Author MRTC

Introduction

REVENUE MEMORANDUM CIRCULAR (RMC) NO. 95-2025

Section 134 covers the tax treatment of ethyl alcohol with a strength of at least 180° proof (90% alcohol by volume), whether imported or locally manufactured. When such alcohol is properly denatured under Section 168 and rendered unfit for human consumption, it is exempt from excise tax.

Amendments to Section 134 clarifies that denatured alcohol, although generally exempt, becomes subject to excise tax when any of the following factors are present:

  1. Denatured alcohol used for purposes covered under Section 106(A) shall be subject to the corresponding tax.
  2. If it is used for motive of power it shall be taxed under 148(d) of tax code.
  3. If alcohol that was previously denatured and considered unfit for drinking is reprocessed and becomes suitable for oral intake, it becomes taxable, and the person in possession of the alcohol is liable for the excise tax due.

Pursuant to the amendment to Section 2 of Section 168 of the NIRC, the reference to “compounding plants where the rectifying facilities are located” is removed, leaving the denaturing requirement applicable only to duly registered distilleries. Amendments to Section 2 of Section 168 further outlined requisites governing the denaturing process of ethyl alcohol as follows:

  1. The denaturing process must be conducted in strict compliance with BIR regulations, including adherence to the prescribed formulation.
  2. Confirmatory testing is required before any denatured alcohol may be removed from the premises.
  3. The BIR retains the authority to assign representatives to supervise and monitor the entire denaturing process.

The amendment of Section 134 and 168 of the tax code aims to give a neutral taxability of denatured alcohol to be consistent and eliminate the discrepancies on exemption from excise tax. It also aims to harmonize tax treatment by exempting both local and import manufactured denatured ethyl alcohol, in line with global practice.