40% Ad Valorem Tax Imposed on Cigarettes Packed in Twenties

February 12, 1988 BIR RULING NO. 044-88 142 000-00 044-88 Gentlemen : This refers to your letter dated November 5, 1987, requesting a ruling in behalf of your client, Philip Morris Incorporated, a U.S. corporation, which is the owner of a number of trademarks in the Philippines several of which have been used and are currently being used for cigarettes which are manufactured and sold in the Philippines. The ruling desired involves the interpretation of Section 142 (formerly Section 126) of the Tax Code, as amended by Executive Order No. 273 effective January 1, 1988 as to the rate of ad valorem tax applicable to locally-produced cigarettes bearing a foreign brand which is not in the listing of brands manufactured in foreign countries appearing in the current World Tobacco Directory. Pertinent portion of said Section 142 (formerly Sec. 126) provides: xxx xxx xxx "(c) Cigarettes packed in twenties . There shall be levied, assessed and collected on cigarettes packed in twenties an ad valorem tax at the rates prescribed below based on the manufacturer's registered wholesale price: "(1) On locally manufactured cigarettes bearing a foreign brand, fifty percent (50%): Provided, That this rate shall apply regardless of whether or not the right to use or title to the foreign brand was sold or transferred by its owner to the local manufacturer. Whenever it has to be determined whether or not a cigarette bears a foreign brand, the listing of brands manufactured in foreign countries appearing in the current World Tobacco Directory shall govern. "(2) On other locally manufactured cigarettes, forty percent (40%)." In reply, please be informed that under the underlined portion of the above-quoted provision, locally-produced cigarettes bearing a foreign brand which is not listed in World Tobacco Directory are not considered cigarettes bearing a foreign brand subject to the 50% ad valorem tax. Accordingly, said cigarettes are subject to the 40% ad valorem tax which is imposed "on other locally manufactured cigarettes" packed in twenties. cdtech Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner