CHAPTER 1

CONSUMPTION TAXES
- Tax upon the usage of income
- A business tax
- ONLY DOMESTIC CONSUMPTION IS SUBJECT TO TAXATION

TYPE OF DOMESTIC CONSUMPTION AS TO SOURCE

1. DOMESTIC SALES
-PURCHASES from resident sellers
-INDIRECTLY imposed upon sellers which are businesses (applies principle of
administrative feasibility)

2. IMPORTATION (VAT on importation)

-PURCHASES from abroad by non-residents
-Directly computed on the landed cost or total purchase cost
-VAT directly levied upon the buyer (importer)
-Imposed regardless if the seller is a business or not.

TYPES OF CONSUMPTION TAXES

1. PERCENTAGE TAX – 0.60% to 30%
2. VALUE ADDED TAX (VAT) – 12%
3. EXCISE TAX – ad valorem or specific tax, imposed IN ADDITION to VAT or Percentage Tax

BASIS OF EXEMPTION VAT on Importation Business Tax

Human Necessity Goods imported Goods, services and property sold
Out of Scope of Tax Does not constitute DOMESTIC Seller NOT engage in Business
consumption
 The imported goods represent
CURRENT domestic
consumption
Tax Incentive Tax incentive to CERTAIN Taxpayers Sales or Receipts exempted to
CERTAIN taxpayers

International Comity Exempted by TREATY Sales or Receipts EXEMPTED by treaty

Import of Goods Import of Services Sales of Goods Sales of Services
Percentage Tax N.A % Tax - Certain
VAT VAT on Final Withholding Vatable Sales Vatable receipts
Importation VAT