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Philippines Sin Tax Guidelines Published

By Mary Swire, Tax-News.com, Hong Kong

03 January 2013

The Philippines' Bureau of Internal Revenue has published guidelines on the country's new 'Sin Tax' law, which applies progressive increases to the taxation of alcohol and tobacco starting from January 1, 2013.

The legislation imposes new flat taxes on distilled spirits and cigars, as well as new VAT rates for these and for other products. The guidelines explain that alcohol and tobacco products currently in the market will be initially classified according to a 2010 price survey conducted by the Bureau of Internal Revenue (BIR), with items introduced since then classified using the suggested retail price as given in a sworn statement by the manufacturer or importer. These prices will be subject to validation by the BIR, followed by revalidation nine months later. An understatement of 15% or more will make the manufacturer or importer liable for additional excise tax equivalent to the tax due and the difference between the understated suggested net retail price and the actual net retail price.

Importers and manufacturers also have to provide other information, including expenses, details of packaging and the names of the regions where a brand is to be marketed. The sworn statement is to be resubmitted before the end of June and December each year, although an importer or manufacturer can submit a revised statement five days or more ahead of any change.

The proper tax classification will be determined every two years, and the guidelines further state that items will be taxed according to brand name, label design, and packaging. Variations, including suffixes or prefixes in brand name or differently coloured labels, will be subject to a separate tax assessment. Further, the downward reclassification of alcoholic drinks is not allowed.

The guidelines further clarify that imported alcohol and tobacco products are subject to excise tax, even when destined for duty-free areas or special economic or freeport zones. Tobacco products produced for export will not be allowed to leave their place of manufacture without the posting of an export bond, and a bond is also required for tobacco products imported in order to be re-exported.

TAGS: tax | value added tax (VAT) | sales tax | Philippines | excise duty | legislation | tax rates | retail | trade | free trade zone

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