THE BUREAU of Internal Revenue (BIR) issued guidelines on how to determine the floor price for cigarettes, as well as heated and vapor tobacco products.

Revenue Regulations No. 7-2021 serves as the implementing rules and regulations for Republic Act (RA) 11346 that increased the excise taxes on so-called “sin” products such as tobacco and alcoholic beverages.

Under the guidelines, the agency said the minimum price of cigarette, heated and vapor tobacco products will be computed by adding the total production cost of the cheapest brand per tobacco product, the excise tax and the value-added tax (VAT).

The BIR determined the reference rates for taxation purposes in case there are no documents available on the actual price of the product.

For instance, a floor price of P78.40 will be imposed for cigarettes with production cost of P20, excise tax of P50 and VAT of P8.40.

Heated tobacco products with a P20 production cost, P42 in excise tax and P7.44 in VAT should have a minimum price of P69.44.

For vapor products, the BIR said 0.7 milliliter (ml) pod of nicotine salts will have P125.44 as floor price this year — given its P70 production cost, P42 in excise tax and P13.44 in VAT. A nicotine salt of 2.5 ml will have P421.12 as a minimum price, while a 4-pod item has P2,195.20.

The floor price for 10-ml tank of freebase nicotine with a production cost of P50 each, P50 in excise tax and P12 in VAT, was estimated at P112, while a larger tank with 25 ml has a P308 minimum price.

“The ELTRD (Excise Large Taxpayer Regulatory Division) shall establish a monthly data profile based on the required periodic manufacturer’s or importer’s sworn declaration for all brands per tobacco product category,” the BIR said.

For those caught selling tobacco and vapor products below the floor price will face penalties from P200,000 to P500,000, or worth 10 times the amount of excise tax and VAT due. Sanctions also include 4-6 years of imprisonment.

“Any person who sells tobacco products including heated tobacco products and vapor products at a price lower than (the floor price) shall be punished with a fine of not less than 10 times the amount of excise tax plus VAT due but not less than P200,000, nor more than P500,000, and imprisonment of not less than 4 years,” it added.

The BIR also imposed inspection fees — 50 centavos per 1,000 pieces of cigars, 10 centavos per 1,000 sticks of cigarettes, and 10 centavos for 1,000 units of heated tobacco products. Meanwhile, one centavo of inspection fee was set per ml of vapor product, two centavos per kilo of whole leaf tobacco and three centavos per kilo of tobacco scraps.

To signify that excise taxes have been paid, the BIR said tax stamps should be attached on the packaging of these “sin” products.

Those who will affix previously used tax stamps, erase cancellation marks or make any alterations on the stamps will have to pay a fine of least P10 million and up to P500 million, with imprisonment of 5-8 years. Selling and using fake stamps will also face similar charges, according to the bureau.

The IRR was signed by BIR Commissioner Caesar R. Dulay and Finance Secretary Carlos G. Dominguez III on May 18 but the document was only published on Wednesday. The guidelines will take effect early next month or 15 days after its publication.

The Department of Finance expects to collect P297.8 billion from “sin” taxes this year. — Beatrice M. Laforga