AAC Tax Code.

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

(1) Effective on January 1, 2013

(a) An ad valorem tax equivalent to twenty percent (20%) of the net retail price (excluding the excise tax and the value-added tax) per cigar; and

(b) In addition to the ad valorem tax herein imposed, a specific tax of Five pesos (P5.00) per cigar.

(2) In addition to the ad valorem tax herein imposed, the specific tax rate of Five pesos (P5.00) imposed under this subsection shall be increased by five percent (5%) effective on January 1, 2024²⁴¹ through revenue regulations issued by the Secretary of Finance.

‘Net retail price’ shall mean the price at which the cigar is sold on retail in at least five (5) major supermarkets in Metro Manila (for brands of cigar marketed nationally), excluding the amount intended to cover the applicable excise tax and the value-added tax. For cigars which are marketed only outside Metro Manila, the ‘net retail price’ shall mean the price at which the cigar is sold in at least five (5) major supermarkets in the region excluding the amount intended to cover the applicable excise tax and the value-added tax. This shall be provided by the manufacturer or importer through a sworn statement and shall be validated by the Bureau of Internal Revenue (BIR) through a price survey.

Major supermarkets, as contemplated under this Act, shall be those with the highest annual gross sales in Metro Manila or the region, as the case may be, as determined by the BIR, and shall exclude retail outlets or kiosks, convenience or sari-sari stores, and others of a similar nature: Provided, That no two (2) supermarkets in the list to be surveyed are affiliated and/or branches of each other: Provided, finally, That in case a particular cigar is not sold in major supermarkets, the price survey

can be conducted in retail outlets where said cigar is sold in Metro Manila or the region, as the case may be, upon determination of the Commissioner of Internal Revenue.

The net retail price shall be validated by the BIR through a biannual price survey under oath.

The methodology and all pertinent documents used in the conduct of the latest price survey shall be submitted to the Congressional Oversight Committee on the Comprehensive Tax Reform Program created under Republic Act No. 8240.²⁴²

(B) Cigarettes Packed by Hand. — There shall be levied, assessed and collected on cigarettes packed by hand an excise tax based on the following schedules:

Effective on January 1, 2020, Forty-five pesos (P45.00) per pack;

Effective on January 1, 2021, Fifty pesos (P50.00) per pack;

Effective on January 1, 2022, Fifty-five pesos (P55.00) per pack;

Effective on January 1, 2023, Sixty pesos (P60.00) per pack;²⁴³

The rates of tax imposed under this subsection shall be increased by five percent (5%)²⁴⁴ every year effective on January 1, 2024,²⁴⁵ through revenue regulations issued by the Secretary of Finance.

Duly registered cigarettes packed by hand shall only be packed in twenties and other packaging combinations of not more than twenty (20).²⁴⁶

‘Cigarettes packed by hand’ shall refer to the manner of packaging of cigarette sticks using an individual person’s hands and not through any other means such as a mechanical device, machine or equipment.

(C) Cigarettes Packed by Machine. — There shall be levied, assessed and collected on cigarettes packed by machine a tax at the rates prescribed below:

Effective on January 1, 2020, Forty-five pesos (P45.00) per pack;

Effective on January 1, 2021, Fifty pesos (P50.00) per pack;

Effective on January 1, 2022, Fifty-five pesos (P55.00) per pack;

Effective on January 1, 2023, Sixty pesos (P60.00) per pack;²⁴⁷

The rates of tax imposed under this subsection shall be increased by five percent (5%)²⁴⁸ every year thereafter effective on January 1, 2024,²⁴⁹ through revenue regulations issued by the Secretary of Finance.

Duly registered cigarettes packed by machine shall only be packed in twenties and other packaging combinations of not more than twenty (20).

Understatement of the suggested net retail price by as much as fifteen percent (15%) of the actual net retail price shall render the manufacturer or importer liable for additional excise tax equivalent to the tax due and difference between the understated suggested net retail price and the actual net retail price.

No tobacco products manufactured in the Philippines and produced for export shall be removed from their place of manufacture or exported without posting of an export bond equivalent to the amount of the excise tax due thereon if sold domestically: Provided, however, That tobacco products

for export may be transferred from the place of manufacture to a bonded facility, upon posting of a transfer bond, prior to export.

Tobacco products imported into the Philippines and destined for foreign countries shall not be allowed entry without posting a bond equivalent to the amount of customs duty, excise and value-added taxes due thereon if sold domestically.

Manufacturers and importers of cigars and cigarettes shall, within thirty (30) days from the effectivity of this Act and within the first five (5) days of every month thereafter, submit to the Commissioner a sworn statement of the volume of sales and removals for cigars and/or cigarettes for the three-month period immediately preceding.

Any manufacturer or importer who, in violation of this Section, misdeclares or misrepresents in his/her or its sworn statement herein required any pertinent data or information shall, upon final findings by the Commissioner that the violation was committed, be penalized by a summary cancellation or withdrawal of his/her or its permit to engage in business as manufacturer or importer of cigars or cigarettes.

Any corporation, association or partnership liable for any of the acts or omissions in violation of this Section shall be fined treble the aggregate amount of deficiency taxes, surcharges and interest which may be assessed pursuant to this Section.

Selling of tobacco products at a price lower than the combined excise and value-added taxes imposed under the law shall be prohibited. The seller of such products shall be punished with a fine of not less than ten (10) times the amount of excise plus value-added taxes due but not less than Two hundred thousand pesos (P200,000.00) nor more than Five hundred thousand pesos (P500,000.00), and imprisonment of not less than four (4) years but not more than six (6) years.

The BIR is mandated to issue a revenue regulation prescribing the cigarette floor price or the minimum cigarette price taking into account the sum of the excise and value-added taxes as provided herein.

Any person liable for any of the acts or omissions prohibited under this Section shall be criminally liable and penalized under Section 254 of this Code. Any person who willfully aids or abets in the commission of any such act or omission shall be criminally liable in the same manner as the principal.

If the offender is not a citizen of the Philippines, he/she shall be deported immediately after serving the sentence, without further proceedings for deportation.²⁵⁰