured Alcohol – domestic alcohol of not less than 180o proof (90% absolute
alcohol, shall, when suitably denatured and rendered unfit for oral intake, be exempt from the excise tax
prescribed in Section 141: Provided, however, that such denatured alcohol shall be subject to tax under
Section 106(A) (VAT) of this Code: Provided, further that if such alcohol is to be used for motive power,
it shall be taxed under Section 148(d) (Petroleum Products): Provided, finally, that any alcohol previously
rendered unfit for oral intake or any other similar process shall be taxed under Section 141 (Distilled
Spirits) of this Code, and such tax shall be paid by the person in possession of such reprocessed spirits.

Section 135. Petroleum Products Sold to International Carriers and Exempt Entities or Agencies –
petroleum products sold to the following are exempt from excise tax:
 International carriers of the Philippine or foreign registry on their use or consumption outside the
Philippines: Provided, that the petroleum products sold to these international carriers shall be
stored in a bonded storage tank and may be disposed of only in accordance with the rules and
regulations to be prescribed by the Secretary of Finance, upon recommendation of the
Commissioner;
 Exempt entities or agencies covered by tax treaties, conventions and other international
agreements for their use of consumption: Provided, however, that the country of said foreign
international carrier or exempt entities or agencies exempts from similar taxes petroleum products
sold to Philippine carriers, entities or agencies; and
 Entities which are by law exempt from direct and indirect taxes.

Section 136. Denaturation, Withdrawal and Use of Denatured Alcohol – any person who produces,
withdraws, sells, transports or knowingly uses, or is in possession of denatured alcohol, or articles
containing denatured alcohol in violation of laws or regulations now or hereafter in force pertaining thereto
shall be required to pay the corresponding tax, in addition to the penalties provided for under Title X
(Statutory Offenses and Penalties) of this Code.

Section 137. Removal of Spirits Under Bond for Rectification – spirits requiring rectification may be
removed from the place of production to another establishment for the purpose of rectification without
prepayment of the excise tax: Provided, That the distiller removing such spirits and the rectifier receiving
them shall file with the Commissioner their joint bond conditioned upon the payment by the rectifier of the
excise tax due on the rectified alcohol: Provided, further, That in cases where alcohol has already been
rectified either by original and continuous distillation or by re-distillation, no loss for rectification and
handling shall be allowed and the rectifier thereof shall pay the excise tax due on such losses: Provided,
finally, That where a rectifier makes use of spirits upon which the excise tax has not been paid, he shall be
liable for the payment of the tax otherwise due thereon.

Section 138. Removal of Fermented Liquors to Bonded Warehouse – any brewer may remove or transport
from his brewery or other place of manufacture to a bonded warehouse used by him exclusively for the

Reyes, Lalaine M.
storage or sale in bulk of fermented liquors of his own manufacture, any quantity of such fermented liquors,
not less than one thousand (1,000) liters at one removal, without prepayment of the tax thereon under a
permit which shall be granted by the Commissioner. Such permit shall be affixed to every package so
removed and shall be cancelled or destroyed in such manner as the Commissioner may prescribe.
Thereafter, the manufacturer of such fermented liquors shall pay the tax in the same manner and under the
same penalty and liability as when paid at the brewery.

Section 139. Removal of Damaged Liquors Free of Tax – when any fermented liquor has become sour or
otherwise damaged so as to be unfit for use as such, brewers may sell and after securing a special permit
from the Commissioner, under such conditions as may be prescribed in the rules and regulations prescribed
by the Secretary of Finance, remove the same without the payment of tax thereon in cask or other packages,
distinct from those ordinarily used for fermented liquors, each containing not less than one hundred seventy-
five (175) liters with a note of their contents permanently affixed thereon.

Section 140. Removal of Tobacco Products without Prepayment of Tax – products of tobacco entirely
unfit for chewing or smoking may be removed free of tax for agricultural or industrial use, under such
conditions as may be prescribed in the rules and regulations prescribed by the Secretary of Finance.
Stemmed leaf tobacco, fine-cut shorts, the refuse of fine-cut chewing tobacco, scraps, cuttings, clippings,
stems, or midribs, and sweepings of tobacco may be sold in bulk as raw material by one manufacturer
directly to another without payment of the tax, under such conditions as may be prescribed in the rules and
regulations prescribed by the Secretary of Finance.

Conditional Tax-Free Tax-exempt

Removal of local and imported wines and distilled Domestic alcohol of not less than 180o proof (90%
spirits – for use in treatment of tobacco leaf for absolute alcohol) when suitably denatured and
manufacture of cigars and cigarettes rendered unfit for oral intake
 Must be suitably denatured
 Upon issuance of permit from the CIR
Removal of spirits to another establishment for Petroleum products sold to the following:
purpose of rectification  International carriers of Philippine or
 Distiller removing such spirits and foreign registry on their use or
rectifier receiving them shall file with the consumption outside, shall be stored in
CIR their joint bond conditioned upon the bonded storage tank, disposed in
payment by the rectifier of the excise tax accordance with rules and regulations
due  Exempt entities or agencies covered by tax
treaties which exempt from similar taxes
petroleum products sold to Philippine
carriers
 Entities which are by law exempt from
direct and indirect taxes
Removal of fermented liquors not less than 1,000
liters at once to a bonded warehouse used
exclusively for storage or sale in bulk of such
products of his own manufacture
 Permit granted by the CIR
 Permit affixed to every package so
removed
 Cancelled and destroyed as the CIR may
prescribe

Reyes, Lalaine M.
 Removal of fermented liquors became sour or
damaged so as to be unfit for use
 After securing permit from the CIR
 In cask or other packages distinct from
those ordinarily used for fermented liquors
 Each containing not less than 175L with a
note of their contents permanently fixed
thereon
Removal of tobacco products unfit for chewing or
smoking for agricultural or industrial use
 Under conditions prescribed by Secretary
of Finance
Sale of stemmed leaf tobacco, fine-cut shorts, the
refuse of fine-cut chewing tobacco, scraps,
cuttings, clippings, stems, or midribs, and
sweepings of tobacco in bulk as raw material
directly to another manufacturer
 Under conditions as may be prescribed

1. Excise Tax on Alcohol Products

Excise Tax on Distilled Spirits

Section 141. Distilled Spirits – on distilled spirits, subjection to the provisions of Section 133 of this
Code, an excise tax shall be levied, assessed and collected based on the following schedules:

Effectivity January 1, 2013 January 1, 2015 January 1, 2016

Ad valorem tax 15% of the net retail 20% of the net retail 20% of the net retail
price* per proof; price* per proof; price* per proof;
Specific tax P20 per proof liter P20 per proof liter Increased by 4% every
year thereafter
*excluding the excise tax and the value-added tax

 Medicinal preparations, flavoring extracts, and other preparations, except toilet preparations, of
which, excluding water, distilled spirits for the chief ingredient, shall be subject to the same tax
rate as such chief ingredient.
 This tax shall be proportionately increased for any strength of the spirits taxed over proof spirits,
and the tax shall attach to this substance as soon as it is in existence as such, whether it be
subsequently separated as pure or impure spirits, or transformed into any other substance either in
the process of original production or by any subsequent process.
 Manufacturers and importers of distilled spirits shall, within 30days from the effectivity of this
Act, and within the first 5 days of every 3rd month thereafter, submit to the Commissioner a sworn
statement of the volume of sales for each particular brand of distilled spirits sold at his
establishment for the 3-month period immediately preceding.

Excise Tax on Wines

Reyes, Lalaine M.
Section 142. Wines – on wines, there shall be collected per liter of volume capacity effective on January
1, 2013, the following excise taxes:

Nature Tax Imposed**

Sparkling wines/champagnes regardless of proof, P500 or less – P250;
if the net retail price* per bottle of 750mL volume More than P500 – P700
capacity is:
Still wines and carbonated wines containing 14% or less – P30;
alcohol by volume of: More than 14% but not more than 25% – P60
More than 25% - tax as distilled spirits1
1
Refer to Section 141
*excluding the excise tax and the value-added tax
**The rates of tax imposed under this Section shall be increased by 4% every year thereafter effective on
January 1, 2014, through revenue regulations issued by the Secretary of Finance.

 Manufacturers and importers of wines, within 30days from the effectivity of this Act, and within
the first 5 days of every 3rd month thereafter, submit to the Commissioner a sworn statement of
the volume of sales for each particular brand of distilled spirits sold at his establishment for the 3-
month period immediately preceding.

Excise Tax on Fermented Liquors

Section 143. Fermented Liquor – 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 domestic fermented
liquors in accordance with the following schedule:

Effectivity Measure Basis and rate of tax

Fermented liquors brewed
January 1, 2013 Net retail P50.60 or less – P15 per liter
and sold at micro-breweries
price* More than P50.60 – P20 per liter
or small establishments such
January 1, 2014 Net retail P50.60 or less – P17 per liter
as pubs and restaurants:
price* More than P50.60 – P21 per liter
January 1, 2015 Net retail P50.60 or less – P19 per liter
price* More than P50.60 – P22 per liter
P28.00 per liter effective on
January 1, 2016 Net retail P50.60 or less – P21 per liter
January 1, 2013, and
price* More than P50.60 – P23 per liter
increased by 4% every year
January 1, 2017 All P23.50 per liter
thereafter on January 1, 2014.
January 1, 2018 All Increased by 4% every year
thereafter
*excluding the excise tax and the value-added tax

 However, in case of fermented liquors affected by the “no downward reclassification” provision
prescribed under this Section, the 4% increase shall apply to their respective applicable tax rates.

Reyes, Lalaine M.
 Illustration:
MAA, Inc., a beer manufacturer, produces the following: LUV brand, NRP of P21.50 per liter and
currently taxed at P15.49 under R.A. 9334. GIV brand, NRP of P51.50 per liter and currently taxed at
P20.57 under R.A. No. 9334. What is the applicable excise tax rate on MAA, Inc.’s LUV and GIV
brands on January 1, 2014?

Answer: Due to the prohibition on downward reclassification on fermented liquors, MAA. Inc. should
apply the following tax rates:
LUV Brand
 January 1, 2013: Applicable tax rate is P15.49 per liter instead of the specific tax of P15.00 per
liter (since NRP of P21.50 is less than P50.60) classified imposed under the Act.
 January 1, 2014: Applicable tax rate is P17.00 per liter instead of the specific tax rate of P16.10
(15.49 x 104%).
GIV Brand
 January 1, 2013: Applicable tax rate is 20.57 per liter instead of the specific tax rate of P20.00
(since NRP of P51.50 is more than P50.60) classified imposed under the Act.
 January 1, 2014: Applicable tax rate is P21.39 (P20.57 x 104%) per liter instead of the specific
tax rate of P21.00. (Section 5, Revenue Regulations, No. 17-2012).

Other matters
 Suggested net retail price – net retail price at locally manufactured or imported distilled spirits are
intended by the manufacturer or importer to be sold on retail in major supermarkets or retail
outlets in Metro Manila for those marketed nationwide, and in other regions, for those with
regional markets.
 Net retail price – price at which the alcohol products is sold on retail in at least 5 major
supermarket s in Metro Manila, excluding the amount intended to cover the applicable excise tax
and the VAT
 Major supermarkets – those with the highest annual gross sales in Metro Manila or the region, as
the case may be, as determined by the National Statistics Office, and shall exclude retail outlets or
kiosks, convenience or sari-sari stores, and others of similar nature
 Understatement of the suggested net retail price by as much as 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.

2. Excise Tax on Tobacco Products

As amended by Revenue Regulations No. 3-2018 pursuant to the Provisions of RA No. 10963 (TRAIN Law)

Excise Tax on Tobacco Products

Section 144. Tobacco Products – There shall be collected an excise tax of P1.75 effective on January 1,
2013 on each kilogram of the following products of tobacco:

Reyes, Lalaine M.
 Tobacco Products Excise tax rates Basis
Tobacco twisted by hand or reduced into a condition to be P1.75 Per kilogram
consumed in any manner other than the ordinary mode of
drying and curing
Tobacco prepared or partially prepared with or without the P1.75 Per kilogram
use of any machine or instruments or without being pressed
on sweetened except as otherwise provided hereunder; and
Fine-cut shorts and refuse, scraps, clippings, cuttings, stems P1.75 Per kilogram
and sweepings of tobacco
Tobacco specially prepared for chewing so as to be P1.50 Per kilogram
unsuitable for use in any other manner
* The rates of tax imposed shall be increased by 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 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 30 days from the effectivity of this
Act and within the first 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 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 or her permit to engage in business as manufacturer or importer
of cigars or cigarettes.

Excise Tax on Cigars

 Cigars – mean all rolls of tobacco or any substitute thereof, wrapped in leaf tobacco.

Section 145 (A). Cigars – there shall be levied, assessed and collected on cigars an excise tax in
accordance with the following schedule:

Effectivity Tax
January 1, 2013 Ad valorem tax of 20% of the net retail price (excluding the excise tax
and the value-added tax) per cigar; and

Specific tax of P5.00 per cigar.

January 1, 2014 and Ad valorem tax of 20% of the net retail price (excluding the excise tax
thereafter and the value-added tax) per cigar; and

Increased specific tax by 4% per cigar.

Reyes, Lalaine M.
Excise Tax on Cigarettes (amended by TRAIN)
 Cigarettes – all rolls of finely-cut leaf tobacco, or any substitute therefor, wrapped in paper or in
any other material.

Section 145 (B) (C). Cigarettes – there shall be levied, assessed and collected on cigarettes packed by
hand and machine an excise tax based on the following schedules:

Effectivity January 1, 2018 July 1, 2018 January 1, 2020 January 1, 2022 January 1, 2024
Tax rate P32.50 P35.00 P37.50 P40.00 4% increase in
rate every year

 Duly registered cigarettes packed by hand shall only be packed in 20s and other packaging
combinations of not more than 20.
 Understatement of the suggested net retail price by as much as 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.
 Vetoed: Incremental revenues from tobacco taxes shall be subject to Section 3 of the Act to
Promote the Development of the Farmer in the Virginia Tobacco Producing Provinces.

Inspection Fees on Tobacco Products

Section 146. Inspection Fee – for inspection made in accordance with this Chapter, there shall be
collected a fee of:

Rates
P0.50 For each thousand cigars or fraction thereof
P0.10 For each thousand cigarettes or fraction thereof
P0.02 For each kilogram of leaf tobacco or fraction thereof
P0.03 For each kilogram or fraction thereof, of scrap and other manufactured tobacco

 The inspection fee on leaf tobacco, scrap, cigars, cigarettes, and other tobacco products as defined
shall be paid by the wholesaler, manufacturer, producer, owner, or operator of re-drying 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.
 50% of the tobacco inspection fee shall accrue to the Tobacco Inspection Fund created by Section
12 of Act No. 613, as amended by Act No. 3179, and 50% shall accrue to the Cultural Center of
the Philippines.

Reyes, Lalaine M.
 3. Excise Tax on Petroleum Products
As amended by Revenue Regulations No. 2-2018 pursuant to the Provisions of RA No. 10963 (TRAIN Law)

Excise Tax on Petroleum Products

Section 148. 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 hereunder
enumerated as soon as they are in existence as such:

Description and basis of tax Old Law 2018 2019 2020

1
Lubricating oils (per L) and greases (per kg) P4.50
Processed gas (per L)
2 P0.05 P8.00
Denatured alcohol for motive power (per L)
P9.00 P10.00
Waxes and petrolatum (per kg) P3.50
3
Naphtha, regular and pyrolysis gasoline (per L)
P4.35 P7.00
Unleaded premium gasoline (per L)
Aviation turbo jet fuel (per L) P3.67 P4.00 P4.00
4 P4.00
Kerosene (per L) P3.00 P5.00
Diesel fuel oil (per L) P0.00 P2.50 P4.50 P6.00
5
Liquefied petroleum gas (per kg) P1.00 P2.00 P3.00
Asphalts (per kg) P0.56 P8.00 P9.00 P10.00
6
Bunker fuel oil (per L) P0.00
7 P2.50 P4.50 P6.00
Petroleum Coke (per metric ton) N/A

Additional notes:
1
Lubricating oils and greases – if produced from basestocks and additives on which the excise tax
has already been paid shall no longer be subject to excise tax, provided, further, that locally produced
or imported oils previously taxed as such but are subsequently reprocessed, re-fined or recycled shall
likewise be subject to the tax imposed under this Section.
2
Denatured alcohol – if mixed with gasoline, excise tax on which has already been paid, only the
alcohol content shall be subject to the tax herein prescribed. For purposes of this Subsection, the
removal of denatured alcohol of not less than 180o proof shall be deemed to have been removed for
motive power, unless shown otherwise.
3
Naphtha and pyrolysis gasoline – if used as a raw material in the production of petrochemical
products, or in the refining of petroleum products, or as replacement fuel for natural-gas-fired-
combined cycle power plant in lieu of locally-extracted natural gas during the non-availability
thereof, per liter of volume capacity, P0.00.
4
Kerosene – when used as aviation fuel, shall be subject to the same tax on aviation turbo jet fuel,
such tax to be assessed on the user thereof.
5
Liquefied petroleum gas – when used as raw material in the production of petrochemical products,
shall be taxed P0.00 per kilogram, provided, finally, that LPG used for motive power shall be taxed
at the equivalent rate as the excise tax on diesel fuel oil.
6
Bunker fuel oil – excise taxes paid on the purchased basestocks (bunker) used in the manufacture
of excisable articles and forming part thereof shall be credited against the excise tax due therefrom
(to be illustrated).
7
Petroleum Coke – when used as feedstock to any power generating facility, P0.00 per metric ton.

Reyes, Lalaine M.
Exempt from Excise Tax
Manufactured oils and other fuels
Naphtha and pyrolysis gasoline
Petroleum products
Liquefied petroleum gas
Petroleum coke
Description
Used as raw material in the production of petrochemical
products or in the refining of petroleum products, or as
replacement fuel for natural-gas-fired-combined cycle power
plant
Production, whether or not they are classified as products of
distillation and for use solely for production of gasoline
When used as raw material in the production of petrochemical
products
When used as feedstock to any power generating facility

Suspension of Schedule Increase

RR No. 2-2018. Section 5. Suspension of Schedule Increase– For the period covering 2018-2020, the
scheduled increase in the excise tax on fuel as imposed in this section shall be suspended when the
average Dubai crude oil based on Mean of Platts Singapore (MOPS) for 3 months prior to the scheduled
increase of the month reaches or exceeds 80$USD per barrel. A separate RR shall be issued for this
purpose.

Creditable excise tax6

RR No. 2-2018. Section 4. Creditable Excise Tax – The excise tax paid on the purchased basestock
(bunker) used in the manufacture of excisable articles and forming part thereof shall be credited against
the excise tax due thereon. For purposes of these regulations, any excess of excise taxes paid on raw
materials resulting from manufacturing, blending, processing, storage, and handling losses shall not give
rise to a tax refund or credit.

Illustration:
(1) Volume of raw materials used is less than the volume of the finished goods produced and removed:
A manufacturer removed 1,000 kilograms of asphalts on June 30, 2016. Based on his production
records, the manufacturer purchased and used 900 liters tax-paid bunker fuel to produce 1,000
kilograms of asphalts. Compute the excise tax due from the manufacturer on his removal of 1,000
kilograms of asphalts.
Tax due on asphalts (1,000 kg x P0.56/kg) P560.00
Less: Creditable excise tax (900L x P0.30/L) P270.00
Balance of excise tax due P290.00
Only the excise tax paid on the raw materials used in production of 900L shall be allowed to be
credited on the finished goods produced and removed.

(2) Volume of raw materials used is more than the volume of finished goods produced and removed:
A manufacturer removed 1,000 kilograms of asphalts on June 30, 2016. Based on his production
records, the manufacturer purchased and used 2,000 liters tax-paid bunker fuel to produce 1,000
kilograms of asphalts. Compute the excise tax due from the manufacturer on his removal of 1,000
kilograms of asphalts.
Tax due on asphalts (1,000kg x P0.56/kg) P560.00
Less: Creditable excise tax (2,000L x P0.30/L) P600.00
Balance of excise tax due (P40.00)

Reyes, Lalaine M.
 The difference of P40.00 shall neither give rise to any claim for refund/credit against subsequent
removals.
(3) Partial use of purchased raw materials and treatment of the raw materials still in the inventory:
A manufacturer removed 1,000 kilograms of asphalts on June 30, 2016. On July 1 to 3, 2016, it
manufactured 1,500 kilograms of asphalts using 1,500 kilograms of bunker fuel as raw materials. On
July 4, 2016, the company removed from its production plant the entire production of 1,500 kilograms
of asphalts. Compute the excise tax due on such removal.
Tax due on asphalts (1,500kg x P0.56/kg) P840.00
Less: Creditable excise tax (1,500L x P0.30/L) P450.00
Balance of excise tax due P390.00
The excise tax paid on the 500 liters of bunker fuel oil but still in the inventory and did not form part of
the finished goods removed from production plant shall not be credited against the excise tax due on
the finished goods actually removed. This will be credited on the day when such raw materials shall
have been produced into asphalts and removed from place of manufacture. The same principle applies
if all raw materials were manufactured into asphalts but only partial removals of finished goods have
been effected.

(4) Tax-exempt removals of finished goods using tax-paid raw materials:

A manufacturer purchased 1,000 liters of tax-paid bunker fuel on June 30, 2012. The tax-paid bunker
fuel were all used and formed part of the 1,000 kilograms of manufactured asphalts. These asphalts
were all removed on July 5, 2012, 500 kilograms of which were removed and delivered to a tax-exempt
entity enjoying tax exemption. Compute the excise tax due on the transactions.
Taxable removals (500kg x P0.56/kg) P280.00
Less: Creditable excise tax (500L x P0.30/L) P150.00
Balance of excise tax due P130.00
The excise tax paid on raw materials attributable to the production and removal of tax exempt finished
goods shall not be considered allowable tax credit but the same forms part of its production costs.

Mandatory Marking of All Petroleum Products

RR No. 2-2018. Section 6. Mandatory Marking of All Petroleum Products – The use of an official fuel
marking or similar technology on petroleum products that are refined, manufacture, or imported into the
Philippines, and that are subject to the payment of taxes and duties, such as but not limited to unleaded
premium gasoline, kerosene, and diesel fuel oil shall be required. It shall be implemented in accordance
with rules and regulations to be issued by the Secretary of Finance in consultation with the Commissioner
of Internal Revenue and Commissioner of Customs and in coordination with the Secretary of Energy.

4. Excise Tax on Miscellaneous Articles

Excise Tax on Automobiles (TRAIN)

Section 149. 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 tax, in
accordance with the following schedule: provided, that hybrid vehicles shall be taxed at 50% of the
applicable tax rates on automobiles subject to the conditions in section 9(E) of this regulations: provided,
further, 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, customs custody and all other charges.

Reyes, Lalaine M.
 Over Up to Excise Tax Rate If Hybrid Vehicle (50%)
P600,000 4% 2%
P600,00 P1,000,000 10% 5%
P1,000,000 P4,000,000 20% 10%
P4,000,000 50% 25%

 Hybrid electric vehicle (as amended) – shall refer to a motor vehicle powered by electric energy,
with or without provision for off-vehicle charging, in combination with gasoline, diesel or any
other motive power: provided, that for purposes of this act, a hybrid electric vehicle must be able
to propel itself from a stationary condition using solely electric motor.
 Automobiles used exclusively within the Freeport Zone shall be exempt from excise tax.
 Tax-exempt removals of automobiles:
o Purely electric vehicles shall be exempt from the excise tax on automobiles;
o Pick-ups

Excise Tax on Non-Essential Goods

Section 150. Non-essential goods – there shall be levied, assessed and collected a tax equivalent to 20%
based on the wholesale price or the value of importation used by the BOC in determining tariff and
customs duties, net of excise tax and value-added tax, of the following goods:
 All goods commonly or commercially known as jewelry, whether real or imitation, pearls,
precious and semi-precious stones and imitations thereof; goods made of, or ornamented,
mounted or fitted with, precious metal or imitation thereof or ivory (not including surgical and
dental instruments, silver-plated wares, frames, or mountings for 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
 Perfumes and toilet waters
 Yachts and other vessels intended for pleasure or sports

Excise Tax on Non-Essential Services (introduced by TRAIN)

RR No. 2-2019. Section 1. Scope – pursuant to RA No. 10963, these regulations are hereby promulgated
to implement Section 150A on the excise tax on non-essential services of the NIRC, as introduced by
Section 46 of the TRAIN Law.

Invasive Cosmetic Procedure Non-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.
 Liposuction
 Mammoplasty
 Breast lift
 Buccal fat removal
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 contact with mucosa, or skin
break, or internal body cavity beyond a natural or
artificial body orifice.
 Acupuncture rejuvenation therapy
 Air dissector
 Botulinum toxin injection or treatment
 Collagen induction therapy

Reyes, Lalaine M.
  Buttocks augmentation  Dermal fillers
 Chin augmentation  Non-surgical face lifting and skin
 Facelift or neck lift tightening using radio frequency,
 Thread lift ultrasound, infrared
 Embedded protein threads  Carbon dioxide fractional laser
 Hair restoration or transplantation resurfacing
 Eyelid surgery  Laser and light treatments
 Vaginal plastic surgery  Body treatments and contouring
 Abdominoplasty or tummy tuck procedures
 Auto grafting  Cleanings and facials
 Rhinoplasty or alar trimming  Peelings (face and body)
 Otoplasty  Injectables and weight management
treatment

RR No. 2-2019. Section 3. Rate and Base of Excise Tax – there shall be levied, assessed, and collected,
and excise tax equivalent to:

On gross receipts derived
from the performance of
5%
services, net of excise tax
and value-added tax
On invasive cosmetic procedures, surgeries and body enhancements
directed solely towards improving, altering, or enhancing the
patient’s appearance and do not meaningfully promote the property
functions of the body or prevent or treat illness or disease

 Gross receipts shall mean 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 5% excise tax and value-added tax.
 For purposes of determining the VAT base, the gross receipts shall be inclusive of the 5% excise
tax.
 Exclusions:
o Procedure to ameliorate deformity related to
 Congenital/development defect or abnormality
 Injury arising from accident or trauma
 Disfiguring disease, tumor, virus or infection
o Cases and treatments covered by the National Health Insurance Program
o Non-invasive cosmetic procedures
 Any person whether natural or juridical, performing 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 and liable to pay excise tax shall file a return of its monthly gross receipts using
BIR Form No. 2200-C, together with the Monthly Summary of Cosmetic Procedures Performed.
o Filed and paid within 10 days following the close of the month.

Reyes, Lalaine M.
 Illustration:
(1) Where the invasive cosmetic procedure is performed in a clinic or any place outside 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 P50,000 (inclusive of 12% VAT but exclusive of 5% excise
tax) for the service rendered. Calculate the 5% excise tax and total amount to be collected from Miss X.
Original Price (inclusive of VAT) P50,000.00
Gross Receipts (net of 12% VAT) (50,000/112%) P44,642.85
Add: 5% Excise Tax (44,642.85 x 5%) 2,232.15
12% VAT [(44,642.85+2232.15) x 12%] 5,625.00
Total Amount to be Collected from Miss X P52,500.00

Journal entry:
Cash 52,500.00
Excise tax expense 2,232.15
Excise tax payable 2,232.15
Output VAT 5,625.00
Service Income 46,875.00

Assuming that the amount of P50,000 is inclusive of both 12% VAT and 5% excise tax, compute the
excise tax and total amount to be collected from Miss X.
Original Price (inclusive of VAT and excise) P50,000.00
Gross Receipts (net of 12% VAT) (50,000/112%) P44,642.85
Gross Receipts (net of excise and VAT (44,642.85/105%) P42,517.01
Add: 5% Excise Tax (42,517.01 x 5%) 2,125.85*
12% VAT (44,642.86 x 12%) 5,357.14
Total Amount to be Collected from Miss X P50,000.00
*To be remitted by Melo Medical Group, Inc.

(2) Where the procedure is performed within a hospital

Same facts as in (1), 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 Miss X other fees
(e.g. supplies and fees for the use of operating room and hospital facilities) in the amount of P20,000,
in addition to the fees charged by Doctor P of P50,000 (inclusive of 12% VAT, excluding excise) for
the service performed.
Billings by Hospital (VAT exempt)1 P20,000.00
Add: 5% Excise Tax (20,000 x 5%) 1,000.00
Doctor’s Fee (50,000/112%)2 44,642.85
Add: 5% Excise Tax (44,642.86 x 5%) 2,232.15
12% VAT [(44,642.85+2232.15) x 12%] 5,625.00
Total Amount to be Collected from Miss X P73,500.00
1
Medical, dental, hospital and veterinary services are exempt from VAT under Section 109(G) of NIRC,
as amended, except those rendered by professionals.
2
Doctor P is presumed to be self-employed and his annual receipts exceeded the VAT threshold.
*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 and shall file a return of its monthly gross receipts using
BIR Form No. 2200-C and remit the 5% excise tax of P2,232.15 collected from the client, together with
the Monthly Summary of Cosmetic Procedures Performed, as required.

Reyes, Lalaine M.
Excise Tax on Sweetened Beverages (introduced by TRAIN)

RR No. 20-2019. Section 1. Scope – pursuant to RA No. 10963, these regulations are hereby promulgated
to implement Section 150A on the excise tax on sweetened beverages, of the NIRC, as introduced by
Section 46 of the TRAIN Law.

Sweetened beverages (SBs) refer to non-alcoholic beverages of any constitution (liquid, powder, or
concentrates) that are pre-packaged and sealed in accordance with the FDA standard, that contain caloric
and/or non-caloric sweeteners added by the manufacturers, and shall include, but not be limited to the
following:
 Sweetened juice drinks;
 Sweetened tea;
 All carbonated beverages;
 Flavored water;
 Energy and sports drinks;
 Other powdered drink not classified as milk, juice, tea, and coffee;
 Cereal and grain beverages; and
 Other non-alcoholic beverages that contain added sugar.

Description of sweetened beverages Basis and rate of tax

Using purely caloric and purely non-caloric
P6.00 per liter
sweeteners, or a mixture of both
Using purely high fructose corn syrup or in
combination with any caloric or non-caloric P12.00 per liter
sweetener
Using purely coconut sap sugar and steviol
Exempt
glycosides

Not considered excisable products

 All milk products
 Soymilk and flavored soymilk
 100% natural fruit juices
 100% natural vegetable juices
 Meal replacement and medically indicated beverages
 Ground, insoluble, and prepacked powdered coffee products

Persons liable
 For locally manufactured sweetened beverages
o All manufacturers of sweetened beverages
o Person having possession of domestically manufactured sweetened beverages removed
from the place of production without the payment of the tax
 For imported sweetened beverages
o All owners or importers of sweetened beverages
o Person having possession of imported sweetened beverages removed from customs
custody without the payment of the tax

Reyes, Lalaine M.
 Illustration:
(1) 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 6 bottles of 1.5 liters each. Calculate the excise
tax to be paid.
No. of cases 100
Multiply by: no. of bottles per case 6
Total no. of bottles 600
Multiply by: content per bottle 1.5L
Total Volume in Liters 900L
Multiply by: specific tax rate P12
Total excise tax to be paid before removal P10,800

(2) 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 1L (per serving suggestion appearing on the label). Calculate the excise tax to be paid.
No. of cases 50
Multiply by: no. of bottles per case 144
Total no. of bottles 7,200
Multiply by: content per bottle 1L
Total Volume in Liters 7,200L
Multiply by: specific tax rate P6
Total excise tax to be paid before removal P43,200

 Sweetened beverages products intended for exports may be removed from the place of production
without prepayment of excise tax, subject to the terms and conditions laid down by the law.

5. Excise Tax on Mineral Products

Excise Tax on Mineral Products (amended by TRAIN)

Section 151. Mineral Products – there shall be levied, assessed and collected on minerals, mineral
products and quarry resources, excise tax as follows:

Mineral Product Basis and rate of tax

Old Law – P10 per metric ton
2018 – P50 per metric ton
Coal and coke products
2019 – P100 per metric ton
2020 onwards – P150 per metric ton
If locally extracted – 4% of actual market value
of gross output
Non-metallic and metallic In case of importation – 4% of value used by
BOC in determining tariff and customs duties, net
of excise tax and VAT
6% of the fair international market price thereof
Indigenous products on the first taxable sale, barter, exchange or such
similar transaction

Reyes, Lalaine M.
  Indigenous products – tax to be paid by the buyer or purchaser before removal from the place of
production.
o First taxable sale, barter, exchange or such similar transaction means the transfer of
indigenous petroleum in its original state to a first taxable transferee
 For the purpose of this Subsection, indigenous petroleum shall include locally-extracted mineral
oil, hydrocarbon gas, bitumen, crude asphalts, mineral gas and all other similar or naturally
associated substances with the exception of coal, peat, bituminous shale and/or stratified mineral
deposits.

References:
Biscocho, L. (2019). Exicse Taxes. PWC.
De Leon, H. (2016). The Law on Transfer and Business Taxation.
Tax Code
Revenue Regulations

Reyes, Lalaine M.