BIR Ruling [DA-170-97]

April 15, 1997 BIR RULING [DA-170-97] Metro Pacific Corporation 41-42/F Rufino Pacific Tower Ayala Avenue cor. Herrera St. Makati City Attention: Atty. Rene G. Banez Group Tax Director Gentlemen : This refers to your letter dated February 03, 1997 in effect requesting for a ruling on the correct classification of Reunite wines for purposes of applying the new specific tax rates under Republic Act No. 8240. It appears that Reunite wine is an effervescent (bubbling) table wine containing an average of 9% of alcohol by volume and which is carbonated by artificial means through CO 2 injection and not by secondary fermentation; that the comparative production process of sparkling wine and Reunite wines are indicated below: CHAMPAGNE PRODUCTION REUNITE WINE PRODUCTION 1. Blending 1. Blending 2. 1st Fermentation (1-3 weeks) 2. Fermentation 3. Clarification (1-2 months) 3. Clarification 4. Assessment/Blending & Bottling 4. Chilling/Precipitation 5. 2nd Fermentation (2 months) 5. Final Adjustments Filtration 6. Maturation (6-12 months) 6. Carbonation CO2 (one day) 7. Remuage (Yeast Settlement) 2 months 7. Micro-Filtration 8. Disgorging and Sweetening 8. Bottling In reply, please be informed that under Revenue Regulations No. 2-97, sparkling wine is defined as an effervescent table wine usually white but occasionally red in color, containing an average of 12% alcohol by volume which is carbonated by secondary fermentation. This includes champagne. This definition shows that neither its production process nor alcohol content will justify the categorization of Reunite wine as sparkling wine. Applying the rule that tax burdens are always strictly construed against the taxing authority, it is our opinion Reunite wine does not meet the criteria for sparkling wine from the aspect of production process and alcohol content. The resulting doubt therefore, should be resolved in favor of the taxpayer; thus, in the instant case Reunite wine shall be classified as still wine subject to the specific tax rate of P12.00 per liter of volume capacity pursuant to Section 3 of Revenue Regulation No. 2-97, implementing Republic Act No. 8240. aHATDI Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue