Excise Taxes.docx

EXCISE TAXES Automobiles Automobiles: Total landed value includes: (i) (ii) (iii)

Total of the market value of the vehicles imported as indicated in the motor vehicle reference books, or the dutiable value, whichever is higher Customs duties paid on the imported goods, and all other charges arising from importation

Completely knocked down (CKD): imports in disassembled condition Semi knocked down (SKD): imports in partially disassembled condition Completely build up (CBU): imports that are completely assembled Imposition of tax Persons liable in the payment of ad valorem tax: a) On locally manufactured/assembled automobiles a. Must be paid by the manufacturer/assembler before removal of goods from place of production/assembly b. If removed without payment, the owner/dealer shall be liable for payment of excise tax c. In case of transfer from tax-exempt to non-tax exempt, the possessor or transferee shall be liable b) On imported automobiles a. Excise tax shall be paid by the owner/importer b. If the article is imported tax free and subsequently sold to non-tax exempt persons, the possessor, buyer or transferee shall be liable for the excise tax as if he was the importer If a locally manufactured motor vehicle previously classified as jeepney, bus, etc. is converted any time after its removal to a vehicle subject to ad valorem tax, the owner/possessor shall be liable for excise tax based on acquisition price plus cost of conversion, and shall be subject to penalties. Rates and bases of ad valorem tax on automobiles -

Must be based on manufacturer’s/assembler’s/importer’s selling price, net of excise tax and VAT

OLD RATES Net Manufacturer’s/Importer’s Selling Price Up to P600,000 Over P600,000 to P1,100,000

Tax Rate 2% P12,000 plus 20% of the value in excess of P600,000

Over P1,100,000 to P2,100,000 Over P2,100,000

P112,000 plus 40% of the value in excess of P1,100,000 P512,000 plus 60% of the value in excess of P2,100,000

NEW RATES Net Manufacturer’s/Importer’s Selling Price Up to P600,000 Over P600,000 to P1,000,000 Over P1,000,000 to P4,000,000 Over P4,000,000 *Provided that hybrid vehicles will be taxed

Tax Rate 4% 10% 20% 50% at 50% of the applicable tax rates

Manufacturer’s selling price: the net manufacturer’s selling price shall refer to the price net of excise taxes and VAT, as sold to dealers, or the price in their sales invoices/receipts, whichever is higher a) The price shall include the value of air conditioner, radio, and mag wheels, and cost of installation, even if these were not installed b) The manufacturer’s selling price shall not be less than: a. 80% x (SRP – excise taxes – VAT) b. Cost to manufacture plus 10% industry profit margin and other expenses incurred c. Actual selling price when sold to the market If imported automobiles are not held for sale, the excise taxes shall be based on the total landed value. But if the same importer imports another automobile within the 12 month period, this shall be not be treated as importation not for sale. Subsequent sale by a tax-exempt entity to non-tax exempt entity: -

shall be subject to ad valorem tax based on the higher of: (i) actual consideration for the sale; or (ii) the depreciated value at the time of sale, subject to depreciation rate of 10%, but in no case shall total depreciation be more than 50% of the total cost or value

Exempted from excise taxes: 1. Removals for export a. There must be permit to export immediately after removal b. The automobile must be directly delivered from production to the vessel for exportation c. Exporters must submit proof of exportation 30 days after removal from production d. Exporter’s bond 2. Delivery to tax-exempt persons or entities

3. 4.

5. 6.

a. Tax exempt entities i. Embassies of foreign governments ii. Tax exempt organizations such as ADB iii. Other tax exempt entities covered by tax treaties Removals for delivery and use exclusively within the free port zone Removal for test run a. Notice of the test shall be given to BIR and the unit must be returned to the plant on the same day Purely electric vehicles shall be exempt from excise tax on automobiles [NEW LAW] Pick-ups [NEW LAW]

Filing and payment of ad valorem tax 1. On locally manufactured/assembled automobiles a. File in triplicate for each place of production a separate consolidated tax return and pay the ad valorem tax before removal from production/assembly b. Filed in the BIR office where the production is located 2. On imported automobiles a. All importation shall not be released without payment of ad valorem tax and presentation to the Collector of Customs of the original copy of the Authority to Release Imported Goods Alcohol and Tobacco Products Net Retail Price: price at which the alcohol and tobacco products are sold on retail in at least 5 major supermarkets in Metro Manila, excluding excise tax and value added tax Suggested Net Retail Price: refers to the net retail price at which locally manufactured or imported tobacco and alcohol is intended to be sold by the manufacturer or importer - SNRP should not be understated by 15% or more of the actual NRP, otherwise the manufacturer or importer shall be liable to deficiency excise tax Any downward reclassification of present categories which would result to a lower excise tax shall be prohibited. There is no excise tax for native liquors such as tuba, basi, and tapuy. Imposition of Tax Ad valorem: Net retail price per unit x proof x ad valorem rate [Distilled Spirits]; Specific tax: When articles may be removed without prepayment of tax 1. Removal of wines and distilled spirits for treatment of tobacco leaf

2. Denatured alcohol rendered unfit for oral consumption (180 degree proof; 90% alcohol) a. The denatured alcohol will not be subject to excise tax but to 12% VAT b. But if the denatured alcohol is used for motive power, it shall be subject to excise tax on manufactured oils but not on alcohol c. If the alcohol underwent ratification that rendered it fit for oral intake, it shall be subject to excise tax 3. Removal of spirits under bond for rectification a. The tax shall be paid after the alcohol have undergone ratification, with no allowance for losses 4. Removal of fermented liquors to bonded warehouse a. Shall not be less than 1000 liters at one removal 5. Removal of damaged liquors a. Shall contain not less than 175 liters with a note of its contents 6. Removal of tobacco products entirely unfit for chewing or smoking Any corporation, partnership or association found liable for acts prohibited will be fined triple the amount of deficiency taxes, surcharges and interest. The proper classification of fermented liquors and distilled spirits shall be determined every two years. Fermented liquors and distilled spirits introduced after the effectivity of RA 10351 shall be initially tax classified according to their suggested net retail prices. If a cask has one liter and an additional fractional part of a proof liter greater than or equal to half a liter, this portion shall be taxed as a liter. Any package containing less than a liter shall be taxed as a liter. Petroleum Products Creditable excise taxes when used on manufacturing excisable articles: 1. Purchased feedstock (bunker) Zero-rate excise taxes: A. B. C. D. E.

Naphtha: applicable when used as a raw material or replacement fuel Kerosene Diesel fuel or oil LPG: not used for motive power Bunker fuel or oil

Exempt from excise taxes a) b) c) d) e) f)

International carriers of Philippine or foreign registry Exempt entities or agencies covered by tax treaties Entities exempt by law on direct and indirect taxes Liquefied petroleum gas not used for motor or vehicle fuel Purchases of gasoline by AFP Gasoline lost through evaporation while stored in bonded warehouse

g) Aviation gasoline and oils used in international flights h) Imported gasoline and oils in bonded warehouses which can be removed and loaded into the tanks of airplanes of foreign airlines