Background: President Rodrigo Duterte signed Republic Act No. 11346 on July 25, 2019. The Act contains numerous amendments to the Internal Revenue Code approved by Congress.
Tax on heated tobacco
Among the amendments approved by Congress was the creation of a new excise tax category for heated tobacco products. The Act defines HTPs as “tobacco products that may be consumed through heating tobacco, either electronically or through other means sufficiently to release an aerosol that can be inhaled, without burning or any combustion of the tobacco.”
The law requires that heated tobacco products only be packed in twenties and other packaging combinations of not more than 20 units. In contrast to most markets which levy a specific tax on heated tobacco based on the weight of the tobacco mixture, the Philippine law assesses a tax of twenty five pesos (P25.00) on packs of twenty units or packaging combinations of no more than 20 units.
Initially the rate was set at 10 pesos per pack but was quickly amended by Congress to 25 pesos in RA 11467 and signed into law by President Duterte.
The rate of tax imposed will be increased on January 1 for each of the next three years by P2.50 per pack. Thereafter, starting on 1 January 2024 the rate will be increased by 5% each year by means of revenue regulations issued by the Secretary of Finance.
The tax went into effect as of 1 January 2020.