The first package of the current administration’s Tax Reform for Acceleration and Inclusion (TRAIN) Law, otherwise known as Republic Act No. 10963, which took effect on January 1, 2018, includes the imposition of a 5 percent excise tax on invasive cosmetic procedures. Under Section 150-A of the TRAIN Law, taxpayers subjected to excise tax are now required to pay and remit to the Bureau of Internal Revenue (BIR) the 5 percent excise tax on gross receipts, net of excise tax and value added tax (VAT), derived from the performance of invasive cosmetic surgeries, procedures, and body enhancements for aesthetic purposes.
The same stated further that cosmetic 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, as well as cases or treatments by the National Health Insurance Program, are not covered by the new law. Hence, the aforementioned cosmetic procedures are exempted from the remittance of excise tax. Other than that, no more arguments were discussed under the new law.
In the National International Revenue Code of 1997, which precedes the enactment of the TRAIN Law, there were no existing provisions for the imposition of excise tax on invasive cosmetic procedures. Thus, the BIR issued the proposed draft Revenue Regulations and presented the same to the public for consultation before implementing the foregoing on Jan. 5. It was noted that public consultations were held last 11 January and 12 January 2018. However, until now the BIR has yet to provide any updates on the draft Revenue Regulation that will properly guide taxpayers in paying the required tax under the amended provision of the new law.
As cited in the draft Revenue Regulations, invasive cosmetic procedures are surgical procedures that are carried out by entering the body through the skin or through a body cavity or anatomical opening, but with the smallest damage possible to these structures. The same procedures shall include, but shall not be limited to, liposuction, laser liposuction, breast augmentation, breast reduction mammoplasty, breastlift/mastopexy, buccal fat reduction, buttocks augmentation, chin augmentation, facelift/necklift, featherlift—Aptos—thread lift, hair restoration/transplantation, blepharoplasty or eyelid surgery, vulvovaginal surgery, abdominoplasty or tummy tuck, stem cell auto grafting, rhinoplasty/alar trimming, otoplasty, and Cobra Coglift.
With the hope that the affected taxpayers can now properly identify cosmetic procedures that are invasive vis-à-vis those that are non-invasive, the BIR further defined non-invasive cosmetic procedures as conservative treatments that do not require incision into the body or the removal of tissue, or when no break in the skin is created and there is no contact with mucosa, or skin break, or internal body cavity beyond a natural or artificial body orifice.
Cosmetic procedures that fall under the definition of non-invasive cosmetic procedures shall include, but shall not be limited to, acupuncture rejuvenation therapy, air dissector, Botox/Dysport, Collagen Induction Therapy, dermal fillers, embedded protein threads, Fotona 4D facelift, Fractional CO2, instalift, Restylane skin booster, SculpSure, Thermage, Time Capsule, uthera, Ultra Form, FemiLift, ThermiVa, lasers and light treatments, body treatments and contouring procedures, cleanings and facials, peels, injectables and weight management treatment.
In view thereof, the BIR mandates that the excise tax on invasive cosmetic procedures be remitted within 10 days following the close of the month using the Monthly Remittance Return of Final Withholding of Excise Tax on Cosmetic Procedure (BIR Form No. 1620-XC).
The BIR further requires the affected taxpayers to be registered as Excise Taxpayers engaged in the performance of Invasive Cosmetic Procedures with the Excise LT Regulatory Division (ELTRD) for Large Taxpayers, or with the required Revenue District Office (RDO) for Non-Large Taxpayers. If the affected taxpayers were already registered with the BIR prior to the enactment of the TRAIN Law, the existing Certificate of Registration (BIR Form No. 2303-COR) should be updated to include the excise tax type using Application for Registration Information Update (BIR Form No. 1905) and the same shall be submitted to the appropriate district offices within 10 days from the effectivity date of the regulation.
The affected taxpayers are also required to issue official receipts indicating therein a separate line item for the amount of excise tax; otherwise, the term “Exempt from Excise Tax” shall be shown if the procedure qualifies as non-invasive. The taxpayer shall also keep a separate subsidiary ledger on which every service rendered/performed on any given day is recorded.
In determining the excise tax derived from invasive cosmetic procedures, the BIR presented a sample computation as shown below:
“To improve her body shape, Starlet S engaged the services of Dok Salamat, a well-known cosmetic surgeon in the country, to perform a liposuction procedure on her thighs, and Dok Salamat charged Starlet S the amount of P50,000.00 inclusive of 12 percent VAT for the service to be rendered. Based on the foregoing, the 5 percent excise tax shall be computed, as follows:
Notwithstanding the fact that no revenue regulations have been implemented to date, we understand that the proposed regulations will be enforced considering that no objections were raised during the public consultations. Let’s just hope that the BIR will issue the regulations in time for the January 2018 tax filings. Is this a taxing vanity? Perhaps. Just the same, compliance is not up for debate.
The author is a senior with the Tax & Corporate Services division of Navarro Amper & Co., the local member firm of Deloitte Southeast Asia Ltd.— a member firm of Deloitte Touche Tohmatsu Limited—comprising Deloitte practices operating in Brunei, Cambodia, Guam, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.