BIR issues rules on excise taxes slapped on cosmetic procedures

MANILA, Philippines – You can have enhancements done on your face or body to change them, but you can’t hide from the excise taxes slapped on these cosmetic procedures.

After over a year of delay, the Bureau of Internal Revenue (BIR) on Thursday finally published Revenue Regulations (RR) No. 2-2019 signed by Finance Secretary Carlos G. Dominguez III and Internal Revenue Commissioner Caesar R. Dulay, which covers the excise tax payments for invasive cosmetic procedures, surgeries, and body enhancements under the Tax Reform for Acceleration and Inclusion Act (TRAIN).

The TRAIN law took effect on January 1 last year, but it took BIR more than one year before it released the RR serving as the implementing rules and regulations (IRR) for the new levy on cosmetic procedures.

It was the last RR for all of the TRAIN law’s provisions.

On the sidelines of the Senate Tax Study and Research Office’s tax forum Thursday, Finance Undersecretary Antonette C. Tionko admitted to reporters that they had difficulty crafting the RR, for instance pointing to the privileged communication between doctors and their patients as an “obstacle.”

“We have to issue regulations within the parameters of the laws,” Tionko said.

So far, excise tax collections from cosmetic procedures remained “small” even as Tionko said they were hopeful that these will eventually increase with the RR in place.

Unofficial Department of Finance (DOF) data obtained by reporters last year showed that as of end-August 2018, the tax take from cosmetic procures had yet to reach P100 million.

Under RR 2-2019, “there shall be levied, assessed, and collected, an excise tax equivalent to 5 percent based on gross receipts derived from the performance of services, net of excise tax and value-added tax (VAT) on invasive cosmetic procedures, surgeries and body enhancements directed solely towards improving, altering, or enhancing the patient’s appearance and do not meaningfully promote the proper functions of the body or prevent or treat illness or disease.”

BIR defined “gross receipts” as “the total amount of money or its equivalent representing the contract price or service fee, including deposits applied as payments for services rendered and advance payments actually or constructively received for services performed or to be performed for another person, but excluding 5- percent excise tax and VAT.”

“For purposes of determining the VAT base, the gross receipts shall be inclusive of the 5-percent excise tax,” BIR said.

RR 2-2019 said that invasive cosmetic procedures included the following: liposuction, mammoplasty, breast lift, buccal fat removal, buttocks augmentation, chin augmentation, facelift and neck lift, thread lift, embedded protein threads, hair restoration/transplantation, eyelid surgery, vaginal plastic surgery, abdominoplasty or tummy tuck, auto grafting, rhinoplasty/alar trimming, and otoplasty.

As for non-invasive cosmetic procedures, treatments covered by the National Health Insurance Program, and other procedures “necessary to ameliorate a deformity arising from or directly related to a congenital or developmental defect or abnormality, a personal injury resulting from an accident or trauma, or disfiguring disease, tumor, virus or infection,” BIR said these will not be slapped with the excise tax.

As such, BIR said following non-invasive cosmetic procedures will not be levied additional taxes: acupuncture rejuvenation therapy; air dissector; botulinum toxin injection/treatment; collagen induction therapy; dermal fillers (crosslinked and non-crosslinked); non-surgical facelifting and skin tightening using radio frequency, ultrasound, and infrared; carbon dioxide (CO2) fractional laser resurfacing; laser and light treatments; body treatments and contouring procedures; cleanings and facials; peelings (face and body); and injectables and weight management treatment.

The persons and establishments performing cosmetic procedures must file a return of monthly gross receipts alongside a monthly summary of cosmetic procedures performed, BIR said. /kga