CONSUMPTION TAX AND VALUE-ADDED TAX (VAT) ON

IMPORTATION

CONSUMPTION TAX
UTILIZATION of goods or services by CONSUMERS or
BUYERS

RATIONALE OF CONSUMPTION TAX

1. Savings Information
2. Wealth redistribution to society
3. Benefit Received Theory

BASIS OF BUSINESS TAX

1. Sales (Goods or Properties)
2. Receipts (Service)

TYPES OF BUSINESS TAX & BUSINESS TAXPAYERS

1. Value Added Tax (VAT) on Sales
- VAT Taxpayer
2. Percentage Tax
- Non-VAT Taxpayer
3. Excise Tax
- Both VAT and Non-VAT Taxpayer

EXCISE TAX
In ADDITION to VAT or Percentage tax, on CERTAIN
GOODS manufactured, produced or imported in the
Philippines for DOMESTIC SALE or CONSUMPTION
EXAMPLE OF EXCISE TAX EXEMPT CONSUMPTIONS
 Sin Products -BASIC NECESSITIES which are consider as PRIORITIES
 Petroleum products -Exempt Importation vs Exempt Sales
 Automobiles
EXEMPT IMPORTATIONS
 Non-essential commodities
1. Importations of Exempt Goods
 Metallic or Non-metallic minerals
a. Agricultural and marine food products in their
VALUE ADDDED TAX (VAT) ON SALE Original state
- consumption tax imposed upon the sale of goods, b. Fertilizers, seeds, seedlings and fingerlings, fish,
properties or services or lease of properties prawn, livestock and poultry feeds, including
ingredients used in the manufacture of finished
CHARACTERISTICS OF THE VAT ON SALES feeds
1. Tax on Value Added c. Books and any newspaper, magazine, review, or
2. Top-up on Sales bulletin which appear at regular intervals with
3. Tax Credit Method fixed prices for subscription and sale
4. Explicit Consumption Tax d. Passengers and cargo vessels and aircrafts,
5. Quarterly Tax including engine, equipment and spare parts
thereof for domestic or international transport
PERCENTAGE TAX
operations
- Sales tax of various rates, generally 3%, imposed upon
the gross sales or gross receipts of non-VAT taxpayers 2. Importation by VAT-exempt persons
a. International shipping or air transport operators
CHARACTERISTICS OF THE PERCENTAGE TAX
on their import of fuel, goods, and supplies
1. Tax on sales or gross receipts
b. Cooperative of direct farm inputs, machineries
2. Expensed tax
and equipment and spare parts thereof
3. Implicit Consumption tax
c. PEZA locators on their import of goods or services
4. Quarterly Tax
3. Quasi-Importation
a. Personal and household effects belonging to
residents of the Philippines returning from
abroad and non-resident citizens coming to
resettle in the Philippines
b. Professional instruments and implements,
wearing apparel, domestic animals.

4. Importation which are exempt under special laws

and international agreement

1. IMPORTATIONS FOR EXEMPT GOODS

1. Agricultural or Marine Food Products in Original
State
o Livestock (cow, bulls, calves, pigs, sheep, goats,
and rabbits)
o Poultry (fowls, ducks, geese, and turkey)
o Marine (fish and Crustaceans, eels, lobsters,
shrimps, prawns, oysters, mussels, and clams)

CONSUMPTION TAX AND VALUE-ADDED TAX (VAT) ON
IMPORTATION
IMPORTATION
- PURCHASE of goods including services by PHILIPPINE
RESIDENTS from NON-RESIDENT SELLERS.
TYPES OF CONSUMPTION TAX ON IMPORTATION
1. VAT on Importation – goods
2. Withholding VAT – services
IN ORIGINAL STATE
It means unprocessed even if it undergone into:
a. Preparation for the market (Boiling, Broiling,
Husking, Roasting, Stripping, Grinding)
b. Preservation (Freezing, Drying, Salting, Smoking)
c. Packaging, including Advanced technological
means (Shrink wrapping, Vacuum packing, Tetra-
packing, other similar packaging methods)
PROCESSED MARINE OR AGRICULTURAL PRODUCTS
Those which have undergone changes in their chemical
compositions or have undergone complex processing or
treatment
 2. Importation of Exempt Marine or Agricultural
Inputs
o fertilizers, seeds, seedlings, fingerlings, fish
prawn, livestock, and poultry feeds are exempt
since they are ultimately intended for the
production of food products for human
consumption.
3. Books, Newspaper and Magazines
Conditions for Exemption:
a. Must appear at regular intervals with fixed prices
for subscription
b. Sale must not be devoted principally to the
publication of paid advertisements
4. Passenger or cargo Vessels and Aircrafts (RA
9295, RA 10378, and TRAIN LAW)
Conditions for Exemption:
a. Must be subject to the requirements on restriction on
vessel importation and mandatory vessel retirement
program of Marina Industry Authority (MARINA):
 Passenger or cargo vessels = 15 years
 Tankers = 10 years
 High Speed passenger Crafts = 5 years
2. IMPORTATIONS BY VAT-EXEMPT PERSONS
1. International Shipping or Air Transport Operators
- Considered as foreign consumption rather than
domestic consumption
Conditions for Exemption:
a. Limited to importation of fuel, goods, and
supplies
2. Agricultural Cooperatives
Conditions for Exemption:
a. Must be an agricultural cooperative duly
registered and in good standing with CDA
b. Involves direct farm inputs, machineries,
equipment, and spare parts to be used directly
and exclusively in producing or processing their
products.
3. Ecozone-locators
- Technical Importation
TECHNICAL IMPORTATION
- Purchase of non-Ecozone Philippine residents from
Philippine Ecozone-registered Enterprises (Subic-
Ecozone, Zambo-Ecozone, Cagayan-Ecozone).
- Subject to VAT on Importation but not on Business Tax.
3. QUASI-IMPORTATION
1. Personal and Household Effects
Conditions for Exemption:
a. Goods belong to Philippine Residents or Non-
residents intending to resettle in the Philippines
b. Goods are exempt from Custom Duties
2. Professional Instruments and Implements,
Wearing Apparel, Domestic Animal
Conditions for Exemption:
a. Goods belong to persons who come to settle in
the Philippines
b. Goods must accompany the person upon arrival
or within 90 days before and after their arrival
c. There must be evidence to show that the change
of residence is bonafide
d. Importation is not a vehicle, machinery or other
equipment used in the manufacture or
merchandise of any kind in commercial quantity
4. IMPORTATION EXEMPT UNDER SPECIAL LAWS OR
TREATIES
-Import that are exempted by special laws, treaties or
international agreements to which the Philippine
Government is a signatory is not subject to the VAT on
Importation.
SUBSEQUENT SALE BY EXEMPT IMPORTATIONS
When an exempt importer SUBSEQUENTLY sells his
exempt importation to a non-exempt person, the non-
exempt buyer shall be SUBJECT to VAT on Importation.
SUBJECT OF VAT ON IMPORTATION
1. Importer and Non-resident seller are Engaged or
not engaged in trade or business
2. Importer is a VAT or Non-VAT Business
3. Importation is for Business or Personal Use
TAX BASIS OF VAT ON IMPORTATION
- 12% of the Total Landed Cost (Dutiable value, Custom
Duty, Excise tax, other land-in cost) of the importation,
other than those listed as exempt importations.
1. Dutiable Value
Cost incurred in bringing the goods up to the Philippine
Port and prior to any other in-land costs of import
Cost of the Goods, Freight, Insurance, Other charges and
costs
TAX BASIS OF VAT ON IMPORTATION (Cont…)
2. Custom Duty
Computed as:
Dutiable Value x Exchange rate x
rate of Duty
TAX BASIS OF VAT ON IMPORTATION (Cont…)
3. Excise tax, if any
Computed as:
(Dutiable Value in Php + Custom Duty + other
Charges) x 1.10 x Excise Tax Rate
4. Other in-land Cost
Bank Charge, Brokerage fee, Arrastre charge, Wharfage
due, Customs Documentary Stamp tax, Import
Processing Fee
PAYMENT OF THE VAT ON IMPORTATION
- The VAT shall be paid to the Bureau of Customs (BOC)
using a form prescribed by the BOC.

WIHHOLDING VAT ON IMPORTATION OF SERVICES

- Under revenue regulations, the sale by NON-RESIDENTS
to Philippine RESIDENTS is always presumed made in the
course of BUSINESS despite IRREGULARITY of sales
operation to qualify the sale as a business sale subject to
VAT

PAYMENT OF THE WITHHOLDING VAT

BIR Form 1600-VT
On or before 10th day of the following month after the
withholding tax was made, except for taxes withheld in
December which is on or before January 25 of the
following year