CHAPTER 11:

EXCISE TAX
PREPARED BY: CARL JUSTINE MANIAGO, CPA
EXCISE TAX
 It 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.
 If the goods are exported out of the country, the manufacturer or producer of
the goods subjected to excise tax may claim tax credit or tax refund for the
excise paid.
 In some cases, however, the regulatory feature of excise tax is so intense
that it disregards its consumption tax nature by taxing even exports. As a
matter of national interest or public policy, the transshipment of sin
product such as alcohol or cigarettes into designated ecozones and the
export of locally extracted mineral products is subject to excise tax even
if they are foreign consumption.
 Excise taxes are generally levied at the point of production or importation.
Exceptionally, cosmetic surgery and mineral products are subject to excise
tax at the point of sale.
EXCISE TAX AS A REGULATORY TAX
 ENVIRONMENTAL TAX
 imposed on products which causes harm to the environment when produced or
extracted or used. It also known as green tax.
 Petroleum products, quarry resources, mineral products

 SUMPTUARY TAX
 imposed to restrain luxury or extravagance. It is also referred to as vanity tax.
 Intrusive cosmetic surgery, automobiles & yacht, jewelry

 SIN TAX
 imposed on the consumption of sin products or those know to pose health risk. It is
also known as health tax.
 Alcohol beverages, tobacco products such as cigar and cigarettes
TYPES OF EXCISE TAX

 SPECIFIC TAX
 Excise tax imposed based on weight or volume capacity or any other physical unit
in measurement.

 AD VALOREM TAX
 Excise tax imposed on selling price and other specified value.

 Specific sin taxes are now 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.
BASIS OF AD VALOREM TAX

 GROSS SELLING PRICE OF LOCALLY PRODUCED GOODS

 The price, excluding the VAT, at which the goods are sold at wholesale or through
sales agents;
 If the manufacturer also sells the goods at wholesale in another establishment of
which he is the owner, the wholesale price in the latter establishment shall be the
gross selling price;
 If the price is less than the cost of manufacturing plus expenses, the gross selling
price shall equal such cost + expenses + a proportionate margin of profit (minimum
margin of 10%)

 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
manufactured articles.
BASIS OF AD VALOREM TAX
ILLUSTRATION

A manufacturer of excisable goods, subject to 20% excise tax, made the

following declaration in filing its excise tax return for goods produced:

Wholesale invoice price P 8,500,000

Production cost 7,500,000
Cost to sell 1,500,000

Compute the excise tax.

PERSONS SUBJECT TO EXCISE TAX
 DOMESTIC PRODUCTS
 Generally, the manufacturer or producer of the domestic products shall file the
return and pay the excise taxes before the removal of the domestic products from
the place of production; or
 Owner or person having possession of domestic products which were removed from
place of production without payment of the excise tax; or
 The first buyer, purchaser, or transferee for local sale or transfer in the case of
indigenous petroleum, natural gas, or liquefied natural gas.

 IMPORTED PRODUCTS
 The importer shall file the return and pay the tax before removal of the imported
goods from the custom house or customs custody; or
 The person who is found in possession of articles which are exempt from excise
taxes other than those legally entitled to exemption.
EXCISE TAX ON ALCOHOL PRODUCTS

ILLUSTRATION

Beer-Gin Serbesa ferments beer from imported malt or ale and sells them in
500-ml bottles at P32/bottle final retail. The beers are sold in cases
containing 24 bottles each. 300 cases of beers are produced in March 2019.
EXCISE TAX ON ALCOHOL PRODUCTS

ILLUSTRATION

Total cases produced 300

Multiply by: 24
Total bottles 7,200
Multiply by: ml/bottle 500
Total ml produced 3,600,000
Divide by: ml/L 1,000
Total liters produced 3,600
Multiply by: Excise tax per liter P 25.42
Total excise tax P91,512
EXCISE TAX ON AUTOMOBILES

 Exception to excise tax rates

 Hybrid vehicles shall be subject to 50% of the applicable excise tax.
 Purely electric vehicles shall be exempt from excise tax on automobiles.
 Pick-ups

 Hybrid vehicle mean a motor vehicle powered by electric energy, with or

without provision for charging, in combination with gasoline, diesel or any
other motive power.
EXCISE TAX ON AUTOMOBILES
ILLUSTRATION
Daza Company manufactures cars and motorbikes powered solar energy or by
a combined gasoline and hydrogen generated from hydrolysis. During the month,
Daza completed a unit each of its car and motorbike model.

Wholesale
Hybrid water car P 2,000,000
Hybrid water bikes 800,000
Solar car 4,000,000