h mption tax on importation. = 5 a y ‘of importations which are exempt consumption rhe ‘concept of in “original state” for agricultural or mati Roa rigi e” for agricultural or ‘marine food The concept of qualified exemption The scope and applicability of the VAT on importation The concept of landed Cost and Import VAT computation The concept of technical importation The treatment of the VAT on importation IMPORTATION Importation ‘refers to the purchase of goods or services’ by Philippine residents from non-resident sellers, Types of Consumption Tax on Importation 1. VAT on importation - for the import of goods 2. Final withholding VAT - for the purchase of services from non-residents Comparison between the Consumption Tax on Importation VAT on importation Final withholding VAT Object consumption Goods Services Imposed upon Importers / buyers | Foreign service providers Statutory taxpayer Importers / buyers Resident purchaser of the service* Nature Direct consumption tax Indirect business tax Tax basis Landed cost Contract price Collecting agency BOC BIR Timing of payment | Before withdrawal of | After the month of payment goods “Individuals engaged in business and corporations T on importation is payable to the Bureau of Custom and is paid prior eens of the goods from the Customs warehouse. The final 21TION a ‘ ‘exempt go M iq f goods ener yasic necessities are not subject to the Vi jortation, such as: , ee Eesgreibsral and marine food products in their original state 2. Fertilizers, seeds, seedlings and fingerlings, fish, prawn, livestock poultry feeds, including ingredients used in the manufacture of finish feeds 5 4 3. Books and any newspaper, magazine, review, or bulletin which appea at regular intervals with fixed prices for subscription and sale a which is not devoted principally to the publication of paig advertisements 3 i Passengers or cargo vessels and aircrafts, including engine, equipmen and spare parts thereof for domestic or international transpoi operations B. Importation by VAT-exempt persons 1, International shipping or air transport operators on their import of fuel, goods and supplies 2. Cooperatives of direct farm inputs, machineries and equipment including spare parts thereof, to be used directly and exclusively in th production and or processing of their produce 3. PEZA locators on their import of goods or services C Quasi-importation 1, Personal and household effects belonging to residents of Philippines returning from abroad and n resettle in the Philippines 2. Professional instruments and im animals, and personal household settle in the Philippines, exchange on-resident citizens coming plements, wearing apparel, dome: effects belonging to persons coming t for their own use and not for sale, barter D. Importation which are exempt under special laws and inter agreement_____ BASIC HUMAN FOOD AND RELATED PRODUCTS ide _ Agricultural or marine food products in original state ad i Pee Bpipetion A ieleed to agricultural or marine food products in their . r those which undergone simple processing. Good that 5 underwent advanced processing are vatable. 7 id Examples of exempt agricultural or marine food products in original state: 1. Grapes, apples, oranges and other fruits at 2, Vegetables, tea, ginseng a 3. Rice, corn, coffee beans and other edible farm products 4, Marine foods such as fish and crustaceans 5. Poultry and livestock j 6. Milk, eggs, and meat for human consumption » Livestock includes cow, bulls, calves, pigs, sheep, goats and rabbits. Poultry shall b include fowls, ducks, geese and turkey. Marine food shall include fish and a crustaceans such as, but not limited to, eels, trout, lobster, shrimps, prawns, oysters, mussels and clams (RR16-2005). To be considered in “original state”, the goods must be in their raw form. However, those that underwent simple processing are also exempt. Meaning of simple processing The term simple processing includes: a. Acts of preparation for the market b. Acts of preservation, or . : c. Acts of paneine including advanced technological means of packaging Examples of simple acts of preparation: a. mae simple acts of Prepar Roasting b a e, Stripping Broiling £ Grinding ¢ Husking 23oange want = gaatsngun ith Cogn ¢ ang act i has: ving FuH technological means, suc ‘wrapping in plastics wa ‘b. Vacuum packing ¢. Tetra-packing _d._ Other similar packaging methods food products which underwent Hence, the following agricultural or marine processing are also exempt: With simple ile act oj BI a ete i With acts of packaging ked rice Sundried fruits Tetra-packed fresh fruit juice ae as Salted meat Shrink wrapped meat: Raw cane sugar ‘Smoked fish Roasted beans Dried fish Ordinary salt Frozen meat or fish | Ground meat | Copra | Boiled eggs ) | Lechon 1 Boiled eggs and lechon Though boiled eggs and lechon are said to be cooked in their ordinary sense, the cooking methods used (i.e, boiling or heating) are simple processing. Hence boiled eggs and lechon are exempt. : Raw Sugar means the natural sugar extracted from sugarcane through simple mechanical process by pressing the juice; boiled to crystallize; filtered using centrifuge to ‘separate these crystals, and dried, resulting to crystalized brown Sugar with sucrose content by weight in dry state Corresponding to a polarimeter reading of less than 99,50 degrees and or whose color is 800 ICU or less. Ra i - pace Ww sugar includes muscobado. (RR8- The importation of the aforementioned agri i a igricultural or marine fo in their original state is exempt from VAT. per 24oma TAY no ealoe importation of processed products and noite an state shall be subject to VAT on jt ten soem not in their "Use or purpose dictates vatability ; Flowers intended as love gifts are vatable since they are not food but cauliflower, of course, is an exempt human food. Cockfighting chickens are vatable since they are primarily intended for human amusement. They are only food when they lose. However, chicken produced for meat or eggs are VAT-exempt human foods. Farm or fishery inputs Marine or agricultural inputs intended for the production of marine or agricultural food products which are ultimately intended for human consumption are also VAT-exempt. The importation of farm or fishery inputs such as seeds, seedlings, breeding stocks and genetic materials are exempt. Likewise, foods of these inputs such as fertilizers and feeds including ingredients manufacture of finished feeds are also VAT-exempt. Products intended as maintenance of crops, livestock or poultry and supplemental implements of agricultural or inputs such as_ pesticides, herbicides, animal medicines, fishing equipment, fishing boats, tractors, plows, driers, threshers and harvesters are vatable. i i i ks and pets are not Zoo animals, race horse, aquarium fish, fighting cocl intended for human consumption; hence, vatable. Feeds of these non-food animals called “specialty feeds” is likewise vatable. 1 i animal food intended for ultimate human 1 ieee alana fo St but ingredients for the processing of human is vatable. 25600,000 800,000 .s on VAT taxation of poultry and feeds ste ae Livestock. Poultry xX x Importation of Importation of feeds for X x Importation of feed x xX ingredients for for the processing of foods for human consumption is vatable, Note: The importation of ingredients vatable because processed human foods are ble non-food agricultural or marine products: nd similar forest products cotton and other non-food Examples of vatal a. Logs, wood, bamboo, orchid, al b. Rubber hem, abaca, tobacco, topical herbs, crops c. Shells, corals, and other non-food marine products usually used as ornaments and other 4. Race horses, fighting cocks, aquarium fish, 200 animals, animals generally considered as pets BOOKS, NEWSPAPERS, MAGAZINE, REVIEW OR BULLETINS ese goods is apparently based information. The Philippine rity to education to foster omote total The VAT exemption on the importation of th upon the necessity of education and constitution requires the state to give prio patriotism and nationalism, accelerate social progress, and pr human liberation and development. (See Sec. 17, Article 1, Philippine Constitution) in Philippine Constitution also recognizes the vital role of communication information in nation-building, (See Sec. 24 Ibid.) or exemption of newspaper, magazine review oF bulletin: pear at regular intervals with fixed prices for subscription. st not be devoted principally to the publication of palVAT exemption on the import of these. s reinstated by RA 10378 and was codified un odh, ein . if ‘This incentive for VAT-exemption is granted by law in an effort to modernization of the shipping, transport and tourism industry. To qualify for exemption, the importation must be subject to the requirements on restriction on vessel importation and mandatory vessel retirement program of the Marina Industry Authority (MARINA): - Passenger or cargo vessels - 15 years - Tankers - 10 years - High speed passenger crafts - 5 years Ilustration Total Transport Group has land, sea and air transport operations, To beef up its operations, it imported 5 units of Daewoo bus, 1 unit of aircraft and 2 cruise ships. The importation of the airplane and ships are exempt but the importation of the buses for land transport is subject to VAT. Note to readers: In mastering the consumption taxes, legal sensitivities must be considered, It is an established principle of law, that items not included are deemed excluded. Exempt goods must be strictly construed to cover only to those listed by the law as discussed herein. Other basic necessities such as medicines, clothing, processed foods, kitchen supplies, school supplies, and the like are not exempt. A familiarization of the list is imperative. TI T- 7 VAT-exempt persons are not subject to VAT on importation. The extent of their exemption varies per exempt persons. an exempt importer subsequently sells his exempt importation to a -exempt Sue the non-exempt buyer shall be subject to 27Ga avseent al aes ir eanspor operators tural cooperatives ‘one-locators tional shipping or air transport operators The exemption aS te to the importation of fuel, goods and suppli Although these goods or supplies are physically brought into Philippines, they are not intended to be consumed herein. They wi ultimately be used in international transport. This consumption is a foreig consumption rather than domestic consumption. Mlustration 1 Ho f * e Malaysian Ferries is an international shipping carrier. It imported to th Philippines fuel and supplies to be used in its shipping operations. Note that the fuel, goods, or supplies will be consumed in the high seas or in foreign territories ‘outside the country. The importation is not a domestic ‘consumption but aforeign consumption; hence, it is exempt from VAT. Mlustration 2 Pinoy Airline imported jet fuel from Iraq at a total cost of P50,000,000. 40% of the importation is declared for domestic airline operations while 60% is declared for international air transport operations. 60% of the P50,000,000 importation will be consumed in foreign airspaces. This is not for domestic consumption; hence, it is exempt from VAT. Only the 40% portion which will be used domestically will be subject to the VAT on importation. Illustration 3 Ba Airline, an international air carrier, imported jet fuel at a total cost of r 0,000. It subsequently sold P10,000,000 of these to a Feel Air, a domestic air carrier, Pes): “Life Airline is exempt on its importation of the P10,000,000 worth jet fuel. Since fc sy not gn exempt person and that jet fuels are vatable goods, Feel Air will: 4s the importer of the P10,000,000 jet fuel and will be subjected to VAT. fa rine isnot required to pass the VAT on its sales ofthe fuel op as VAT-exempt person is limited to im] i ; portation 0 ‘machineries and equipment, including their 28arts to be used dir of their produce. i a TGR: Baul Gey Abra Farmer's Cooperative imported the following equipment: Tractors and threshers to be used by the cooperative Plows and water pumps to be resold to members Fertilizers and hybrid seeds to be sold li | by the cooperative Herbicides and pesticides to be used by the aURarAve Cars for the use of cooperative directors and officers 2,000,000 | The following table summarizes the tax treatment of the im} hi a portation: Tractors and threshers to be used by the cooperative Exempt Plows and water pumps to be resold to members Vatable Fertilizers and hybrid seeds to be sold by the cooperative | Exempt Herbicides and pesticides to be used by the cooperative Exempt Cars for the use of cooperative directors and officers Vatable Note: 1, The importation of machineries and equipment for the processing or processing needs of the cooperative is exempt; hence, tractors and threshers are exempt from VAT on importation. 2. The importation of fertilizers and seeds is exempt to any importer, The importation of herbicides and pesticides which are “direct farm inputs” is exempt to cooperatives. Note that the importation of farmers of herbicides and pesticides is vatable. 3. Although plows and water pumps qualify as machineries, they are not intended for the use of the cooperative; hence, these are also vatable. 4. The cars are vatable because they are not direct farm inputs, machineries, or equipment, Illustration 2 4 unit lt 3 Assume that fertilizers and herbicides in the foregoing illustration is subsequently sold by Abra Farmer's Cooperative to Jon Juan, member farmer. What is the tax consequence of the sale? Jon Juan shall be treated as importer and shall be subject to VAT but only to on vatable goods such as the herbicides. Since the fertilizer is a VAT-exempt goods, Jon Juan shall not pay VAT on importation thereon. Mustration 3 s A eee uta imported a computer server from abroad at a 1,500,000. This importation is generally subject to VAT on exemption does not extend to cooperatives which are not:m tive, impo! ‘seeds. Arado Coop ‘subsequently sold fou ds to Mr. Laco, a cooperative member. “farm equipment and do Coop is exempt from VAT on its importation of fa Its. ee culoment ‘and seeds to Mr. Laco is not subject to business tax. Laco shall be considered an importer but Mr. Laco shall be subject to VAT only hybrid seeds. the farm equipment but not on the Illustration 6 ‘A cooperative imported frozen meat from China, It subsequently s to Philippine consumers. The importation of frozen meat, an exempt 90 any importer. Hence, the sale by the coopera consumption) shall not be subject to VAT. Likewise, to VAT on importation. old all of this ods, is an exempt importation tive to the consumers (te, final the buyers shall not be subje omic activity for the production of he export market. By legal fiction, economic zones are considered foreign countries and are deemed outside Customs territory. Thus, the importation of goods into the economic zones by locators is exempt not only from VAT on importation but also from customs duties. The’ exemption from VAT covers any goods, supplies or machineries brought into the ecozones by locators. Ecozone-locators Ecozones are designa' goods or services for t ted places of econ Technical Importation The rules of VAT on importation apply to technical importation by consumers in a customs territory from persons located in Special Economic Zones (Sec. 4.107-1, RR 16-2005). f the Republic of the Philippines Customs territory refers to the portion o! ‘es (Ecozones). (RR2-2005) outside of designated special economic zon “Technical importation” refers to the purchase of non-Ecozone Philippine residents from Philippine Ecozone-registered enterprises. By legal fiction, aah zones are considered foreign territories. Hence, the purchase from eal ic zones such as but not limited to, Subic-Ecozone, Zambo-Eco: ks and Cagayan-Ecozone is subject to the VAT on importation. iy 30_ F ‘the Ecozo Industries shall pay the VAT on im ion directly : iportation directly to th ms (BOC). Winshield Corporation is not required to ni the VAT payment (See BIR Ruling No. DA-031-2007, January 19, 2007). Illustration 2 KT, an ecozone locator, imported two machineries for use in the ecozone. It resold one machinery to S3, a fellow PEZA-locator, and resold the other to T4, a person outside the zone. The importation by the locator shall be exempt. The sales to $3 shall not be subject to business tax since it is deemed a foreign consumption. $3, also an ecozone locator, shall not likewise be subject to the VAT on importation. However, T4, a non-locator, shall pay VAT on importation on the machinery it purchased from KT. QUASI-IMPORTATION 1. Import of personal and household effects belong to residents of the Philippines returning from abroad or non-resident citizens coming to resettle in the Philippines 2. professional instruments and implements, wearing apparel, domestic animals, and personal household effects belonging to persons coming. to settle in the Philippines, for their own use and not for sale, barter or exchange Conditions for exemption: 1. The personal and housel non-residents intending to reset 2. The goods are exempt from Custom: hold effects belong to Philippine residents or ttle in the Philippines 1s duties Note that these goods are past consumptions which have been previously subjected to consumption tax herein. i fessional The i f personal or household effects or prof a : i intending to resettle in the Philippines is a foreign consumption not subject to Philippine consumption tax. 31 sales. However, it must be furnished a copy of the receipt issued by the BOO ihe :“of perso il jewelry d value, When his contract ve he baa 0 hhim the same effects whi now have him | 0 in ne personal effects will not be subject to VA had been subjected to consumption tax wl The importation (ie, return) of the since these are past purchases which purchased in the Philippines. Illustration 2 ‘ While employed abroad, Mr. Siman purchased an iPhone 6 worth P30,000 fo selfie purposes. Mr. Siman brought the iPhone to the Philippines when his ‘employment contract ended. "The importation of the iPhone shall not be subject to VAT on importation for the: "same reason that it is not a present consumption of household effects when it was brought into the Philippines. Furthermore, purchases abroad by non-residents are not subject to consumption tax in the Philippines. Their subsequent importation to, the Philippines is exempt from VAT on importation. , | Illustration 3 Mrs. Kookai Ukay, a Philippine resident, purchased used clothing and shoes) worth P300,000 from abroad to be sold in her “Ukay-ukay” sales outlets in the] Philippines. She reserved P50,000 of these for her personal use. | The entire P300,000 purchase of goods from abroad is a domestic consumption | subject to the VAT on importation. This rule applies without regard to the purpose j of the importation whether for business or for personal use. | Illustration 4 Mrs. Lovely Bulalo, a non-resident Filipino businesswoman, owns a machine in her business in France. She decommissioned the machi ness ii i to b ___ her business in the Philippines. ine to be transferred ta Although the machine is a past foreign consum| Philippines is subject to VAT professional or household iption, the importation of the same because the VAT-exemption is limited only effects. 32of these donated g rice - a VAT-exempt goods, These ‘made in favor of accredited non-profit organi tation of professional instruments ai a ie - , ind wearing apparel, domestic animal and personal ouseMaIMoRaetAEh Ose Conditions for exemption: The goods belong to persons who come to settle in the Philippines. The goods must accompany the person uj ival or withi before or after his/her arrival. Don Tt eee . There must be evidence to show that the change of residence is bona fide. . The importation is not a vehicle, machinery or other equipment used in the manufacture or merchandise of any kind in commercial quantity, Mlustration 1 Mr. Marquez, a professional boxer, applied for an application to migrate in the Philippines and was granted by the Philippine government. He brought his boxing gears and household effects including his personal car to the Philippines. The importation of professional instruments and household effects are exempt but the importation of the car is subject to VAT. Ilustration 2 Mr. Kung Fu, a Chinese martial arts master, arrived in the Philippines with an immigration visa. He brought with him the following which he declared as his personal effects: | 40 pieces of brand new iPhone 6 P 150,000 each 10 pieces of brand new IBM laptops P-80,000 each 5 desktop computers P4000 <0 Tpiece of used laptop P3000. [ 1 piece of used iPhone 4S 20,000, | 1piece of used calculator 400 [Used clothes, apparel and travelling bag 7,000 clothes, and apparel are apparently The i Iculator, Bie eneetslaptop,. iPhone 45, co hence, these are exempt from VAT. __ Personal effects which are past consumptions; e 6, IBM laptops and desktop computers is t of personal effects. These items are hence, subject to VAT. — re and quantity of the iPhon ‘inconsistent with the concep! for domestic consumption; 33; treaties or Import that are exempted by special laws, | agreements to which the Philippine governmentis a signatory to the VAT on importation. THE VAT ON IMPORTATION ; Other fnspeeestor of goods is subject to VAT regardless of whether the: Z importer is engaged or not engaged in trade or business 2. importeris.a VAT or non-VAT business 3, importation is for business or personal use 4. non-resident seller is engaged or not engaged in business the VAT on importation applies without regard to ‘Asa consumption tax, ther or not the sellers or buyers ai purpose of the importation and whe! engaged in business. Presumption of vatability Importation is generally subject to VAT unless it can be proven as exemp under any of those conditions discussed herein or under a provision of special law or treaty. The burden of proof in establishing VAT exemptiol i rests upon the importer. Tax basis of the VAT on importation The VAT on importation is computed as 12% of the total landed cost of importation. Composition of landed cost: A. Dutiable value B. Oher in-land costs 1. Custom duty 2. Excise tax, if any 3. Other in-land Costs, such as: a. Bank chai en Be e. Arrastre charge aioe € E f, Wharfage due ; Arrastre charg. 8 Documentary stamp tax d. Wharfage due sic bs h. Import processing feesje dutiable value encompasses al * at 3 I i ingi u ods Bt itigsine port and pric any ones nee eee The customs duty is computed as: Dutiable value x Exchange rate x Rate of Duty ee } Illustration 1- basic MRS Trading Corporation imported good: , Shown below are the details of the Bitar abroad cana Peso value of supplier's invoice P 2,000,000 hal Other costs incurred to bring goods to Philippine port 70,000 ia Other charges before withdrawal of goods, including P5,000 facilitation fee paid to a fixer 85,000 Customs duties 10% Freight of goods from BOC warehouse to ot MRS warehouse in Makati City 20,000 4 The customs duties shall first be computed as: m Peso value of supplier's invoice P 2,000,000 Other costs to bring goods to the Philippines 7 Dutiable value P_ 2,070,000 q Rate of duty —— a Customs duties p__207,000 The VAT on importation shall be computed as: _Dutiable value ¢ sl bil 3PR0-090 Other official costs paid before withdrawal of goods aot . from the BOC ee P. 2,357,000 “Multiply by: VAT rate ‘on importation 35_ Teather ch relevant Memorandum Circular is it exchange rate per Bureau of Customs C nee The eration is subject to P683,510 excise tax and 30% tariff rate. ‘The dutiable value and customs duties shall be computed as: Purchase price $ 50,000 Insurance in transit en Freight eter Ue Dutiable value in $ $ 51,300 Multiply by: Exchange rate 45.00 Dutiable value in Peso P 2,308,500 Multiply by: Rate of duty 30% ‘Customs duty P___ 692,550 The landed cost and value added tax are computed as: Dutiable value P 2,308,500 Customs duty 692.550 Excise tax 683510 Other charges 105, Landed cost P3,790378 Multiply by: VAT rate on import 12% VAT on importation The VAT shall be tenor: Paid to the Bureau of Customs (BOC) using a form prescribed IMPORT OF SERVICES The purchase of services from non-resid 4 TR ces residents may be: 2. Subject to specific Percentage tax 365 » our Current tax law views the final withho vi s " oe : tax. ‘The VAT is deemed imposed upon nent Adee re this purpose, the law conclusively presumes that the non-resid Ts are engaged in business even if their sales transactions are merely casual. Since non-residents cannot be obligated to file tax returns an) consideration, the resident buyer is obligated to Teh: A remit the same to the government. Thus, the term “final withholding VAT.” The VAT is deemed passed-on by the non-resident service provider which, in turn, is withheld by the resident purchaser of the service. As a withholding tax, the obligation to withhold the VAT technically exists only if: 1. the service is rendered within the Philippines; and 2, the payor-purchaser of the service is an individual engaged in business or a corporation There is no obligation to withhold the VAT if the payor is not a business, except for corporate purchasers of service. Moreover, the situs of taxation of services is determined by the place where the service ts rendered and not the place where the output of the service will be ultimately used. Hence, the service must be rendered within to be subjected to the withholding tax. Illustration 1 Eagle Company sought the help of Australia, to fix its malfunctioning m: price was P1,000,000. Eagle Company s! withholding VAT to the BIR. Mr. Putin, a repairman doing business in achinery in the Philippines. The contract hall pay P120,000 (12% x P1M) final Query: “ . : Be air i vi Patin ig nok engaged ta business i Ast ala a Toa aay _ is still subject to the 12% final withholding VAT. Mr. ‘is conclusively presumed engaged in business. 37fuldua od bid ines ohicapead aibaipeyt ee a rogaiae so fet i f Mr. nts, asked the as sistance of ee aeed, to help him install a GPS shall pay P36 holding VAT. Mr. Wong shall pay P36,000 (12% x P300,000) final withholding hah : if Mr. Teng is not engaged in i c oo talk Ta es to the 12% final withholding VAT since he will be presumed engaged in business. 2 2, What if Mr. Wong is not a businessman? The contract price shall not be subject to final withholding VAT because withholding tax obligation exists only for individuals engaged in business. VAT-EXEMPT IMPORT OF SERVICES ‘The following are exempt from the final withholding VAT: ‘a. Purchase of services from non-residents when the service is rendered abroad ; b. Purchase of services from non-residents when the individual purchaser ii isnot engaged in business ¢. Purchase of services from non-residents by VAT-exempt persons such as i ecozone locators In case the service is rendered by non-residents to ecozone locators, the final withholding VAT is not imposable since ecozone locators are ie seouisidered non-residents. The withholding requirement cannot be imposed with non-residents. Hence, the transaction shall be exempt from the final _ withholding VAT. (See BIR ITAD Ruling N ‘ : os. 311-14, and 316-14 dated November 24, 2014). dated November 4, 2014 38table Import of services: yr use of properties or i Other services rendered in the Philippines nero gm “ ilustration 1 > Session Food Corporation is a licensed franchisee of Ronald, Inc, anon-resident foreign franchisor. During the month, Session is due to pay P800,000 royalties. ~The final withholding VAT shall be: Royalties VAT tax rate Re AO ‘Amount due Ronald, Inc. oe ‘The amount to be remitted to Ronald, Inc, abroad shall be: Royalties P 800,000 Less: Final income tax (P800,000 x 30%) 240,000 P_ 560,000 Amount due Ronald, Inc. Unless agreed that the contract price is VAT-inclusive, the VAT is not deductible ss royalty because the Withholding VAT is not a tax on income. against the gro: t that non-resident corporations are subject to 30% final Remember that withholding tax on income. Illustration 2 , Phil Mines imported a customized ozone generator from Chen Company in China. Before shipment, Phil Mines had the machine customized by Guangzu Industries in China for P500,000. The generator has a total landed cost of P1,200,000 on importation. Chen Company installed the generator at Phil Mine’s processing plant in the Philippines for P220,000. Phil Mines shall pay the following VAT on importation to the BOC: 10 Import landed cost P 1,200,001 Multiply by: VAT on importation : 39withholding VAT since it is done within. A a _ Payment of the withholding VAT 1 Using BIR Form 1600, the withholding VAT is remitted monthly on orb the 10 day of the following month after the withholding was made, exe for taxes withheld for December which shall be filed or paid on or befor January 25 of the following year. ] Treatment of the VAT on importation and the Withholding VAT 1. If the resident purchaser is a VAT-registered business, it can claim t VAT on importation or withholding VAT as input VAT creditable agains its output VAT. 2. Ifthe resident purchaser is a non-VAT business, or final withholding VAT shall be part of the cost services and shall be treated as asset or expense. If the purchaser is not engaged in business, i , the VAT merely added to the costs of the goods imported. a the VAT on importatia of purchase of goods itn Tepe of the VAT on it , e list of exempt importations, en is meant by the phrase “in original state” landed cost? cee! inguish dutiable value from |; g, Discuss technical importat eee a 9, Enumerate the current and existin, i é - Uae |-0 Dias the in withholding VAT, ts scope and natures 41, Discuss the treatment of i i ‘ as of the VAT on importation and the final withholding _ True or False 1 4. The VAT on importation is a business tax. 2. The final withholding VAT isa business tax. 3, The VAT on importation is 12% of the value added on importation. 4. The VAT on importation is 12% of the receipts from the sale of services abroad. Importation is subject to either VAT or percentage tax. The final withholding VAT is 12% of the contract price of purchased services from within the Philippines. The sale of services abroad is subject to 12% final withholding VAT. The VAT on importation is paid to the Bureau of Internal Revenue, The final withholding VAT on services is paid to the Bureau of Internal an een Revenue. 10. The importation of any agricultural or marine products is VAT exempt. ments and implements is exempt 11. The importation of professional instrw from VAT. ; 12. The importation of any product intended for human consumption is VAT- eh: ded for the manufacture of dients which are inten tion is VAT-exempt. 13. The importation of ingre struments and implements in commercial goods for human consum 14, The importation of professional in: wuantities is VAT-exempt. . ; 15. The importation of equipment, machinery and spare parts for marine vessels is VAT-exempt. or F; - , io ie eit foreigners are not subject to the et oa Lor - Allagricultural or aquaculture inputs ae a The sale of processed agricultural produ 41p awh inf a* an' importation of agricultural machineries ‘ . importation of agricultural ‘machineries iby ‘ a ir i in business. — “11. The VAT on importation is payable only by those sears a 12, The final withholding VAT on importation 0! those not engaged in business. i av i 13. The VAT Aeration and the final ee VAT can be claim Input VAT creditable against Output VAT. ‘ ; 14. Ee saottic, aay the VAT on importation and the final withholding V, taxes paid by non-resident sellers. v 15. Qualified oe importation is exempt from VAT only if made by exempt person. Multiple Choice: Theory ~ Agricultural or marine. food products: Part1 1. Which is subject to value added tax? c. Cut sheep meat a. Sheep b. Sheep wool d. All of these 2, Which agricultural product is VAT-exempt on importation? ~ a. Charcoal c. Lumber b. Wood d. Corn 3. Which importation is subject to VAT? a. Importation from abroad _ b. Purchase of goods from economic zones in the Philippines ¢ Both AandB _d. Neither A nor B 4, Which is not subject to VAT on importation? a, Importation of goods for personal use % Im pisos of goods for business use € of goods from Ecozone entities a. eg of goods from other domestic sellers | of the foll is , “allowing is subject to the VAT on importation wl aos m Ordinary saltrich agricultural produce i ‘Rubber te ohne 4. Fitewood 10. Which is vatable? a. Bamboo shoots c. Ban; i . jana fr b. Banana hearts d. Bamboo ae ~ 41. Which is VAT-exempt? a. Cotton soft wood c. Cotton wool b. Cotton seeds d. None of these "12. Which is VAT-exempt? a. Coconut lumber c. Coconut shells b. Coconut brooms sticks d. Coconut meat "13, Which is subject to VAT on importation? a, Wheat c. Barley b. Coffee bean d. Cocoa subject to VAT? c. Sugar cane d. Sugar beets 14, Which agricultural product is a. Honey b. Rattan cane “45. Which is subject to VAT on importation? ‘a. Cocoon silk c, Furniture b. Pineapple silk d. All of these Seedlings of this tree are exempt from VAT on imp\ a, Rubber tree Palm oil tree i d: Mahogany tree 43 ortation. Talanimals are considered as specialty fee ip eeiee c.Livestock d. Fighting cocks Theory - Agricultural or marine food products: Part 2 Multiple Choice: i exempt? rr eather ove Hamsters b. Eggs d. Leather . Which is vatable on importation? a, Tealeaves c. Cayenne pepper b, Tobacco leaves d. Chinese cabbage . Which of these is VAT exempt on importation? a. Almonds c.Ginseng roots b. Blueberries d. All of these . Which is not exempt from VAT? a. Sunflower seeds c. Peanuts b. Beeswax d. None of these 5. Which is not Y : a Rabbit en aly considered as pet under the regulation? c.Race horses d. Fighting cocks b. Zoo animals 6. act these is Non-vatable? a - ee ©, Goldfish d. Milkfish s am a VAT-exempt Poultry? 5 © Turkeys d. Game: fowl Toostersoc Stree © Catfish a a © Koi ish * raced 4 va b . L atest taxable with VAT on importation? “jemi od ‘Yellowfin tuna a Pink salmon ee crt conted 2 legit a nao Which of the followin, i Fl ‘ ? \VAT-exempt? 8 seafood is considered as vegetable and therefore a. Kelp c.Sea grapes b. Sea lettuce (“Green nori”) d. All of i 43, Which of these is vatable? "a. Seashells c. Squids _b, Octopuses d. Shrimps , Examples of mollusk and shellfish: A, Crabs B.Oysters C.Lobsters__D. Clams Which of these is subject to VAT on importation? a AandD c. All of these d, None of these I b. BandC | 45. Which of these agricultural products is not considered as being in its original state? a Kopra c. Refined sugar b. Muscovado sugar d. Ordinary salt 6. By revenue regulation, which of the items below is not considered in original state? a. Marinated fish c, Frozen meat ‘b. Dried fish d, Smoked fish s oa product is non-taxable with VAT on importation? Z ’s mil c. Butter faa a d, Parmesan cheese » 45¢, Plastic shrink wrapping d. Tetra-packing Multiple Choice: Theory - Other exempt importation 1, Which is not exempt from VAT on importation? __a._ Importation of books b. Importation of school supplies Importation of magazines d. Allofthese Which importation is not VAT-exempt? a. Importation of personal and housel resettle in the Philippines Importation of personal and hi settle permanently in the Phili Importation of personal and ‘customs duties d. Allofthese hold effects of residents coming to, jousehold effects of forei ppines ! household effects which are subject to) igners coming to) The "importation of professional instruments and implements may be subject to VAT when the a volume is not in commercial quantity, b. goods accompany the person or arrive within 30 days before or after! his/her arrival, ¢ importation involves vehicles and machineries, 4. Allofthese 4. Which importatio: nis exempt from VAT? a. Importation of books bya schoo! of books by a student c of books by a bookstore Importation d. Allof theseeae Domestic carriers _ p. International carriers ¢, Domestic carriers on their internati Soria d. Either Bor C ‘onal operations . Which of the following items is subj. i Sefeldual whoisintendingta setticinthe ce mii a, Vehicles e b. Professional instruments c. Household effects d. Personal effects The importation of fuel, goods and supplies is not exempt from VAT when. used in a. Domestic operation b. International shipping operations ¢, International transport operations d. Any of these ie? 10. Which is vatable? a, Importation of life saving equipment __b. Importation of safety or rescue equipment 4 c. Importation of spare parts, steel or other metal plates for marine Bo, vessels _ 4. None of these . The importation of vessel or aircraft for domestic operations is a vatable. _b. always VAT exempt. » TAY, ae VAT exempt if the importer complies with maximum law. ervice life set by ' ‘vatable ifthe importer complies with maximum service liftsey by law. 47‘b. a trader engaged in business. amagricultural cooperative. d. AorC 14. Who has the burden of proving ‘exemption from VAT on importation? a. The government c. The seller b. Theimporter-buyer 4 Both Aand C 15. Which isa qualified exempt importation? a. Importation by a cooperative of farm equipment b. Importation by a cooperative of rice Importation of books d. Importation of marine food products 16. Which is not a qualified exempt importation? a) Importation of fuels or supplies by a person engaged in domestic transport operations b. Importation of fuels or supplies by an international carrier ¢ Importation of cargo vessels and aircraft by those engaged in domestig transport operations d, Importation of cargo vessels and aircraft by those engaged i international transport operations 17. Which of these is non-vatable? a. Purchase of services from a foreign service provider who is mi & engaged in business b. Purchase of goods from a foreign service provider who is engaged i business abroad ¢. Purchase of goods from economi i ic zone entel d. None of these intl itou shall ae the VAT on importation when a VAT-exempt el s an imported article or goods to a non-exempt entity?Which is not included in the landed is . ‘a, Purchase price ox ; Allincidental cost of bringi ging the goods to th ‘Taxes other than VAT paid prior to the ‘hee Cost of transporting the goods from the Custor eee importer’s warehouse or residence oe ee "Multiple Choice ~Problems 1 4, Oceanizers, Inc. purchased the following from abroad: "Sea shells and coral decor P 320,000 Tuna and salmon 120.000 Total 440,000 What is the amount of taxable importation? a PO c. P200,000 b. 120,000 d. P320,000 ed various personal and household effects with a value aggregating P400,000. P320,000 of these was subjected to a 8% customs duty by the BOC. What is the VAT on importation? c. P42,240 a PO b. P41,472 d. P48,000 "3. Abookstore company impo 2, Mr. A import rted the following items: Landed cost P 350,000 200,000 49eo pares ‘Compute tht /AT on im] yrtation. a PO PeyAb grime .P 53/600 b. 12,000 d.P 69,600 imported the following househol 5. a percentage taxpayer, eau pa euro tle Oe rae 269 P 1,150,000 ___250,000 Machineries, for business use Heating system, for home use Total B_1,400,000 Compute the VAT on importation. wal Po cP 150,000 b. P27,000 .P 168,000 6. Danes AgriCorp imported the following: Landed cost Seeds P 400,000 Fertilizers 750,000 Farming equipment 450,000 i sapesnleroices and pesticides __ 250,000 | c 21,850,000 7 _ Compute the VAT on importation. a PO c.P 72,000 d.P84,000 P 600,000 250,000 450,000cP 126,000 d.P 128,400 tural supply dealer imported the following: P 200,000 350,000 300,000 ition. cc. P42,000 d.P. 102,000 pute the VAT on importa a PO b, P36,000 rettes by Mr. Shinto: “it Thefollowing data relates to the importation of cigal P 1,000,000 taal invoice value BOC charges 300,000 Customs duties 200,000 Excise taxes 300,000 Compute the VAT on im, portation. a P 120,000 c.P 180,000 Te b. P 156,000 d.P 216,000 Choice - Problems 2 ter from the United States with a total cost of ion is subject to 10% Pepito imported a harvest 1,100,000 before Customs duties. The importati 's duties, What is the VAT on importation? b P158,400 c.P 129,600 145,200 d.Po0 51P 100,000 ‘costs of personal belongings Compute the total amount subject to VAT on importation, = P0. c.P 300,000 sib _ P.200,000 d.P550,000 5. Mr. Xhi, a non-VAT taxpayer, made the following domestic purchases goods: "Purchase of scrap metals from a PEZA-locator P 200,000 "Purchase of machine from a VAT supplier 800,000 itis the imposable VAT on importation? c.P 96,000 d.P 120,000 ing Company imported P 3,000,000 worth of vessel fuels cs ng use. The company earmarked 60% of this le 40% was reserved for its international operations. \T on importation? cP 216,000 d.P 360,000© P35,260 d.P 38,160 7 ,. Shanum Company had the following data seamed evan importation: Invoice price in US Dollars oe Other costs to bring goods to the Philippines P. cee BOC charges Customs duties is 10% of dutiable value 190,099 Peso-Dollar Exchange rate P. 42.80:$1 Compute the VAT on importation. @...P.0. c. P91,032.00 b. P81,643.20 d. P98,935.20 10. Mr. Dolinger imported various merchandise from abroad. The importation was invoiced at $ 5,000. Mr. Dolinger also incurred the following costs of importation: Insurance P 4,000 Freight 15,000 Wharfage fee 4,000 Arrastre charge 7,000 Brokerage fee 8,000 5,000 Facilitation fee 000 and P 18,000, respectively, for Mr. Dolinger was also assessed P 24, licable exchange rate was P42.50:$1. customs duties and excise tax. The app! What is the VAT on importation? a P 25,500 cP 35,100 b. P30,540 .P35,700 53