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Rolex watches get a tax break thanks to Diokno

Finance Secretary Benjamin Diokno has rejected Bureau of Internal Revenue Commissioner Romeo D. Lumagui’s proposal to classify Rolex watches as jewelry and subject them to higher taxes.

Jewelry is typically categorized as non-essential and subject to 20 percent excise tax.

Lumagui urged the Department of Finance to reconsider DOF Opinion No. 012-2022, suggesting that luxury watches, such as opera glasses and lorgnettes adorned with precious stones and metals, be treated as jewelry.

In DOF Opinion No. 012-2022, dated August 7, 2023, Diokno firmly stated that “sound fiscal policy dictates that the Secretary of Finance’s decision is final and binding on the Bureau.”

The imposition of percentage taxes on semi-essential items, including watches and clocks, was discontinued on January 1, 1986, before the fall of the Marcos administration, under Presidential Decree No. 1994.

Diokno argued that the object’s function determines whether it is essential or semi-essential. He justified this by stating, “Watches and clocks, used to keep track of time, are considered semi-essential, whereas jewelry used for personal adornment falls into the non-essential category.”

He further explained that watches and clocks have historically been regarded as semi-essential items, while non-essential articles like jewelry are subject to a 20% excise tax.

With the rejection of Lumagui’s proposal, Diokno also directed the BIR to “fully respect” the decision.”

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