Amzelle Diego Laspinas

BSA- II

CHAPTER 11 EXCISE TAX

Excise Tax
 Is a hybrid consumption tax with a regulatory overture. It is imposed only to a certain goods or
services
 It normally applies when the goods are intended for domestic consumption. It taxes goods
domestically produced or imported for domestic use and exempts goods produced for exports.
 If the goods are exported, the manufacturer or the producer of the goods subjected to excise
tax may claim tax credit or tax refund for the excise tax paid.
 As a matter of national interest or public policy, the transshipment of sin products into
designated ecozones and the export of locally extracted mineral products is subject to excise tax
even if they are for foreign consumption.
 Are generally levied at the point of production or importation.
 Tax is collected before the goods are removed at the point of production or before the removal
of the goods from Customs. Cosmetic surgery and mineral products are subject to excise 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. Other countries, gambling and morally damaging activities are taxed.
List of Excisable Articles and Services in the Philippines
1. Alcohol Products
2. Tobacco Products
3. Petroleum Products (gas, gasoline, diesel, wax, lubricant oils and greases, kerosene, naphtha,
denatured alcohol, coke, asphalt and bunker fuel oil.
4. Mineral Products
5. Miscellaneous Articles (automobiles, non-essential goods such as jewelry, perfume and yacht,
and sweetened beverages like soft drinks and sweetened drinks.
6. Non-essential Services (cosmetic surgery)

Taxable point of
Excisable Article or Services Import Production Sales
1. Alcohol Products Yes Yes -
2. Tobacco Products Yes Yes -
3. Petroleum Products Yes Yes -
4. Mineral Products Yes - Yes
5. Automobiles Yes Yes -
6. Non-essential goods Yes Yes -
7. Sweetened Beverages Yes Yes -
8. Non-essential services - - Yes

Nature of Philippine Excise Tax

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BSA- II
 Excise Tax as a Regulatory Tax
1. Environmental Tax - products which cause harm to the environment when produced or
extracted or used. Also known as Green Tax.
2. Sumptuary Tax - imposed to restrain luxury or extravagance. Also known as Vanity Tax.
3. Sin Tax - imposed on the consumption of sin products or those known to pose health
risk. Also known as Health Tax.
 Excise Tax as an Indirect Tax
 Levied upon producers or importers with the understanding that he will pass-on the
same to the consumers.
 Excise Tax as a Consumption Tax
 Levied at the point of production or importation, except excise tax on materials and
cosmetic surgery which is levied at the point of sale.
 Excise Tax as an Additional Business Tax
 If it produces or imports excisable goods or sells excisable services, the excise tax is
imposed in additional tax to the usual business tax
 Excise Tax as Specific and Ad Valorem Tax
 Imposed in the Philippines are primarily specific taxes but there are also ad valorem
impositions and mixed of them.

Type of Excise Tax

1. Specific Tax
 Imposed based on weight or volume capacity or any other physical unit of
measurement.
 Indexed to inflation at a rate of 4% per annum to preserve the regulatory potency of the
tax from the gradual decline in purchasing power of money over time.
2. Ad Valorem Tax
 Imposed on selling price and other specified value

Basis of Ad Valorem Tax

Locally Produced Goods
 Subject to Gross Selling Price
 Gross selling price means the price, excluding VAT, at which the goods are sold at
wholesale in the place of production or through their sales agent to the public shall
constitute the gross selling price.
 If the manufacturer allows such goods to be sold at wholesale, the wholesale price in
such establishments shall constitute the selling price.
 Price be less than the cost of manufacture plus expense incurred until the goods are
finally sold, then a proportionate margin of profit, not less than 10% of such
manufacturing cost and expense, shall be added to constitute the gross selling price.
 Manufacturer’s or producer’s sworn statement is required
 Shall file with the CIR statement showing the different products or goods manufactured
and their corresponding selling price, together with the cost of manufacture plus
expenses incurred until the goods are finally sold.
Imported Goods
 Imposed with ad valorem tax shall be subject to the same rates and basis of excise taxes
applicable to locally manufactured articles.

Amzelle Diego Laspinas
BSA- II

Tax Compliance Requirement

A. Who are the Persons Liable to Excise Tax?
For Domestically Produced Excisable Article
General Rule:
Excise Tax is paid by manufacturers or producers of excisable goods.
Exception Rule:
1. Indigenous petroleum, natural gas or liquefied natural gas payable by:
a. For local sale - the taxpayer is the first buyer’
b. For export sale - the taxpayer is the owner, lessee,
concessionaire
2. Removal without payment
 The person having possession thereof shall be liable to the tax.
For Imported Excisable Article
General Rule: The importer
Shall be paid by the owner-importer of the imported goods.
Exception Rule: The non-exempt buyer
 When good is 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.
B. When to File and Pay Excise Tax?
Domestically Produced Excisable Products
General Rule: Before Removal
 Payable before removal of the domestic goods from the place of production
Exemption Rule: Mineral Products
 Payable within 15 days after the end of the calendar quarter when such
products were removed.
 Taxpayer shall file a bond in an amount which approximates the amount of
excise tax on the removal for the said quarter.
Imported Excisable Products
 Shall be paid before their removal from custom custody
Who is the taxpayer?
Domestically Produced - Producer
Imported - Importer
When to pay?
Domestically Produced - Before removal from production
Imported - Before removal from Customs
Excise Tax-Free Importation by Exempt Persons
 Products into tax and duty-free shops, Freeport zones and special economic zones shall not be
subject to excise taxes since they are considered foreign territories. Consumption of persons
inside these places are considered foreign consumption, exempt.
 Exemption does not apply to sin products such as cigars, cigarettes, distilled spirits, fermented
liquors and wines.
 Introduction into the customs territory refers to the sale or transfer of tax-free articles to
persons outside tax and duty-free shops, freeport zones and special economic zones.
Export of Excisable Goods
 Exported without returning to the Philippines, any excise tax paid thereon may be claimed as tax
refund of tax credit.
Amzelle Diego Laspinas
BSA- II
 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 is mineral 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 for
foreign consumption.

Excise Tax on Alcohol Products

Alcohol Products

Distilled Spirits Per proof liter P 23.40

NRP 20%

Sparkling wines/ Champagnes NRP per 750ml bottle: P500 or less 316.33

More than 500 885.73

Still wines and carbonated wines 14% alcohol by volume or less 37.96/L

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

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
 Sparkling wines have sugar and yeast on them which makes them bubbly due to continuous
fermentation even after bottling.
 Carbonated wine is one which is artificially added with carbon dioxide to influence character or
taste of the wine.
 Fortified wines means 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.
Fermented Liquors
 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 liquors
Denaturation of Alcohol
 When used for treatment of tobacco leaf, it would be tax free, but alcohol must first be suitably
denatured.
 Muse be of not less than 180° proof (90% absolute alcohol) when suitably denatured and
rendered unfit for oral intake is exempt from excise tax
Amzelle Diego Laspinas
BSA- II
 If used for motive powers shall be taxed as petroleum products.
 If rendered for oral intake after denaturation but restored fit for oral intake shall be subject to
tax as alcohol products.
Rectification of Spirits
 Spirits for rectification may be removed from the place of production for rectification without
prepayment but this requires submission of a joint bond by the distiller and rectifier conditioned
on the rectifier’s payment of the excise tax.
 Rectifiers using spirits with unpaid taxes shall be liable for the payment
Removal of fermented liquors to bonded warehouse
 Must not be less than 1,00 liters at one removal without prepayment of the tax under a permit
which shall be granted by the CIR.
Removal of damaged liquors
 When the liquor is damaged, brewers may sell and after securing a special permit form the CIR,
remove the same without the payment of tax thereon, distinct from those ordinary used for
fermented liquors, 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 condition 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 of any

machine or instruments or without being pressed or sweetened
P2.20/kg as of
January 1, 2019*
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 unsustainable for P1.89/kg as of

use in any other manner January 1, 2019*
*subject to 4% yearly increase

Cigar and Cigarettes

Cigar, per cigar Excise Tax
- Ad Valorem Tax 20% on net retail price
- Specific Tax 6.32/cigar as of 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% increase yearly starting Jan. 1, 2024

Cigar – rolls of tobacco or any substitute thereof, wrapped in leaf tobacco

Amzelle Diego Laspinas
BSA- II
Cigarettes – rolls of finely-cut leaf tobacco, or any substitute thereof, wrapped in paper or in any other materials

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 tobacco P0.03/kilogram or fraction thereof

EXCISE TAX ON PETROLEUM PRODUCTS

Petroleum Products Tax Rate Unit of Measure
2019 2020
Lubricating oils and greases including but not limited P9.00 P10.00 Liter & kilogram
to basestocks 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 9.00 10.00 Liter or volume
other similar products of distillation
- If used as raw materials in the
production of petrochemicals or as a 0.00 0.00
replacement fuels 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
Liquefied petroleum gas 2.00 3.00 Kilogram
- If used for motive power Tax 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 fan
- If used as feed stocks to power 0.00 0.00
generation facilities

Petroleum products to be used as raw materials

- For power plants are not taxable
- Bioethanol products 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
- Excise tax paid on the purchase of bunker shall be credited against the excise tax due
thereon.
Amzelle Diego Laspinas
BSA- II
- Excess of excise tax paid on raw materials shall not give rice to a tax refund or credit.
Note the following:
Used in production or Used as replacement fuels for
processing of products subject power plants
to excise tax
Naphtha, gasoline and other Exempt Exempt
similar products
Liquefied petroleum gas Exempt Exempt
Petroleum coke - Exempt
Bunker fuel Taxable but creditable -

Mandatory marking of all petroleum products

- Imported or locally manufactured petroleum products such as but not limited to
unleaded premium gasoline, kerosene and diesel oils are required to be marked after
payment.
- Products found not marked in domestic markets but diluted beyond the acceptance
percentage approved by the Secretary of Finance
- Random field test will be periodically conducted to inspect the quality and quantity of
fuel check incidence of fuel trafficking.
- Confirmatory test to validate the findings of the field test.
Sale of Petroleum Products to Exempt Entities
Petroleum products sold to the following 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

Mineral Products Domestically Produced Imported
Coal and Coke P50/MT effective Jan. 1, 2018
P100/MT effective Jan. 2019
P150/MT effective Jan. 1, 2020
Non-metallic minerals and quarry resources 4% 4%
Copper, gold, chromite and other metallic 4% 4%
minerals
Indigenous petroleum 6%
Natural gas and liquefied natural gas Exempt

Ad valorem tax on mineral products

1. Excise tax on metallic and non-metallic minerals
- Domestically, excise tax based on the actual market value of the gross output upon a
removal
- Imported, based on the value used by the BOC in determining the tariff and customs
duties
2. Excise tax on indigenous petroleum
- Based on the fair international market price on the first taxable sale
Amzelle Diego Laspinas
BSA- II
Small Scale Miners
- RA 11256 exempts registered small scale miners and accredited traders who are selling
gold to the BSP from paying income tax and excise tax
- Gold is sold shall be exempt from the payment of tax
EXCISE TAX MISCELLANEOUS ARTICLES
Automobile
- any four or more wheeled motor vehicle propelled by gasoline, diesel, electricity or
other motive power
- buses, trucks, cargo vans, jeepneys, cement mixer, fire truck, boom truck or medical unit
shall not be considered automobiles
Ad valorem ta on manufactured or imported automobiles
Manufacturer’s selling price (net of excise tax or VAT) Tax rate
Up to 600,000 4%
600,000 to 1M 10%
1M to 4M 20%
Over 4M 50%
Exception to the excise tax tares:
1. Hybrid vehicle shall be subject to 50% of the applicable excise tax.
- Motor vehicle powered by electric energy
2. Purely electric vehicle and shall be exempt on excise tax on automobiles.
3. Pick-ups
The net of manufacturer’s selling price shall not be less than:
1. 80% x (suggested price – excise tax – VAT); and
2. 110% x (cost of manufacture or import + selling expenses)
Imported vehicle not for sale
- Shall be subject to the excise tax on the total landed value
Technical Importation
- Imported by exempt person is not subject to excise tax and, when sold to taxable person
is subject to excise tax
- 10% depreciation expense shall be provided but not in excess of 50% of the original cost
or value.
Tax Exempt Removals of Automobiles
A. Removal of export
No excise tax shall be imposed on vehicles removed for export, subject to the following
conditions:
1. Permit to export
2. Direct delivery to vessel
3. Proof of exportation
4. Exporter’s bond
B. Delivery to tax-exempt persons or entities
C. Removals for delivery and exclusively within the Freeport zone
D. Removal of automobiles for test run
Amzelle Diego Laspinas
BSA- II
NON-ESSENTIAL GOODS
A 20% ad valorem tax is exposed upon the following:
1. Jewelry
2. Perfume and toilet waters
3. Yachts and other vessels intended for pleasure or sports
The following are not jewelry and hence exempt:
1. Surgical and dental instruments
2. Silver-plated wares
3. Frames for eyeglasses
4. Dental golds or gold alloys and other precious metals used in filling, mounting or fitting of the
teeth
NON-ESSENTIAL SERVICES
- 5% on gross receipts from the performance of services
Examples of taxable invasive cosmetic procedures:
Chin augmentation Eyelid surgery
Mammoplasty Facelift/necklift Vaginal plastic surgery
Breastlift Thread lift Auto grafting and otoplasty
Buccal fat removal Buttocks augmentation Rhinoplasty/ alar trimming
Embedded protein threads Hair restoration/ Abdominoplasty or tummy
transplantation tuck
Examples of exempt non-invasive cosmetic procedures:
Acupuncture rejuvenation Non-surgery face lifting and skin Dermal fillers (cross-linked and
therapy tightening using radio frequency non-crosslinked)
Air dissector Cleanings and facials Peelings (face and body)
Collagen induction therapy CO2 fractional laser resurfacing Injectibles and weight
management treatment
Botulinum toxin Laser and light treatment Body treatment and contouring
injection/treatment procedures

SWEETENED BEVERAGES
- Non-alcoholic beverages that are pre-packed and sealed that contain caloric and non-
caloric sweeteners added.
Includes:
Sweetened juice drinks Energy and sports drinks
Sweetened tea Flavored water
All carbonated beverages Cereal and grain beverages
Other powered drinks not milk, juice, other non-alcoholic beverages that contain sugar
tea and coffee
caloric sweeteners
– include sucrose, fructose, and glucose that produces a certain sweetness
non-caloric sweeteners
– that is artificially processed that produces certain sweetness
high fructose corn sugar
– refers to sweet saccharide mixture containing fructose and glucose derived from corn
Amzelle Diego Laspinas
BSA- II
Product description Tax rate per
liter
Using purely caloric sweeteners, and purely non-caloric P 6.00
sweeteners or a mix of them
Using purely high fructose corn syrup or in combination P12.00
with any caloric or non-caloric sweetener
Using purely coconut sap sugar and purely steviol glycosides Exempt
Exempt products from Excise Tax
1. All milk products
2. Soymilk and flavored soymilk
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 products
Transfer of raw materials
- Shall not allowed to transfer or remove raw materials from placer of production unless
intended for further processing
Transfer of semi-processed goods
- Such as syrups, 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
- Shall be subject to the payment of excise tax by the manufacturer.
Export of sweetened beverages
- May be removed from the place of production without payment of excise tax shall be
subject to the following conditions:
1. Shipment permit
2. Surety bond
3. Direct transport and loading to the international shipping vessel or carrier for
direct shipment abroad
4. Proof of exportation
5. Marking of the primary container with “Exported from the Philippines”