Publishing Republic Act No. 5449, Amending Sections 133, 135 and 164 of the National Internal Revenue Code

November 20, 1968 REVENUE MEMORANDUM CIRCULAR NO. 44-68 SUBJECT : Publishing Republic Act No. 5449, Amending Sections 133, 135 and 164 of the National Internal Revenue Code TO : All Internal Revenue Officers and Others Concerned For the information and guidance of all concerned, there is quoted hereunder Republic Act No. 5449: "REPUBLIC ACT NO. 5449 "AN ACT INCREASING THE SPECIFIC TAX ON CERTAIN DISTILLED SPIRITS AND ON FERMENTED LIQUORS AND LIMITING TO DISTILLERIES THE PROCESS OF DENATURATION, AMENDING FOR THIS PURPOSE SECTIONS ONE HUNDRED THIRTY-THREE, ONE HUNDRED THIRTY-FIVE AND ONE HUNDRED SIXTY-FOUR OF THE NATIONAL INTERNAL REVENUE CODE. "Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled: "Section 1. Section one hundred thirty-three of the National Internal Revenue Code, as amended, is hereby further amended to read as follows: "Section 133. Specific tax on distilled spirits . On distilled spirits there shall be collected subject to the provisions of Section one hundred and twenty-eight of this Act, except as hereinafter provided, specific taxes as follows: LLpr "(a) If produced from sap of the nipa, coconut, cassava, camote, or buri palm, or from the juice, syrup, or sugar of the cane, per proof liter seventy-seven centavos: Provided, That if produced in a pot still or other similar primary distilling apparatus, by a distiller producing not more than one hundred liters a day, containing not more than fifty per centum of alcohol by volume, per proof liter, seventy centavos. "(b) If produced from any other materials, per proof liter, twenty pesos. "This tax shall be proportionally increased for any strength of the spirits taxed over proof spirits. "'Distilled spirits' as here used, include all substances known as ethyl alcohol, hydrated oxide or ethyl, or spirits of wines, which are commonly produced by the fermentation and subsequent distillation of grain, starch, molasses, or sugar, or of some syrup or sap, including all dilutions or mixtures; and the tax shall attach to this substance as soon as it is in existence as such, whether it be subsequently separated as pure or impure spirits, or be immediately or at any subsequent time transformed into any other substances either in process of original production or by any subsequent process. "'Proof spirits' is liquor containing one-half of its volume of alcohol of a specific gravity of seven thousand nine hundred and thirty-nine ten thousandths at fifteen degrees centigrade. A proof liter means of proof spirits". "Section 2. Section one hundred thirty-five of the same Code, as amended, is hereby further amended to read as follows: "Section 135. Specific tax on fermented liquors. On beer, lager beer, ale, porter, and other fermented liquors (except tuba, basi, tapuy and similar domestic fermented liquors), there shall be collected, on each liter of volume capacity, twenty-seven and one -half centavos." "Section 3. Section one hundred sixty-four of the same Code, as amended, is hereby further amended to read as follows: "Section 164. Denaturing within premises . For purposes of this title, the process of denaturing alcohol shall be effected only within the distillery premises where the alcohol to be denatured is produced in accordance with formulas duly approved by the Bureau of Internal Revenue and only in the presence of duly designated representative of said bureau." "Section 4. This act shall take effect upon its approval." prll "Approved: September 25, 1968" Features of the Amendments 1. Increased rates of specific tax on distilled spirits and fermented liquors: Section 133, subsection (a) The rate of tax on distilled spirits produced from raw materials enumerated in this subsection, is increased from SEVENTY (P0.70) to SEVENTY-SEVEN (P0.77) CENTAVOS per proof liter. However, a proviso was added in the amendment subjecting to only seventy (P0.70) centavos per proof liter, distilled spirits produced: (1) In a pot still or other similar primary distilling apparatus; (2) by a distiller producing not more than one hundred gauge liters a day, and (3) At not more than fifty per centum of alcohol by volume. In order that distilled spirits produced from raw materials enumerated under this subsection may be taxed at seventy (P0.70) centavos per proof liter, the three conditions above-stated should concur. The absence of any one of these conditions shall subject the distilled spirits to the higher rate of seventy-seven (P0.77) centavos per proof liter. Considering the above limitations imposed in the said proviso, the rate of seventy (P0.70) centavos per proof liter may be availed of only by small distilleries producing crude distilled spirits locally known as "lambanog", "meding", "layao", etc., by the use of pot still or other crude apparatus with a daily capacity of not more than one hundred gauge liters of not more than fifty per centum of alcohol by volume. SECTION 133, subsection (b) : The rate of tax per proof liter on distilled spirits produced from any material other than those enumerated in subsection (a) is increased from fifteen (P15.00) pesos to twenty (P20.00) pesos. Section 135 : On fermented liquors, the rate of tax per liter of volume capacity is increased from twenty-five (P0.25) centavos to twenty-seven and one half (P0.275) centavos. 2. Application of the increased rates of tax on distilled spirits and fermented liquors : On imported articles : As a rule, the rate of tax prevailing at the time the imported articles are withdrawn from customs custody shall apply. However, where the tax had been paid before such withdrawal or release from the customhouse, the rates of tax prevailing at the time of payment shall govern. Consequently, distilled spirits and fermented liquors which arrived before September 25, 1968 and the tax due thereon had been duly paid before the said date, are subject to the old rates of tax even if removed or withdrawn on or after September 25, 1968. On locally manufactured articles : The rates of specific tax on distilled spirits and fermented liquors prevailing at the time of removal from the place of production or bonded warehouse shall govern. Deficiency specific taxes arising from the increased rates : In cases where distilled spirits and fermented liquors became subject to the new rates by operation of the new law but the taxes paid were still based on the old rates due to lack of publicity of the approval and effectivity of the said law, the difference between the specific tax due under the new rates and the amount paid based on the old rates, shall be collected without penalty. 3. Process of denaturing under the new law: Before the amendment of Section 184, denaturing of alcohol can be effected either in the distillery premises or in a bonded denaturing warehouse designated by the Commissioner of Internal Revenue for denaturing purposes only. Under the new law, the process of denaturing can be effected only within the distillery premises where the alcohol to be denatured is produced in accordance with formulas duly approved by the Bureau of Internal Revenue and only in the presence of duly designated representatives of the Bureau. Accordingly, no denaturing shall henceforth be affected in bonded denaturing warehouses. Preparatory to final stock-taking of, and cancellation of the permits granted to, bonded denaturing warehouses, the stock of alcohol received under bond by them which can no longer be denatured because of the operation of the new law shall be disposed of not later than December 31, 1968 by (1) returning the alcohol under bond to the distillery of origin, (2) transferring the alcohol under bond to a duly registered rectifier or a bonded distillery warehouse, or (3) transferring the alcohol to a duly registered compound or other users of alcohol only after the specific tax due thereon has been duly paid. In either of these cases, corresponding permits should, however, be first secured from the Commissioner of Internal Revenue before removing the alcohol from the warehouse. After disposal of their stocks, a final stocktaking and examination of the books and records for retirement purposes shall be conducted by the Alcohol Tax Division after which the respective permits to operate such bonded denaturing warehouses shall be cancelled. Effectivity Republic Act No. 5449 took effect on September 25, 1968. Enforcement and Publicity All internal revenue officers and others charged with the enforcement of the internal revenue laws should be guided accordingly and should give the law as wide a publicity as possible. (SGD.) MISAEL P. VERA Commissioner of Internal Revenue APPROVED: (SGD.) EDUARDO Z. ROMUALDEZ Secretary of Finance