REVENUE REGULATIONS NO. 17-2012 issued on December 26, 2012 prescribes the implementing guidelines on the revised tax rates on alcohol and tobacco products pursuant to the provisions of Republic Act (RA) No. 10351 and clarifies certain provisions of existing Revenue Regulations (RR). The Excise Tax on alcohol or tobacco products shall be levied, assessed and collected in accordance with the schedule specified in the Regulations. Any alcohol or tobacco product that is introduced in the domestic market on or after the effectivity of RA No. 10351 shall be initially tax classified according to their suggested net retail prices as declared in the prescribed manufacturer’s or importer’s sworn statement, subject to the initial validation and revalidation requirements prescribed under RR No. 3-2006, as amended by Section 6 of these Regulations. In case of an alcohol and or tobacco product that was duly registered with the BIR before the effectivity of the Act but was not tax classified by the BIR according to the new tax rates provided under the Act, such product shall be treated as a newly introduced product upon re-introduction thereof in the domestic market after the effectivity of the Act. Accordingly, the tax classification thereof shall be based on the suggested net retail price declared in the aforesaid sworn statement, subject to the initial validation and revalidation requirements. The proper tax classification of all fermented liquors and tobacco products, whether registered before or after the effectivity of the Act, shall be determined every two (2) years from the date of effectivity of the Act. For purposes of tax classification, alcohol or tobacco products, whether imported or domestically manufactured, shall be taxed according to their individual brand name (whether or not with prefix or suffix), color and/or design of label (such as logo, font, picturegram, and the like), manner and/or form of packaging or size of container of the product. Accordingly, the following instances, but not limited to, shall be taxed differently: a. Two products bearing exactly the same root name but with different suffixes or prefixes b. Two products bearing exactly the same brand name but with different colors and/or design of labels c. Two products bearing exactly the same brand name and label but with different forms of packaging (e.g., soft packs and hard packs for cigarettes, or in bottles, cans or kegs for alcohol products) d. Two products bearing exactly the same brand name and label but with different sizes of container (e.g., one liter, 500 ml., 330 ml., etc., for alcohol products) e. One product is sold on a regular basis while the other product is introduced on a limited basis such as a special edition, for specific occasion and other similar instances Any downward reclassification of any fermented liquor product that is duly registered with the BIR at the time of effectivity of the Act, which will reduce the tax imposed herein, or the payment thereof, shall be prohibited. Starting January 1, 2014, the applicable tax rate shall be increased by 4% annually: Provided, however, it shall not be lower than the rates prescribed under Section 3 of these Regulations. The revalidation of the suggested net retail price of a newly introduced alcohol or tobacco product shall be conducted after the end of nine (9) months from the initial validation. The initial validation and revalidation of the suggested net retail price of all newly introduced alcohol and tobacco products shall be conducted exclusively by the authorized representatives of the BIR. For the initial registration of alcohol or tobacco product, every local manufacturer or importer of alcohol and tobacco products shall submit a duly notarized manufacturer’s or importer’s sworn statement for alcohol or tobacco product showing the information specified in the Regulations. Thereafter, an updated sworn statement shall be submitted on or before the end of the months of June and December of the year: Provided, however, That whenever there is a change in the cost to manufacture, produce and sell the brand or change in the actual selling price of the brand, the updated sworn statement shall be submitted at least five (5) days before the actual removal of the product from the place of production or release from the customs’ custody, as the case may be: Provided, further, that if the manufacturer or importer sells or allows such goods to be sold at wholesale in another establishment of which he is the owner or the profits thereof of which he has an interest, the selling price in such establishment shall constitute the wholesale price. Should such price be less than the said costs and expenses, a proportionate margin of profit of not less than 10% thereof shall be added to constitute the wholesale price. With respect to imported alcohol or tobacco products, the cost of importation shall, in no case, be less than the value indicated in the reference books or any other reference materials used by the Bureau of Customs in determining the proper valuation of the imported products, or the dutiable value as defined under the Tariff and Customs Code of the Philippines, as amended, whichever, is higher: Provided, finally, That, in case the newly introduced alcohol or tobacco product shall be subsequently marketed in another region/other regions before the proper tax classification is finally determined by the BIR, an updated sworn statement shall be submitted to the appropriate BIR office before the same shall be removed from the place of production. The sworn statement prescribed herein shall be subject to verification by the BIR to validate its contents with respect to its accuracy and completeness. In the event that the contents thereof are found to be inaccurate and/or incomplete, the taxpayer shall be required to submit a revised sworn statement, without prejudice to the imposition of corresponding sanctions and penalties. The 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. The provision of any special or general law to the contrary notwithstanding, the importation of alcohol or tobacco products, even if destined for tax and duty-free shops, Duty Free Philippines or into the chartered or legislated economic and/or freeport zones shall be subject to Excise Tax pursuant to the provisions of the Act: Provided, however, That, upon the effectivity of the Act, the importation of any alcohol or tobacco product bearing suffixes or prefixes to the root name, color and/or design of the label (such as logo, font, picturegram, and the like), manner and/or form of packaging or size of container of the product that is different from that already registered and locally being sold in the domestic market shall be treated as a newly introduced product. Accordingly, the same shall be initially classified according to its suggested net retail price, subject to the validation and revalidation requirements prescribed by these Regulations. 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. All cigarettes whether packed by hand or packed by machine shall only be packed in 20s, and through other packaging combinations which shall result to not more than 20 sticks of cigarettes: Provided, That, in case of cigarettes packed in not more than 20 sticks, whether in 5 sticks, 10 sticks and other packaging combinations below 20 sticks, the net retail price of each individual package of 5s, 10s, etc. shall be the basis of imposing the tax rate prescribed under the Act. Upon the effectivity of the Act, the following transitory provisions shall be strictly observed by all concerned: a. All alcohol and tobacco products existing in the market at the time of the effectivity of this Act shall be initially classified according to the tax rates prescribed by the Act based on the 2010 price survey of these products conducted by the BIR, subject to the prohibition against downward reclassification on fermented liquors: Provided, however, That in case of alcohol and/or tobacco products that were introduced after the 2010 price survey but before the effectivity of the Act, their respective tax classification or rate shall be based on the suggested net retail price declared in latest sworn statement filed by the local manufacturer or importer, as the case may be. The Commissioner of Internal Revenue shall issue a Revenue Memorandum Circular containing the tax classifications/rates applicable to all alcohol and tobacco products existing in the market at the time of the effectivity of the Act. b. For purposes of determining the actual volume of locally manufactured alcohol and tobacco products that shall be imposed with the new tax rates upon the removal thereof from the place of production, an actual stocktaking shall be conducted by the BIR on all stocks of locally manufactured alcohol and tobacco products held in possession by the manufacturer as of the effectivity of the Act. c. The specific tax that was paid on the physical inventory of ethyl alcohol held in possession by manufacturers of compounded liquors as of the effectivity of the Act subsequently used as raw materials in the production of compounded liquors shall not be entitled to tax credit/refund or shall not be deducted from the total Excise Tax due on compounded liquors. Violations of these Regulations shall be subject to the corresponding penalties under Title X of the National Internal Revenue Code (NIRC) of 1997, as amended. Further, the following penalty provisions are hereby prescribed pursuant to the provisions of the Act, as follows: a. Any manufacturer or importer who misdeclares or misrepresents in his or its sworn statement herein required any pertinent data or information shall, upon discovery, be penalized by a summary cancellation or withdrawal of his or its permit to engage in business as a manufacturer or importer of alcohol or tobacco products; b. Any corporation, association or partnership liable for any of the acts or omissions in violation of the Act and implemented by these Regulations shall be fined treble the aggregate amount of deficiency taxes, surcharges and interest which may be assessed pursuant to the provisions of the Act; c. Any person liable for any of the acts or omission prohibited under the Act and implemented by these Regulations shall be criminally liable and penalized under Section 254 of the NIRC of 1997, as amended; and d. If the offender is not a citizen of the Philippines, he shall be deported immediately after serving the sentence, without further proceedings for deportation.