CHAPTER 11

EXCISE TAX

Excise tax is a hybrid consumption tax with a regulatory overture. It is imposed only on certain
goods or services.

As a consumption tax, it normally applies when the goods are intended for domestic
consumption. Hence, it taxes domestically produced or imported for domestic use and exempts
goods produced for export.

If the goods are exported out of the country, the manufacturer or producer of the goods
subjected to excise tax may claim tax credit of tax refund for the excise tax.

Excise taxes are generally levied at the point of production or importation. The tax is collected
before the goods are removed at the point of production or before the removal of the goods
from Customs. Exceptionally, cosmetic surgery and mineral products are subject to tax at the
point of sale.

Scope of Excise Tax

The Philippine version of excise tax is limited only to certain goods with the exception of
cosmetic surgery – the only service currently subject to excise tax. In other countries, even
vices such as gambling or morally damaging activities such as prostitution are taxed.

List of Excisable Articles and Services in the Philippines

1. Alcohol products, such as distilled spirits, wines and fermented liquors
2. Tobacco products, such as cigars and cigarettes
3. Petroleum products, such as gas, gasoline, diesel, wax, lubricant oils and greases,
kerosene, naphtha, denatured alcohol, coke, asphalt and bunker fuel oil.
4. Mineral products whether as metallic or non-metallic mineral and quarry resources.
5. Miscellaneous articles, such as automobiles, non-essential goods like jewelry, perfume
and yacht, and sweetened beverages like soft drinks and sweetened drinks.
6. Non-essential services such as cosmetic surgery

Timing of Excise Taxation

Taxable at the point of
Excisable article or service import Production sale

Alcohol products Yes yes -

Tobacco products Yes Yes -
Petroleum products Yes Yes -
Mineral products Yes - Yes
Automobiles Yes Yes -
Non-essential goods Yes Yes -
Sweetened beverages Yes Yes -
Non-essential services - - yes
NATURE OF PHILIPPINE EXCISE TAX
A. Excise Tax as a regulatory tax
1. Environmental tax – it is imposed on products which causes harm to the environment
when produced or extracted or used. It is also known as green tax.
Examples are excise tax levied on:
a. Petroleum products
b. Quarry resources
c. Mineral products

Environment tax may also refer to as green tax.

2. Sumptuary tax - it is imposed to restrain luxury or extravagance. It is also referred to
as vanity tax.

Examples are excise tax levied on:

a. Intrusive cosmetic surgery
b. Automobiles and yacht
c. Jewelry

3. Sin tax – it is imposed on the consumption of sin products or those known to pose
health risk. It is also known as health tax.

Examples are excise tax levied on:

a. Alcohol beverages
b. Tobacco products such as cigar and cigarettes

The excise tax may be imposed on purely punitive grounds or to raise funds to alleviate the
damage caused on society by the consumption of the undesirable products.

B. Excise tax as an indirect tax

Excise tax is an indirect tax. It is levied upon producers or importers with the
understanding that he will pass-on the same to the consumers.

C. Excise tax as a consumption tax

The excise tax is usually levied at the point of production or importation except excise
tax on minerals and cosmetic surgery which is levied at the point of sale. Thus, it is
typical pre-consumption tax, compared to other business taxes which are levied at the
point of sale or consumption.

D. Excise tax as an additional business tax

A business normally pays either percentage tax or value added tax. However, if it is
produced or imports excisable goods or sells excusable services, the excise tax is
imposed in additional tax on the usual business tax.

Thus, a business importing or producing excisable goods or selling excisable services

shall be taxed as follows:
 Business registration Tax to pay
VAT taxpayer VAT and excise tax
Non-VAT taxpayer Percentage tax and excise
tax

E. Excise tax as specific and ad valorem tax

excise taxes as imposed in the Philippines are primarily specific taxes but there are also
ad valorem imposition and mixed of them.

Differences between excise tax and the other business tax

1. With only few exceptions, excise tax is an indirect tax levied at the point of production
or importation while other business taxes are levied only at the point of sale.
2. Excise tax is typically a specific or per unit tax, while business tax is purely ad valorem
tax.
3. Excise tax covers the production or import or sale of narrower range of products or
services while business taxes cover the sale of almost all products and services
including those already subjected to excise tax.
4. Excise tax imposes heavier tax rates compared to reasonable business taxes which are
fairly reasonable.
5. Excise tax may subject even-nonbusiness producers while business tax covers only
those engaged in business.
6. Excise tax is revenue tax with a regulatory overture as it intends to curb health risks,
or social, moral or environmental wrongs while business tax is purely levied to raise
revenue.

Similarities of excise tax and the other business tax

1. Excise tax is generally a consumption tax similar to other business taxes. Thus, the
export of the goods is both exempted from excise or business tax. Exceptionally,
export of mineral is subject to excise tax.
2. Excise tax which are imposed ad valorem tax are similar to business taxes which are
also imposed based on selling price.
3. Excise tax and business tax are both classified as indirect taxes since it is normally
passed on by the sellers to consumers.

TYPES OF EXCISE TAX

1. Specific tax – excise tax imposed based on weight or volume capacity or any other
physical unit of measurement.
2. Ad valorem tax – excise tax imposed on selling price and other specified value

BASIS OF AD VALOREM TAX

Locally produced goods
Locally produced goods imposed with ad valorem tax is subject to tax on gross selling price.

Gross selling price means he price, excluding the VAT, at which the goods are sold at wholesale
at the place of production or through their sale agents to the public shall constitute the gross
selling price.
If the manufacturer also sells or allows such goods to be sold at wholesale in another
establishment of which he is the owner or in the profits of which he has an interest, the
wholesale price in such establishment shall constitute the selling price.

Should such price be less than the cost of the manufacturer plus expenses incurred until the
goods are finally sold, then a proportionate margin of profit, not less than 10% of such
manufacturing cost and expenses, shall be added to the constitute the gross selling price.

Manufacturer’s or producer’s sworn statement is required

Manufacturer’s or producer’s shall file with CIR a statement showing the different products or
goods manufactured or produced and their corresponding selling price or market value,
together with the cost of manufacture or production plus expenses incurred or to be incurred
until the goods are finally sold.

Illustration 1
ABC Company produced 1,000 units of an excisable goods that has a total wholesale value of
P1,120,000, inclusive of VAT. If sold retail, the goods would earn P1,400,000. The goods are
subject to a 20% ad valorem tax.

The excise tax shall be computed as follows:

Wholesale invoice price P1,120,000

Divide by: 112%
Wholesale price P1,000,000
Multiply by: 20%
Excise tax P 200,000

Illustration 2
DEF Company produced 5,000 units of an excisable goods. The goods are delivered to
consignees who to sell the goods at P1,000 a unit to customers. The consignees take 20% of
the retail sales and 16% of wholesales. Consignees are allowed to sell the units at P900 a unit
at a minimum wholesale value of 100 units. The excisable goods are subject to a 15% ad
valorem tax.

The excise tax shall be computed as:

Wholesale invoice price (P900 x 5,000) P4,500,000

Divide by: 112%
Wholesale price 4,017,857
Multiply by: 15%
Excise tax P 602,679

Illustration 3
A manufacturer of excisable goods, subject to 20% excise tax, made the following declaration
in filling its excise tax return for goods produced.
Wholesale invoice price P8,500,000
Production cost 7,500,000
Cost to sell 1,500,000

The excise tax shall be computed as follows:

Production costs P7,500,000

Cost to sell 1,500,000
Total cost P9,000,000
Minimum margin [10% x P9M] 900,000
Tax base P9,900,000
Multiply by: 20%
Excise tax P1,980,000

The tax is based on the total cost since it is higher than the wholesale price.

Imported goods
Unless otherwise specified by law, imported goods imposed with ad valorem tax shall be
subject to the same rates and basis of excise taxes applicable to locally manufactured articles.

Illustration
Clark enterprise imported excisable goods subject to 10% excise tax and 20% customs duties.
Data relating to the imported articles were as follow:

Purchase price P4,000,000

Other inland cost 1,000,000
Domestic wholesale price, net of VAT 9,000,000

The excise tax shall be computed as:

Wholesale price P9,000,000

Multiply by: 10%
Excise tax P 900,000

The custom duties shall be computed as follows;

Purchase price P4,000,000

Other inland cost 1,000,000
Excise tax 900,000
Transaction value P5,900,000
Multiply by: 20%
Excise tax P1,180,000

The VAT on importation shall be computed as follows:

Purchase price P4,000,000
Other inland cost 1,000,000
Custom duties 1,180,000
Excise tax 900,000
Landed cost P7,080,000
Multiply by: excise tax rate 12%
VAT on importation P 849,600

TAX COMPLIANCE REQUIREMENTS

WHO ARE THE PERSONS LIABLE TO EXCISE TAX?

For domestically produced excisable article

General rule: Producer

Excise tax is paid by manufacturers or producers of excisable goods or services in the
Philippines for domestic sale or consumption, and importers of excisable goods.

Exception rule:
1. The excise tax on indigenous petroleum, natural gas or liquified natural gas is
payable by the following person:

If the goods is The taxpayer is

For local sale The first buyer or assignee
For export sale The owner, lessee, concessionaire or operator of the mining
claim

2. Removal without payment

If goods are removed in their place of production without payment of the excise tax,
the owner or person having possession thereof shall be liable to the tax.

For imported excisable article

General rule: The importer
The excise tax shall be paid by the owner-importer of the imported goods.

Exception rule: The non-exempt buyer

When good are exempted by an exempt person is subsequently sold to another non-exempt
buyer, the latter shall pay for the excise tax otherwise due thereon on the importation.

WHEN TO FILE AND PAY EXCISE TAX?

Domestic produced excisable products
General rule: Before removal
The excise tax is payable before removal of the domestic goods from the place of production.
Exception rule: Mineral or mineral products
The excise tax or locally produced or extracted mineral or mineral products is payable within
15 days after the end of the calendar quarter when such products is removed.

The taxpayer shall file a bond in an amount which approximates the amount of excise tax on
the removal of the said quarter.

Imported excisable products

The excise tax on imported excisable products shall be paid before their removal from customs
custody. This rule applies even for imported metallic or non-metallic mineral products.

EXCISE TAX-FREE IMPORTATION BY EXEMPT PERSONS

The importation of products into tax duty-free shops. Freeport zones, and special economic
zones shall not be subject to excise taxes since they are considered foreign territories.
Consumption of person insides these places are considered foreign consumption; hence,
exempt.

Exception:
Exemption does not apply to sin products such as cigars, cigarettes, distilled spirits, fermented
liquors and wines. A surety bond, however, may be required in some cases to protect the
interest of the government.

Introduction of tax-free-articles into the customs territory

Introduction into the customs territory refers to the sale or transfer of tax-free articles to persons
outsides tac and duty-free shops, Freeport zones and special economic zones.

The sin tax is a punitive tax hence it applies in disregard of the legal fiction that duty-free ports,
ecozones or Freeport zones are foreign countries. The legal fiction holds only for purposes of
VAT and custom duties. Import of sin products would be exempt from VAT and customs
duties.

EXPORT OF EXCISABLE GOODS

When goods locally produced or manufactured are removed and actually exported without
returning to the Philippines, any excise tax paid thereon may be claimed as:
a. Tax refund, or
b. Tax credit

This applies whether the goods are exported in their original estate or as ingredients or parts of
any manufactured goods or products.

Exception: Mineral products

The excise tax on mineral products, except coal and coke, shall not be creditable or refundable
even if the mineral products are actually exported.
Excise tax on minerals is apparently imposed to compensate the environmental destruction
arising from their or extraction or production, as such the excise tax applies even if the goods
are foreign consumption.
EXCISE TAX ON ALCOHOL PRODUCTS

Alcohol products Excise tax rates for 2019

Distilled spirits Per proof liter P23.40
NRP 20%
Sparkling NRP per 750ml bottle; P500 or less 316.33
wines/champagnes More than P500 885.73
Still wines and 14% alcohol by volume or less 37.96/L
carbonated wines More than 14% but not more than 25% 75.92/L
Fermented liquors If brewed and sold at pub and restaurants 35.43/L
Others 25.42/L

The specific tax rates are subject to 4% annual adjustment every January 1 of each year.

Distilled spirits
Distilled spirits are the substance known as ethyl alcohol, ethanol or spirits of wine, including
dilutions and mixtures thereof, from whatever source, by whatever process produced, and shall
include whiskey, brandy, rum, gin and vodka, and other similar products or mixtures.

Distilled spirits have an additional ad valorem tax of 20% of the NRP, excluding the value
added tax and excise tax. The specific tax per proof liter is subject to 4% adjustment every
year.

Wines
Wines normally have carbon dioxide (CO2) on them due to the fermentation process. CO2 is
normally released when yeast and sugar mix making the wine bubbly, sparkling or fizzy, thus
the term “sparkling” wines. Sparkling wines have sugar and yeast on them which makes them
bubbly due to continuous fermentation even after bottling. Wines with CO2 removed are not
bubbly or fizzy, thus the term “still” wines. A carbonated wine is one which is artificially added
with carbon dioxide to influence character or taste of the wine.

Fortified wines mean natural wines to which distilled spirits are added to increase their alcohol
strength. Fortified wines containing more than 25% of alcohol shall be taxed as distilled spirits.
Fortified wines mean natural wines to which distilled spirits are added to increase their alcohol
strength.

Fermented liquors
Fermented liquors include beer, lager, beer, ale, porter and similar products, except tuba, tapuy
and similar products.

Conditional Tax-free Removal of Alcohol Products

1. Removal of wines and distilled spirits for treatment of tobacco leaf
2. Removal of spirits for rectification
 3. Removal of fermented liquor to bonded warehouses
4. Removal of damaged liquor

Denaturation of alcohol
When wines and distilled spirits are to be used for the treatment of tobacco leaf by
manufacturers of cigars and cigarettes, this is not human consumption; hence, tax free, but such
wines and distilled spirits must first be suitable denatured.

Denatured alcohol of not less than 180 proof (90% absolute alcohol)) when suitably denatured
and rendered unfit for oral intake is exempt from excise tax, denatured alcohol used for motive
power shall be taxed as petroleum products.

Alcohol rendered unfit for oral intake after denaturation but restored fit for oral intake after
undergoing fermentation, dilution, purification, mixture or any other similar processes shall be
subject to tax as alcohol products.

Rectification of spirits
Spirits requiring rectification maybe removed from the placed of production to another
establishment for purposes of rectification without prepayment of taxes but this requires
submission of a joint bond by the distiller and the rectifier conditioned on the rectifier’s
payment of the excise tax on the rectified alcohol. No loss for rectification and handling shall
be allowed. The rectifier shall pay the excise tax on such losses. Rectifiers using spirits with
unpaid excise taxes shall be liable for the payment of the excise tax thereon.

Removal of fermented liquors to bonded warehouses

Fermented liquors may be removed or transported from the brewery or other places of
manufacture to a bonded warehouse used by him exclusively for storage or sale in bulk of
fermented liquor, not less than 1,000 liters at one removal without prepayment of the tax under
a permit which shall be granted by the CIR.

Removal of damaged liquors

When fermented liquor has become sour or otherwise damaged so as to be unfit for use as such,
brewers may sell and after securing special permit from the CIR, remove the same without the
payment of tax thereon, in cask or other packages, distinct from those ordinarily used for
fermented liquors, each containing not less than 175 liters with a note of their contents
permanently affixed thereon.

EXCISE TAX ON TOBACCO PRODUCTS

Tobacco products Tax rates
a. Tobacco twisted by hand or reduced into a conditioned to be
consumed in any manner other than the ordinary mode of drying
and cutting
b. Tobacco prepared or partially prepared with or without the use P2.20/kg as of January 1,
of any machine or instruments or without being pressed or 2019
sweetened
 C. Fine-cut shorts and refuse, scrips, clippings, cuttings, stems
and sweeping of tobacco
d. On tobacco specially prepared for chewing so as to be P1.89/kg as of January 1,
unsuitable for use in any other manner. 2019
Cigar and cigarettes
Cigars, per cigar Excise tax
- Ad valorem tax 20% on net retail price
- Specific tax 6.32/cigar as on January 1, 2019
Cigarettes, per pack Packed by hand Packed by machine
- July 1, 2018 to Dec.31, 2019 P35/pack P35/pack
- Jan. 1,2020 to Dec.31, 2021 P37.50/pack P37.50/pack
- Jan. 1,2022 to Dec.31, 2023 P40/pack* P40/pack*
*Subject to 4% yearly increase thereafter starting January 1,2024.

Cigars means all rolls of tobacco or any substitute thereof, wrapped in leaf tobacco. Cigarettes
means all rolls of finely-cut leaf tobacco, or any substitute thereof, wrapped in paper or in any
other materials.

Duly, registered cigarettes packed by machines shall only be packed in twenties and other
packaging combinations of not more than twenty.

Tobacco inspection fee

Tobacco products Inspection fee rate
Cigars P0.50/thousand or fraction thereof
Cigarettes P0.10/thousand or fraction thereof
Leaf tobacco P0.02/kilogram or fraction thereof
Scraps and other manufactured P0.03/kilogram or fraction thereof
tobacco

Removal of tobacco products without prepayment of tax

Tobacco products entirely unfit for chewing or smoking maybe removed tax-free for
agricultural or industrial use. Stemmed leaf tobacco, fine-cuts shorts, refuse of fine-cut chewing
tobacco, scraps, cuttings, clippings, stems or midribs, and sweepings of tobacco may be sold
in bulk as raw materials by one manufacturer directly to another without payment of the tax.
Stemmed leaf tobacco means leaf tobacco which has the stem or midrib removed and does not
include broken leaf tobacco.

Tobacco products manufactured into the Philippines and destined for foreign countries shall
not be allowed entry without posting a bond equivalent to the amount of customs duty, excise
tax and VAT due thereon if sold domestically.

EXCISE TAX ON PETROLEUM PRODUCTS

Petroleum product Tax Unit of measure
2019 2020
Lubricating oils and greases Liter &kilogram
including but not limited to base P9.00 P10.00
 stocks for lube oils and greases, and
additives
Processed gas 9.00 10.00 Liter of volume
Waxes and petroleum 9.00 10.00 Kilogram
Denatured alcohol for motive power 9.00 10.00 Liter of volume
Naphtha, regular gasoline,
pyrolysis gasoline and other similar 9.00 10.00 Liter of volume
products of distillation
- If used as raw materials in the
production of petrochemicals 0.00 0.00
or as a replacement fuel for
power plants
Unleaded gasoline 9.00 10.00 Liter of volume
Aviation turbo jet and aviation gas 4.00 4.00 Liter of volume
Kerosene 4.00 5.00 Liter of volume
Diesel fuel oil and similar fuel oils 4.50 6.00 Liter of volume
Liquified petroleum gas 2.00 3.00 kilogram
- If used for motive power Taxes as diesel oil
- If used for production of 0.00 0.00
petrochemical products
Asphalts 9.00 10.00 kilogram
Bunker fuel oil and similar fuel oils 4.50 6.00 Liter of volume
Petroleum coke 4.50 6.00 Metric ton
- If used as feed stocks to power 0.00 0.00
generation facilities

Petroleum products to be used as raw materials

Petroleum products used as raw materials in the manufacture of other petroleum products or as
fuel for power plants are not taxable.

Bioethanol products to be subject to the excise tax herein must be denatured before the release
thereof from Customs in the case of importation or before removal from the place of production
if domestically produced.

Creditable excise tax

The excise tax paid on the purchase of base stock in the manufacture of excisable articles and
performing part thereof shall be credited against the excise tax due thereon. Any excess tax
paid on raw materials resulting from manufacturing, blending, processing, storage and handling
losses shall not give rice to a tax refund or credit.

Mandatory marking of all petroleum products

Imported or locally manufactured petroleum products such as but not limited to unleaded
premium gasoline, kerosene, and diesel fuel oil are required to be marked after the taxes and
duties thereon have been paid.

Random field test will be periodically conducted in the warehouse, storage tanks gas stations
and other retail outlets to inspect the quality and quantity of fuel to check incidence of fuel
trafficking. Field testing are required to be properly filmed and video-taped and documented.
A confirmatory test will be rendered on tested unmarked, adultered, or diluted fuel to validate
the findings of the field test. Confirmatory fuel test certificates issued by fuel testing facilities
shall be valid for any legal purposes from the date of issue and shall continue admissible and
conclusive evidence before any court.

Sale of petroleum products to exempt entities

Petroleum products sold to the following are exempt from excise tax:
1. International carriers
2. Entities exempted under tax treaties, conditional on reciprocal tax exemption treatment
3. Entities which are exempt from direct and indirect tax.

EXCISE TAX MINERALS

Minerals, minerals products and quarry resources shall be taxed as follows:

Mineral product Domestically produced Imported

Coal and coke P50/MT effective Jan. 1, 2018
P100/MT effective Jan. 1. 2019
P150/MT effective Jan. 1, 2020
Non-metallic minerals and quarry 4% 4%
resources
Copper, gold, chromite and other 4% 4%
metallic minerals
Indigenous petroleum 6%
Natural gas and liquified natural gas exempt

Indigenous petroleum shall include locally extracted mineral oil, hydrocarbons gas, bitumen,
crude asphalt, mineral gas and all other similar or naturally associated substances with the
exception of coal, peat, bituminous and shale and/or stratified mineral deposits.

Minerals mean all naturally occurring inorganic substances whether in solid, liquid, gaseous or
any intermediate state.

Mineral products mean things produced and prepared in a marketable state by simple treatment
processes such as washing or drying, but without undergoing any chemical change or process
of manufacturing by the lessee, concessionaire or owner of the mineral lands.

Hydrocarbon based fuel such as petroleum, coal or natural gas are derived from living matters
of past geologic times. While hydrocarbon fuels are organic while minerals are inorganic.

Quarry resources shall mean any common stone or other common mineral substances as the
Director of the Bureau of Mines and Geo-Science may declared to be quarry resources such as
but not restricted to mal, marble, granite, volcanic, cinders, basalt, tuff and rock phosphate;
provided, that they contain no metal or metals or other valuable minerals in economically
workable quantities.
Coke is a fuel with high carbon content derived from the anaerobic distillation of coal or oil. It
may also be formed by natural geological process. It is used in iron smelting or fuel in stoves
and forges.

Ad valorem tax on mineral products

1. Excise tax on metallic and non-metallic minerals
If domestically produced, the excise tax is based on the actual market value of the gross
output upon removal. If imported, it is based on value used by the BOC in determining
tariff and customs duties, net of excise tax and VAT.

2. Excise tax on indigenous petroleum

The excise tax on indigenous petroleum is based on the fair international market price
o the first taxable sale, barter or exchange of such similar transaction or the transfer of
indigenous petroleum in its original state to a first taxable transferee.

Small Scale Miners

RA 11256 exempts registered small scale miners and accredited traders who are selling gold
to the Bangko Sentral ng Pilipinas from paying income tax and excise tax. Note also that the
sale on gold to the BSP is also exempt from business tax.

Pursuant to RA 11256, gold which is sold or eventually sold to the BSP, shall be exempt from
the payment of excise tax. If the excise tax due thereon is paid prior to the sale of the gold to
the BSP, the taxpayer may file a claim for refund with the Commissioner of Internal Revenue.

All gold sold to the BSP by accredited traders shall be presumed to have been purchased by
said traders from small-scale miners.

Import of minerals
Note that imported minerals is exceptionally subject to excise tax upon the basis used by the
Bureau of Custom in computing custom duties

EXCISE TAX MISCELLANEOUS ARTICLES

AUTOMOBILES
Automobiles refers to any four or more wheeled motor vehicles regardless of seating capacity
which is propelled by gasoline, diesel, electricity or other motive power.

Ad valorem tax on manufactured or imported automobiles

Manufacturers or importer’s selling price Tax rate
Up to P600,000.00 4%
P600,000.00 to P1,000,000 10%
P1,000,000 to P4,000,000 20%
Over P4,000,000 50%

Exception to the excise tax rates:

1. Hybrid vehicles shall be subject to 50% of the applicable excise tax.
2. Purely electric vehicles and shall be exempt on excise tax on automobiles.
3. Pick-ups
Hybrid vehicles means a motor vehicle power by electric energy, with or without provision for
charging, in combination with gasoline, diesel or any other motive power.
Net manufacturer’s or Importer’s selling price
This refers to the price, net of excise tax and VAT at which locally manufactured/assembled or
imported automobiles are offered for sale to dealers, or the public directly or through their sale
agents, as reflected in the manufacturer’s or importer’s sworn declaration or in their sale
invoice, whichever is higher.

Minimum prices
The net manufacturer’s or importer’s selling price shall include the value of air conditioning
unit, radio and mag wheels including the installation cost thereof whether or not the same is
actually installed in the automobile.

The net manufacturers’ selling price shall not be less than:

1. 80% x (suggested retail price – excise tax – VAT)
2. 110% x (cost of manufacture or import + selling expenses)

Imported vehicle not for sale

Imported vehicle not for sale shall be subject to the excise tax on the total landed value,
including transaction value, customs duty and all other charges.

Technical Importation
Automobiles imported by exempt persons such as ecozone locators, the same is not subject to
excise tax. When the same is subsequently sold to taxable persons, the same shall be subject to
excise tax at the higher of the consideration paid and the depreciated cost.

A 10% depreciation expense shall be provided but not in excess of 50% of the original cost or
value.

Tax Exempt Removals of Automobiles

1. Removal for export
No excise tax shall be imposed on vehicles removed foe export, subject to the following
condition:
a. Permit to export- to be applied in writing from the CIR immediately before
removal.
b. Direct delivery to vessels- automobiles for export must be loaded directly to the
vessels or means of transportation carrying them outside the Philippines.
c. Proof of exportation- to be submitted within 30 days from the date of removal
d. Exporter’s bond- may be required when deemed necessary by the BIR

2. Delivery to tax-exempt person or entities

Tax exempt persons or entities include:
a. Embassies for foreign government, subject to the principle of reciprocity
b. Tax exempt organizations, such as the ADB and IRRI
 c. Other tax-exempt entities covered by tax treaties, conventions or international
agreements to which the Philippines is a signatory, subject to the principle of
reciprocity.

Manufacturers’, assemblers or importers of automobiles are allowed to sell to persons or

entities without prepayment of ad valorem tax, subject to the following conditions:
a. Application by the tax-exempt customer or importer in writing for the approval of the
exemption.
b. Favorable endorsement from the concerned government agency such as the DFA for
embassies.
c. Written approval of the CIR
d. Authenticated true copy of the purchase order indicating the description of the
automobiles to be purchased, the chassis and engine number, and the place and location
of the point of delivery.
e. The approval shall be on a per-transaction basis.

Tax credits or tax refunds

If tax exempt persons purchased automobiles in which the excise tax thereon is paid or where
the ad valorem tax is erroneously or illegally collected, such tax-exempt person may file a tax
refund or tax credit with the CIR.

3. Removals for delivery and exclusively within the Freeport zone

Automobiles imported directly into the legislated freeport zones from abroad or
purchased from establishments located within the customs territory for use exclusively
within the freeport zones shall be exempt from the imposition of the excise tax.

4. Removal of automobiles for test run

Should an automobile be removed for test run, prior notice of the test should be given
to the appropriate BIR Office that may allow the test run: provided, that the unit under
the test run shall be returned to the plant on the same day.

NON-ESSENTIAL GOODS
A 20% ad valorem tax is imposed upon the following non-essential goods:
1. Jewelry
2. Perfume and toilet waters
3. Yacht and other vessels intended for pleasure or sports

Precious metals include platinum, gold, silver and other metals of similar or greater value.
Imitations include platings and alloys of such metals.

The following are not jewelry and hence exempt:

a. Surgical and dental instruments
b. Silver-plated wares
c. Frames or mountings for spectacles or eyeglasses
 d. Dental golds or gold alloys and other precious metals used in filling mounting or fitting
of the teeth.

NON-ESSENTIAL SERVICES
A tax of 5% on gross receipts derived from the performance of services, net of excise tax and
VAT, on invasive cosmetic procedure, surgeries and body enhancement directed solely towards
improving, altering or enhancing the patient’s appearance and do not meaningfully promote
the proper function of the body or prevent or treat illness or disease.

SWEETENED BEVERAGES
Sweetened beverages (SBs) refer to non-alcoholic beverages of any constitution that are pre-
packed and sealed in accordance with the Food and Drug Administration standards, that contain
caloric and non-caloric sweeteners added by the manufacturers.

SBs includes:
Sweetened juice drinks Energy and sport drinks
Sweetened tea Flavored water
All carbonated beverages Cereal and grain beverages
Other powdered drinks not classified as milk, Other non-alcoholic beverages that contain
juice, tea and coffee sugar

Caloric sweeteners include sucrose, fructose, and glucose that produces a certain sweetness.

Non-caloric sweeteners refer to a substance that is artificially or chemically processed that

produces a certain sweetness, such as aspartame, sucralose, saccharin acesulfame, potassium,
neotame, cyclamates, and other non-nutritive sweeteners approved by the FDA.

High fructose corn sugar (HFCS) refers to sweet saccharide mixture containing fructose and
glucose which is derived from corn and added to provide sweetness to beverages, and which
includes other similar fructose syrup preparations.

Product description Tax rate (per

liter)
Using purely caloric sweeteners, and purely non-caloric sweeteners P6.00
or a mix of them
Using purely high fructose corn syrup or in combination with any P12.00
caloric or non-caloric sweeteners
Using purely coconut sap sugar and purely steviol glycosides. Exempt

Illustration1
Anga Cola Manufacturing Company is about to remove 100 cases of Super cola using HFCS
and non-caloric sweeteners. Each case contains 6 bottles of 1.5 liters each.
The excise tax shall be computed as:

Number of cases 100

Multiply by: no. of bottles per case 6
Total bottles 600
Multiply by: liter content per bottle 1.5L
Total volume in liters 900L
Multiply by: excise tax rate P12.00
Total excise tax to be paid before removal P10,800.00

Illustration 2
Frooty Juicy Corporation imported 50 cases of four seasons powdered juice using caloric and
non-caloric sweeteners and non-caloric sweeteners containing 144 packs by 25 grams. Each 25
packs can make 1 liter per saving suggestions appearing in the label.

The excise tax shall be computed as:

Number of cases 50
Multiply by: no. of packs per case 144
Total packs 7,200
Multiply by: serving suggestions per pack 1L
Total volume in liters 7,200L
Multiply by: excise tax rate P6.00
Total excise tax to be paid before removal P43,200.00

Exempt products from EXCISE Tax

The following shall not be subject to the excise tax on sweetened beverages:
1. All milk products, including plain milk, infant formula milk, follow-on milk, growing
up milk, powdered milk, ready-to-drink milk, flavored milk, and fermented milk.
2. Soymilk and flavored soy milk
3. 100% natural fruit juices
4. 100% natural vegetable fruit juices
5. Meal replacement and medically indicated beverages
6. Ground coffee, instant soluble coffee, and pre-packed powdered coffee.

Milk products refers to products obtain by processing of milk, which may contain food
additives, and other ingredients functionally necessary for the processing. Dairy products are
not synonymous with milk products and hence taxable.

Transfer of raw materials

Manufacturers of sweetened beverages subject to tax shall not be allowed to transfer or remove
raw materials from place of production, except when the transfer or removal thereof is intended
for further processing to its other registered production or too-manufacturing plants and shall
be accompanied by an Excise Tax Removal Declaration.

Transfer of semi-processed goods

The transfer of semi-processed goods as syrups, puree, concentrates sold to fast food chains
where they are mixed with carbonated water and dispensed through soda vending machines
shall be considered as finished goods subject to excise tax.
Beverages consumed within the place of production
Sweetened beverages that are produced or manufactured and are subsequently consumed
within the place of production shall be subject to the payment of excise tax by the manufacturer.
Export of sweetened beverages
Sweetened beverages intended for export may be removed from the place of production without
the prepayment of excise tax, subject to the following conditions:
1. Shipment permit
A permit per shipment shall be secured from the BIR office where the taxpayer is
required to be registered as an excise taxpayer.
2. Surety bond
3. Direct transport and loading to the international shipping vessels or carrier for direct
shipment abroad
4. Proof of exportation
5. Marking of the primary container with “Exported from the Philippines”