Taxability of Packed Cigarettes

November 2, 1990 BIR RULING NO. 207-90 142 (c) 000-00 207-90 Gentlemen : This refers to your letter dated September 4, 1989 requesting a ruling in behalf of your client, Philip Morris Products, Inc., a United States corporation which is reportedly 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 being requested is whether a locally manufactured brand of cigarettes packed in twenties introduced subsequent to the enactment of Section 142 of the Tax Code and sold at a registered wholesale price, including tax, not exceeding P3.60 per pack, would be subject to the same ad valorem tax rate of 15% prescribed for cigarettes packed in thirties regardless of whether the cigarettes bear a foreign brand. cdta In reply, please be informed in the negative. Section 142 (c)(1) of the Tax Code is explicit in its provisions that locally manufactured cigarettes packed in twenties are taxed at 50% if the cigarettes are bearing a foreign brand . This rate of tax applies even if the existing registered wholesale price of the cigarettes packed in twenties is P3.60 per pack, including tax, as long as said cigarettes bear a foreign brand. The last paragraph of subsection (c) which provides that if the wholesale price of cigarettes packed in twenties does not exceed P3.60 per pack including tax, the rate for cigarettes packed in thirties shall apply, is obviously intended to cover other locally manufactured cigarettes which are subject to 40% rate of ad valorem tax under subsection (c)(2) thereof. If the rule is otherwise, the difference in the rates of tax between locally manufactured cigarettes bearing a foreign brand and other locally manufactured cigarettes would be obliterated. It may be stated however, that the ad valorem tax rate of cigarettes packed in twenties (20's) was already modified by Republic Act No. 6956 amending Section 142(c) of the Tax Code, among others. Under the amendment, which took effect on July 5, 1990, locally-produced cigarettes bearing a foreign brand are now subject to ad valorem tax at the rate of 55%, cigarettes with a wholesale price that exceeds P4.00 per pack are taxed at 45% while those with wholesale price that does not exceed P4.00 per pack are subject to 20%. Accordingly, in your adverted query, the rate of ad valorem tax would be 55%. cd Very truly yours, (SGD.) JOSE U. ONG Commissioner