EXCISE TAXES

EXCISE TAX – BASIC CONCEPTS

Characteristic of Excise Tax
1. National
2. Indirect
3. Ad valorem and specific
4. Proportional and progressive
5. Privilege/Transactional

Tax Base
 The tax base is gross selling price
 Unless otherwise provided, the price, excluding the
VAT, at which the goods are sold at wholesale in the
place of production or through their sales agents to the
public shall constitute the gross selling price

 Should such gross selling price be less than the cost of

manufacture plus expenses incurred until the goods are
finally sold, then a proportionate margin of profit, not
less than 10% of such manufacturing cost and
expenses, shall be added to constitute the gross selling
price. (Section 130 B, National Internal Revenue Code)

BIR’s Power of Supervision

 The BIR has authority to supervise establishments where articles subject to excise tax are made or kept. The SOF
shall prescribe rules and regulations in which the process of production shall be conducted insofar as may be necessary to
safeguard revenue, such rules and regulations may allow the appointment of third parties to monitor production and
removal processes and volumes, and the exclusion of exciseable goods from duty-free barter transactions. (Sec. 152,
NIRC, as amended by RA No. 10963 and 11346)

Excise Tax Credit

 When goods locally produced or manufactured are removed and actually exported whether so exported in their original
state or as ingredients or parts of any manufactured goods or products, any excise tax paid thereon shall be credited or
refunded upon
1. Submission of the proof of actual exportation and
2. Receipt of the corresponding foreign exchange payment. (Section 130 D, National Internal Revenue Code)

Tax-Free Importation
 In the case of tax-free articles brought or imported into PH by persons or entities exempt from tax which are subsequently
sold, transferred or exchange in PH to non-exempt persons or entities, the purchasers or recipients shall be
considered the importers thereof, and shall be liable for the duty and internal revenue tax due on such importation.

Time, in general
 If locally manufactured: Place of production
 If imported: BOC

EXCISE TAXES
 In addition to the VAT (or OPT)
 Taxes which apply to certain goods manufactured or
produced in the Philippines for domestic sale or
consumption, and to things imported.
 Excise tax shall also apply to certain service performed in
the Philippines
 Deductible for income tax purposes.

Goods/Services Subject to Excise Taxes –

1. Goods manufactured or produced in the Philippines for
domestic sale or consumption or for any other disposition;
2. To things imported.
3. Non-essential services (added by TRAIN LAW)

Note: Excise tax is collected in addition to value-added tax. It

should be emphasized, however, that not all goods manufactured or produced in the Philippines for domestic consumption are
subject to excise tax.

Purposes of Excise Tax:

1. To raise revenue;
2. To curtail the consumption of certain commodities;
3. To protect domestic industries.

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 TYPES OF EXCISE TAXES
Specific Tax – excise tax imposed on goods or articles based on Ad Valorem Tax – excise tax imposed on goods or articles
weight or volume capacity or any other physical unit of based on the selling price or other specified value of the goods,
measurement. exclusive of VAT and tariff and customs duties (if imported).

(Note: But in computing VAT on importation, excise tax and

tariff and customs duties are included in the tax base.)

Excise tax on: Excise tax on:

ALCOHOL PRODUCTS 1. Distilled sprits

1. Distilled spirits (including proof spirits) – whisky, brandy,
rum, gin, and vodka, fortified wines; 2. Cigars
2. Wines – sparkling wines, champagne, still wines
3. Fermented liquor – beer, lager beer, ale, porter and other 3. Automobiles excluding:
fermented liquors except tuba, pasi, tapuy. a. Buses, trucks; *
*Pick-ups are considered trucks, and therefore exempt
TOBACCO PRODUCTS from excise tax.
4. Tobacco products (except stemmed leaf tobacco or tobacco b. Cargo vans;
by-products which are to be exported or used in the c. Jeepneys/jeepney substitutes**;
manufacture of cigars and cigarettes) **Jeeps are considered automobiles subject to excise
tax.
- Includes tobacco specially prepared for chewing d. Single cab chassis;
- Heated tobacco products e. Special-purpose vehicles; and
f. Automobiles used exclusively within the Freeport zones.
Heated tobacco products refer to tobacco products that Provided:
may be consumed through heating tobacco, either 1) Purely electric vehicles and pick-ups are exempt from
electrically or through other means sufficiently to release an excise tax.
aerosol that can be inhaled, without burning or any 2) Hybrid vehicles shall be taxed at 50% of the
combustion of the tobacco. Heated tobacco products include applicable excise tax rates.
liquid solutions and gels that are part of the product, and are
heated to generate an aerosol.
NON-ESSENTIAL GOODS
- Vapor products
4. Jewelry, whether real or imitation; pearls; precious and
Vapor products shall mean any liquid solution or gel which semi-precious stones and imitations;
contains nicotine that transforms into an aerosol without 5. Goods made of or ornamented, mounted or fitted with
combustion through the employment of a mechanical precious metals or imitations thereof or ivory;
heating element, battery, or circuit that can be used to heat
such solution or gel, and includes but is not limited to a Except:
cartridge, a tank, and the device without a cartridge or tank. a. surgical and dental instruments;
It is commonly known as e-liquids for e-cigarettes. b. silver-plated wares, frames, or mountings for spectacles
or eyeglasses; and
5. Cigars c. dental gold or gold alloys and other precious metals
6. Cigarettes used in filling, mounting, or fitting the teeth.
6. Opera glasses and lorgnettes;
PETROLEUM PRODUCTS 7. Perfumes and toilet waters;
7. Lubricating oils and greases; 8. Yachts and other vessels intended for pleasure or sports.
8. Processed gas;
9. Waxes and petrolatum; MINERAL PRODUCTS
10. Denatured alcohol to be used for motive power;
11. Naphtha, regular gasoline, and other similar products of 9. Non-metallic minerals and quarry resources such as marble,
distillation; granite, volcanic cinders, basalt, tuff and rock phosphate;
12. Leaded and unleaded premium gasoline; 10. Metallic minerals:
13. Aviation turbo jet fuel; a. Copper and other metallic minerals;
14. Asphalts b. Gold and chromite
15. Kerosene; 11. Indigenous petroleum including locally-extracted mineral oil,
16. Diesel fuel oil; hydrocarbon gas, bitumen, crude asphalt, mineral gas.
17. Liquefied petroleum gas;
18. Bunker fuel oil. Except:
a. Locally-extracted natural gas; and
MINERAL PRODUCTS b. Locally-extracted liquefied natural gas.
19. Coal and coke
NON-ESSENTIAL SERVICES8 - 5% tax on gross receipts, net
SWEETENED BEVERAGES4 - imposes a tax per liter of volume of excise tax and VAT, derived from the performance of invasive
capacity on sweetened beverages. cosmetic surgeries, procedures, and body enhancements for
aesthetic/cosmetic purposes.
The excise tax shall be based on the following schedule:
PRODUCT TAX RATE The following shall be exempt from the 5% excise tax:
Per Liter of a. Procedures to ameliorate a deformity arising from or
Volume directly related to a congenital or developmental defect
Capacity or abnormality, a personal injury resulting from an
Using purely caloric sweeteners, and purely non-caloric Php6.00 accident or trauma, or disfiguring disease, tumor, virus,
sweeteners, or a mix of caloric and non-caloric or infection; and
sweeteners b. Cases or treatments covered by the National Health
Using purely high fructose corn syrup or in combination Php12.00
Insurance Program.
with any caloric or non-caloric sweetener
Using purely coconut sap sugar and purely steviol Exempt
glycosides

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The following products are excluded from the excise tax on
sweetened beverages:
a. All milk products;
b. 100% natural fruit juices;
c. 100% natural vegetable juices;
d. Meal replacement and medically indicated beverages;
and
e. Coffee – ground coffee, instant soluble coffee, and pre-
packaged powdered coffee products.

Gross Selling Price of Goods Subject to Ad Valorem Tax

1. The price, excluding the VAT, at which the goods are sold at wholesale or through sales agents;
2. 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;
3. 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 (≥ 10% of the cost + expenses).

Persons Subject to Excise Tax

1. Domestic Products

a. 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
b. Owner or person having possession of domestic products which were removed
from place of production without payment of the excise tax; or
c. The first buyer, purchaser, or transferee for local sale or transfer in the case of
indigenous petroleum, natural gas, or liquefied natural gas;

2. Imported Products
a. The importer shall file the return and pay the tax before removal of the imported goods
from the customhouse or customs custody; or
b. The person who is found in possession of articles which are exempt from excise taxes
other than those legally entitled to exemption.

Credit for Excise Taxes on Goods Actually Exported

Excise taxes paid on goods actually exported shall be credited or refunded upon submission of proof of actual exportation and upon
receipt of the foreign exchange payment.

Provided: Excise tax on mineral products (except coal and coke) shall not be creditable nor refundable even if the mineral products
are actually exported.

Changes under the TRAIN:

1. Cigarettes packed by hand, and packed by machines follow the same schedule of specific excise taxes.
2. Excise taxes on the following products were increased:
a. Cigarettes packed by hand, and cigarettes packed by machine;
b. Manufactured oils and other fuel oils;
c. Locally manufactured and imported automobiles;
d. Domestic or imported coal and coke;
e. Non-metallic and metallic minerals;
f. Indigenous petroleum.

Exemptions from the Excise Tax:

a. Naptha and pyrolysis gasoline used as raw material in the production of petrochemical products or in the refining of petroleum
products, or as replacement fuel for natural-gas-fired-combined cycle power plant;
b. Production of petroleum products, whether or not they are classified as products of distillation, and for use solely for production
of gasoline;
c. Liquefied petroleum gas when used as a raw material in the production of petrochemical products;
d. Petroleum coke, when used as feedstock to any power generating facility;
e. Purely electric vehicles, and pick-ups*

*Hybrid vehicles shall be subject to 50% of the applicable excise tax rates on automobiles.

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EXCISE TAX

 Excise tax 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. Hence, it taxes goods
domestically produced or imported for domestic use and
exempts goods produced for export.
 If the goods are exported out of the country, the manufacturer
or producer of the goods subject to excise tax may claim tax
credit or tax refund for the excise tax paid.
 In certain 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 for foreign consumption.
 Excise taxes are generally levied at the point of
production or importation. The tax is collected before
the goods are removed at the point of production or before
the removal of the goods from Customs. Exceptionally,
cosmetic surgery and mineral products are subject to excise
tax at the point of sale.

Scope of Excise Tax

 The Philippines version of excise tax is limited only to
certain goods with the exception of cosmetic surgery – the
only service currently subject to excise tax. In other
countries, even vices such as gambling or morally damaging activities such as prostitution are taxed.

List of
Excisable Articles and Services in the Philippines
1.Alcohol products, such as distilled spirits, wines and fermented liquors
2.Tobacco products, such as cigars and cigarettes
3.Petroleum products, such as gas, gasoline, diesel, wax, lubricant oils and greases, kerosene, naphtha, denatured alcohol
coke, asphalt and bunker fuel oil
4. Mineral products whether as metallic or non-metallic minerals and quarry resources
5. Miscellaneous articles, such as automobiles, non-essential goods like jewelry, perfume and yacht, and sweetened
beverages like soft drinks and sweetened drinks.
6. Non-essential services such as cosmetic surgery.

Note:

The excise tax covered in these lectures should be differentiated with the excise tax imposed on privilege. The excise tax in this
lecture are the excise taxes imposed on certain goods and services.

Timing of Excise Taxation

Taxation at the point of
Import Production Sale
Alcohol products √ √ ×
Tobacco products √ √ ×
Petroleum products √ √ ×
Mineral products √ × √
Automobiles √ √ ×
Non-essential goods √ √ ×
Sweetened beverages √ √ ×
Non-essential services × × √

NATURE OF PHILIPPINE EXCISE TAX

A. Excise tax as a 1. Environmental tax – It is imposed on products which causes harm to the environment
regulatory tax when produced or extracted or used. It is also known as green tax.

Examples are excise tax levied on:

a. Petroleum products
b. Quarry resources
c. Mineral products

2. Sumptuary tax – It is imposed to restrain luxury or extravagance. It is also referred to as

vanity tax.

Examples are excise taxes levied on:

a. Intrusive cosmetic surgery

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 b. Automobiles and yacht
c. Jewelry

3. Sin tax – It is imposed on the consumption of sin products or those known to pose health
risk. It is also known as health tax.

Examples are excise taxes levied on:

a. Alcoholic beverages
b. Tobacco products such as cigar and cigarettes

The excise taxes may be imposed on purely punitive grounds or to raise funds to alleviate the
damage caused on society by the consumption of the undesirable products.

B. Excise tax as an indirect Excise tax is an indirect tax. It is levied upon producers or importers with the understanding
tax that he will pass-on the same to the consumers.

C. Excise tax as a The excise tax is usually levied at the point of production or importation, except excise tax on
consumption tax minerals and cosmetic surgery which is levied at the point of sale. Thus, it is a typical pre-
consumption tax, compared to other business taxes which are levied at the point of sale or
consumption.

D. Excise tax as an A business normally pays either percentage tax or value added tax. However, if it produces or
additional business tax imports excisable goods or sells excisable services, the excise tax is imposed in additional tax to
the usual business tax.

Thus, a business importing or producing excisable goods or selling excisable services shall be
taxed as follows:
Business registration Tax to pay
VAT taxpayer VAT and Excise tax
Non-VAT taxpayer Percentage tax and Excise tax

E. Excise tax as specific Excise taxes imposed in the Philippines are primarily specific taxes but there are also ad valorem
and ad valorem tax imposition and mixed of them.

Differences between excise tax and the other business tax

Excise tax Other business tax
Indirect tax levied at the point of production or importation Levied only at the point of sale
A specific or per unit tax Purely ad valorem tax
Covers the production or import or sale of narrower range of Covers the sale of almost all products and services including
products and services. those already subjected to excise tax
Imposes heavier tax rates compared to reasonable Which are fairly reasonable
May subject even non-business producers Covers only those engaged in business
Is a revenue tax with a regulatory overture as it intend to curb Purely levied to raise revenue
health risk, or social, moral, or environmental wrongs.

Similarities of excise tax and the other business tax

1. Excise tax is generally a consumption tax similar to other business taxes. Thus, the export of the goods is both exempted from
excise or business tax. Exceptionally, export of minerals is subject to excise tax.
2. Excise tax which are imposed ad valorem are similar to business taxes which are also imposed based on selling price.
3. Excise tax and business tax are both classified as indirect taxes since it is normally passed on by sellers to consumers.

TYPES OF EXCISE TAX

1. Specific tax – excise tax imposed based on weight or volume capacity or any other
physical unit of measurement.
2. Ad valorem tax - excise tax imposed on selling price and other specified value,
exclusive of VAT and tariff and customs duties (if imported).

MANNER OF COMPUTATION:
 Specific Tax = No. of Units/other measurements x Specific Tax Rate
 Ad Valorem Tax = No. of Units/other measurements x Selling Price of any
specific value per unit x Ad Valorem Tax Rate

Note: But in computing VAT on importation, excise tax and tariff and customs
duties are included in the tax base.

Specific sin taxes are now index 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.

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 EXAMPLES OF SPECIFIC TAX
ALCOHOL PRODUCTS
1. Distilled spirits (including proof spirits) – whisky, brandy, rum, gin, and vodka, fortified wines;
2. Wines – sparkling wines, champagne, still wines;
3. Fermented liquor – beer, lager beer, ale, porter and other fermented liquors except tuba, pasi, tapuy.

TOBACCO PRODUCTS
4. Tobacco products (except stemmed leaf tobacco or tobacco by-products which are to be exported or used in the
manufacture of cigar and cigarettes)
- Includes tobacco specially prepared for chewing
5. Cigars
6. Cigarettes

PETROLEUM PRODUCTS
7. Lubricating oils and greases;
8. Processed gas;
9. Waxes and petrolatum;
10. Denatured alcohol to be used for motive power;
11. Naphtha, regular gasoline, and other similar products of distillation;
12. Leaded and unleaded premium gasoline;
13. Aviation turbo jet fuel;
14. Asphalts;
15. Kerosene;
16. Diesel fuel oil;
17. Liquefied petroleum gas
18. Bunker fuel oil.

MINERAL PRODUCTS
19. Coal and coke

SWEETENED BEVERAGES – imposes a tax per liter of volume capacity on sweetened beverages.
The following products are excluded from the excise tax on sweetened beverages.
a. All milk products;
b. 100% natural fruit juices;
c. 100% natural vegetable juices;
d. Meal replacement and medically indicated beverages; and
e. Coffee – ground coffee, instant solution coffee, and pre-packed powdered coffee products.

EXAMPLES OF AD VALOREM TAX

1. Distilled spirits
2. Cigars
3. Automobiles excluding:
a. Buses, trucks;
b. Cargo vans;
c. Jeepneys/jeepney substitutes (A vehicle used as public transport in the Philippine);
d. Single cab chassis;
e. Special-purpose vehicles; and
f. Automobiles used exclusively within the Freeport zones

Provides:
a. Purely electric vehicles and pick-ups are exempt from excise tax.
b. Hybrid vehicles shall be tax at 50% of the applicable excise tax rates.

Note:

Pick-ups are considered trucks, and therefore exempt from excise tax.
Jeeps (A vehicle (of a particular brand) suitable for rough terrain) are considered automobiles subject to excise
tax.

NON-ESSENTIAL GOODS
4. Jewelry, whether real or imitation, pearls; precious and semi-precious stones and imitations;

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 5. Goods made of or ornamented, mounted or fitted with precious metals or imitations thereof or ivory;
Except:
a. Surgical and dental instruments;
b. Silver-plated wares, frames, or mountings for spectacles or eyeglasses; and
c. Dental gold or gold alloys and other precious metals used in filling, mounting, or fitting the teeth.
6. Opera glasses and lorgnettes;
7. Perfumes and toilet waters;
8. Yachts and other vessels intended for pleasure or sports.

MINERAL PRODUCTS
9. Non-metallic minerals and quarry resources such as marble, granite, volcanic cinders, basalt, tuff and rock phosphate;
10. Metallic minerals;
a. Copper and other metallic minerals;
b. Good and chromite
11. Indigenous petroleum including locally-extracted mineral oil, hydrocarbon gas, bitumen, crude asphalt, mineral gas.
Except:
a. Locally-extracted natural gas; and
b. Locally-extracted liquefied natural gas

NON-ESSENTIAL SERVICES – 5% tax on gross receipts, net of excise tax and VAT, derived from the performance of invasive
cosmetic surgeries procedures and body enhancements for aesthetic/cosmetic purposes.

The following shall be exempt from the 5% excise tax:

a. Procedures to ameliorate a deformity arising from or directly related to a congenital or development defect or
abnormality, a personal injury resulting from an accident or trauma, or disfiguring disease, tumor, virus, or infection;
and
b. Cases and treatment covered by the National Health Insurance Program.

BASIS OF AD VALOREM TAX

Locally produced goods

 Locally produced goods imposed with ad valorem tax is subject to tax on 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 also sells or allows such goods to be sold at wholesale in
another establishment of which he is the owner or in the profits of which he has
an interest, the wholesale price in such establishment shall constitute the selling
price.
 Should such price be less than the cost of manufacture plus expenses incurred until the goods are finally sold, then a
proportionate margin of profit, not less than 10% of such manufacturing costs and expenses, shall be added to constitute
the gross selling price. (Sec. 130(B), NIRC)

Note:
Gross Selling Price of Good Subject to Ad Valorem Tax
1. The price, excluding the VAT, at which the goods are sold at wholesale or through sales agents;
2. If the manufacturer also sells the goods at wholesale in another establishment of which he is the owner, the wholesale
price is the latter establishment shall be the gross selling price;
3. 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 (≥10% of the cost + expenses)

Manufacturer’s or producer’s sworn statement is required

Manufacturer’s or producer’s shall file with CIR a statement showing the different products or goods manufactured or produced and
their corresponding selling price or market value, together with the cost of manufacturer or production plus expenses incurred or to
be incurred until the goods are finally sold.

REVIEW QUESTIONS

Problem 1: ABC Company produced 1,000 units of an excisable goods that has a total wholesale value of P1,120,000, inclusive of
VAT. If sold retail, the goods would earn P1,400,000. The goods are subject to a 20% ad valorem tax.

Required: Compute the excise tax.

Wholesale invoice price 1,120,000

Divide by: 112%
Wholesale price 1,000,000
Multiply by: 20%
Excise tax 200,000

Problem 2: DEF Company produced 5,000 units of an excisable goods. The goods were delivered to consignees who sells the
goods at P1,000 a unit to customers. The consignees take 20% of the retail sales and 16% of wholesales. Consignees are allowed
to sell the units at P900 a unit at a minimum wholesale value of 100 units. The excisable goods are subject to a 15% ad valorem
tax.

Required: Compute the excise tax.

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 Wholesale invoice price (P900 x 5,000) 4,500,000
Divide by: 112%
Wholesale price 4,017,857
Multiply by: 15%
Excise tax 602,679

Problem 3: 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 P8,500,000
Production cost 7,500,000
Cost to sell 1,500,000

Required: Compute the excise tax.

Production costs 7,500,000

C ost to sell 1,500,000
Total costs 9,000,000
Minimum Margin (10% x P9M) 900,000
Tax base 9,900,000
Multiply by: 20%
Excise tax 1,980,000

The tax is based on the total cost since it is higher than the wholesale price.

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 locally manufactured articles. (Sec. 131 (B), NIRC)

REVIEW QUESTIONS

Problem 1: CCC Enterprise imported excisable goods subject to 10% excise tax and 20% custom duties. Data relating to the
imported articles were as follows:

Purchase price P4,000,000

Other inland costs 1,000,000
Domestic wholesale price, net of VAT 9,000,000

Required: Compute the excise tax.

The excise tax shall be computed as:

Wholesale price 9,000,000
Multiply by: 10%
Excise tax 900,000

The customs duties shall be computed as:

Purchase price 4,000,000
Other inland cost 1,000,000
Excise tax 900,000
Transaction value 5,900,000
Multiply by: 20%
C ustom duties 1,180,000

The VAT on importation shall be computed as follows:

Purchae price 4,000,000
Other inland costs 1,000,000
C ustom duties 1,180,000
Excise tax 900,000
Landed costs 7,080,000
Multiply by: Excise tax rate 12%
VAT on importation 849,600
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Note: You have to note the specific unit bases of specific excise taxes but for CPA examination purposes, they are not required to
be memorized as the rates will be given when tested.

TAX COMPLIANCE REQUIREMENTS

WHO ARE THE PERSONS LIABLE TO EXCISE TAX?

For domestically produced excisable article

General rule: Producer Excise tax is paid by manufacturers or producers of excisable goods or services in the Philippines for
domestic sale or consumption, and importers of excisable goods.
Exception rule: 1, The excise tax on indigeneous petroleum, natural gas or liquefied natural gas is payable
by the following person:
If the goods is The taxpayer is
For local sale The first buyer or assignee
For export sale The owner, lessee, concessionaire or operator of the mining claim

2. Removal without payment

If goods are removed in their place or production without payment of the excise tax, the owner or
person having possession thereof shall be liable to the tax. (Sec. 131(A), NIRC).

For imported excisable article

General rule: The The excise tax shall be paid by the owner-importer of the imported goods.
importer
Exception rule: The When good are exempted by an exempt person is subsequently sold to another non-exempt buyer,
non-exempt buyer the latter shall pay for the excise tax otherwise due thereon on the importation.

Note:

Persons Subject to Excise Tax

1. Domestic Products
a. 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
b. Owner or person having possession of domestic
products which were removed from place of production
without payment of the excise tax; or
c. The first buyer, purchaser, or transferee for local
sale or transfer in the case of indigenous petroleum,
natural gas, or liquefied natural gas;

2. Imported Products
a. The importer shall file the return and pay the tax before
removal of the imposed goods from the customhouse
custody; or
b. The person who is found in possession of articles which
are exempt from excise taxes other than those legally
entitled to exemption.

Credit for Excise Taxes on Goods Actually Exported

 Excise taxes paid on goods actually exported shall be credited or refunded upon submission of proof of actual exportation
and upon receipt of the foreign exchange payment.
 Provided, Excise tax on mineral products (except coal and coke) shall not be creditable nor refundable even if the
mineral products are actually exported.

BIR Form Description Filing date

This return is filed by an individual or The return is filed and the excise tax
BIR Form No. 2200-A (Excise Tax non-individual in paying the excise tax paid by the manufacturer or producer
Return for Alcoholic products) of exciseable articles such as minerals before removal of domestic products
and mineral products, liquor/alcohol and from place of production, except on the
BIR Form No. 2200-AN (Excise Tax tobacco before removal from the place following:
Return for Automobiles and Non- of production/ mining site/bonded
essential goods) warehouse. 1. Locally manufactured petroleum
products and indigenous petroleum
BIR Form No. 2200-M (Excise Tax removed shall be paid before removal
Return for Mineral products) from place of production of such.

BIR Form No. 2200-P (Excise Tax 2. Non-metallic mineral or mineral

Return for Petroleum products) products or quarry resources shall be

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 paid upon removal from the locality
BIR Form No. 2200-T (Excise Tax where mined or extracted
Return for Tobacco products)
3. Locally produced or extracted metallic
BIR Form No. 2200-S (Excise Tax mineral or mineral products shall be
Return for Sweetened Beverages) paid within fifteen (15) days after
the end of the taxable quarter when
BIR Form No. 2200-C (Excise Tax such products were removed provided a
Return on Invasive Cosmetic Procedure) surety bond was posted by the mining
company.

4. The tax return (BIR Form 2200-C)

shall be filed and the excise tax due, if
any, shall be paid at the same time
within ten (10) days following the
close of the month.

WHEN TO FILE AND PAY EXCISE TAX?

For domestically produced excisable article

General rule: Before The excise tax is payable before removal of the domestic goods from the place of production. (Sec.
removal 130 (A)(2), NIRC)
Exception rule: Mineral The excise tax on locally produced or extracted mineral or mineral products is payable within 15
or mineral products days after the end of the calendar quarter when such products were removed.

The 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

The excise tax on imported excisable products shall be paid before their removal from customs custody. This rule applies even for
imported metallic or non-metallic mineral products.

Note:
For excisable products that is
Domestically produced Imported
Who is the taxpayer? Producer Importer
When to pay? Before removal from production Before removal from customs

EXCISE TAX-FREE The importation of products into tax and duty-free shops, Freeport zones, and special economic zones
IMPORTATION BY shall not be subject to excise taxes, since they are considered foreign territories. Consumption of
EXEMPT PERSONS persons inside these places are considered foreign consumption; hence, exempt.

Exception:
Exemption does not apply to sin products such as cigars, cigarettes, distilled spirits, fermented liquors
and wines. A surety bond, however, may be required in some cases to protect the interest of the
government.

Introduction of tax-free articles into the customs territory

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.

When tax-free articles are subsequently introduced into the customs territory, this is a technical
importation subject to excise tax.

Example:

DDD Industries, an ecozone locator, imported and subsequently sold the following excisable goods:

Value of import Portion sold within Portion sold outside

the ecozone the ecozone
Cigarettes P400,000 P200,000 P100,000
Wines 500,000 200,000 100,000
Automobiles 12,000,000 3,000,000 4,000,000

Importation
The importation inside special economic zone is normally exempt except sin products; hence, the
import of P400,000 cigarettes and P500,000 wines shall be subject to excise tax.

The importation of the automobiles shall be exempt from excise tax if exclusively used within ecozones.
(Sec. 149, NIRC)
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 Subsequent sale
The subsequent sale of the cigarettes and wines either within or outside of the ecozone shall be exempt
from excise tax as the tax is already paid at the point of importation.

The subsequent sale of the P3,000,0000 automobile within the ecozone is exempt as this is a foreign
consumption but the sale of the P4,000,000 automobile outside the ecozone is an introduction to the
custom’s territory subject to excise tax.

The sin tax is punitive tax hence it applies in disregard of the legal fiction that duty-free ports, ecozones
or Freeport zones are foreign countries. The legal fiction holds only for purposes of VAT and custom
duties. Import of sin products would be exempt from VAT and customs duties.
EXPORT OF EXCISABLE When goods locally produced or manufactured are removed and actually exported without returning to
GOODS the Philippines, any excise tax paid thereon may be claimed as:
a. Tax refund, or
b. Tax credit

This applies whether the goods are exported in their original state or as ingredients or parts of any
manufactured goods or products. Note that the excise tax is levied only on domestic consumption.
(Sec. 130(D), NIRC).

Exception: Mineral products

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 on minerals 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.

ALCOHOL PRODUCTS
1. Alcohol Products (Sections 141-143)
a. Distilled Spirits (Section 141)

b. Wines (Section 142)

c. Fermented Liquors (Section 143)

Excise Tax on Alcoholic Products

Three Excisable Articles

 1. Wines
 2. Fermented Liquor
 3. Distilled Spirits

Wines – These are all alcoholic beverages produced by fermentation without distillation, from the juice of any kind of fruit.
Fermentation is a process by which enzymatic changes are brought about.

Distilled Spirits - These refer to the substance known as ethyl alcohol, ethanol or spirits or wine, including all dilution’s,
purifications and mixtures thereof, from whatever source by whatever process produced and shall include whisky, brandy, rum, gin
and vodka, and other similar products or mixtures.

Fermented Liquor – These refers to beer, lager beer, ale, porter, and other fermented liquor such as draft beer, and other similar
products.

Exemptions
 1. Tuba
 2. Basi
 3. Tapuy

Rates of Excise Tax

Wines
Year Tax per liter
2020 P50
2021 Shall be increased by 6% through RRs

Fermented Liquor
Year Tax per liter
2020 P35
2021 P37
2022 P39
2023 P41
2024 P43

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 2025 Shall be increased by 6% through RRs

Distilled Spirits
Year % of net retail price + Tax per proof liter
2020 22% + P42
2021 22% + P47
2022 22% + P52
2023 22% + P59
2024 22% + P66
2025 22% + Shall be increased by 6%
through RRs

Net Retail Price

 Net retail price shall mean
 - for brands marketed nationally: the price at which the fermented liquor is sold on retail in at least 5 major supermarkets
in Metro Manila
 - for brands marketed outside NCR: the price at which the liquor is sold in at least 5 major supermarkets in the region.
 Note: excluding the amount intended to cover excise tax and VAT.

Proof liter
 Shall mean a liter of proof spirits. A proof means 50% of alcohol content. Thus, 70 proof means 70/2 or 35% alcohol
content.

Major Supermarkets
 Major supermarkets shall be those with the highest annual gross sales in NCR or the region, as the case may be, as
determined by the (PSA), and shall exclude retail outlets or kiosks, convenience or sari-sari stores, and others of a similar
nature.

Understatement of GSP
 Understatement of the suggested net retail price by as much as 15% of the actual net retail price shall render the
manufacturer or importer liable for additional excise tax equivalent to the tax due and difference between the understated
suggested net retail price and the actual net retail price.

Other matters
 Micro-breweries and micro-brew pubs are required to register with the BIR and provide for
a non-resettable counter or metering device to monitor the volume of sales (Sec. 6, RR
no. 2-1997)
 Only distilled spirits and wines shall be covered by the rules of affixtures of internal
revenue official labels.

 The regular official labels shall contain the following information to be printed “ Regular
Official Label”, “Importer No.__,’ “ Republic of the Philippines” “Tax paid Spirits”; the seal
of the Republic, the serial number of the regular official label. (Sec. 7, RR No. 2-1997)

Timing of ET for Alcohol

 Before removal (Section 130 (A) (2), NIRC; Section 11.1 (2) (1), RR No. 2-1997)
 Advanced payment (Section 130 (A) (2), NIRC; Section 11.1 (2) (1), RR No. 2-1997)

Compliance Requirements
 Submission of Sworn Statement of Volume of Sales – within first 5 days of every month.

Importation to Freeport Zones

 GR: Exempt
 XPN: Cigarettes, cigar, alcoholic products. Even if destined for tax and duty – free shops: still subject to excise taxes.
 XPN to XPN: Government-owned and operated duty-free shops.

DISTILLED SPIRITS
 Distilled spirits is the substance known as ethyl alcohol, ethanol or spirits of wine, including dilutions, purification and
mixtures thereof, from whatever source, by whatever process produced, and shall include whisky, brandy, rum, gin and
vodka, and other similar products or mixtures.
 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.

REVIEW QUESTIONS

Problem 1: (Distilled spirits) EEE Brewery produces its famous Sarap Whisky of 60 proof 750ml-bottle sold at net retail price of
P100/bottle. During the period (2019), it produced a total of 15,000 bottles.

Required: Compute the total excise tax.

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 Alcohol content in a 60 proof (60/2) 30%
Total alcohol content in liters (30% x .75L x 15,000 bottles) 3,375
Total proof liters = 3,375 alcohol x 2 6,750

Specific tax (6,750 proof liter x P23.40) 157,950

Ad valorem tax (15,000 bottles x P100/bottle) x 20% 300,000
Total excise tax 457,950

Note:
1. 60 proof = 30% alcohol content
2. 1,000 ml = 1 liter

Problem 2: (Distilled spirits) FFF Distillers, Inc. produces its branded a Royal Gin. The 90-proof Royal Gin is sold in 1-liter bottles
and packed in 12 bottles. A small bottle of 500-ml Royal Gin, called “Ginebra Pilak” is packed in 24 bottles. A bottle of Royal Gin
and Ginebra Pilak is packed in 24 bottles. A bottle of Royal Gin and Ginebra Pilak sell at net retail prices of P120 and P65 each.
During the period During the period (2019),, a total of 500 packs of Royal Gin and 800 packs of Ginebra Pilak is produced.

Required: Compute the total excise tax.

Alcohol content in a 90 proof (90/2) 45%

Total alcohol of Royal Gin in liters (45% x 1L x 12 x 500) 2,700
Total alcohol of Ginebra Pilak in liters (45% x 0.50L x 24 x 800) 4,320
Total alcohol in liters 7,020
Multiply by: 2
Total proof liters 14,040
Multiply by: 23.40
Total specific tax 328,536

Royal Gin (12 x 500 x P120) x 20% 144,000

Ginebra Pilak (24 x 800 x P65) x 20% 249,600
Total ad valorem tax 393,600
Total excise tax 722,136

WINES
 Wines normally have carbon dioxide ( CO2 ) on them due to the fermentation process.
 CO2 is normally released when yeast and sugar mix making the wine bubbly, sparkling or fizzy, thus the term “sparkling”
wines.
 Sparking wines have sugar and yeast on them which makes them bubbly due to continuous fermentation even after
bottling. Wines with CO2 removed are not bubbly or fizzy, thus the term “still” wines. A carbonated wine is one which
is artificially added with carbon dioxide to influence character or taste of the wine.
 Fortified wines mean 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. Fortified wines means natural wines to which
distilled spirits are added to increase their alcohol strength.

REVIEW QUESTIONS

Problem 1 : (Wines) CCC Winery produces various wines packed in cases of 12 bottles. It produced the following during a month
in 2019:

Class Bottle SRP Total case produced

Champagne 750 ml P1,600 20 cases
Carbonated wine – 50 proof 750 ml 200 150 cases
Fortified wine – 60 proof 1L 120 80 cases

Required: Compute the total excise tax.

Champagnes (20 cases x 12 bottles/case x P885.73) 212,575.20

Carbonated wines (150 x 12 x 750/1,000) x P75.92 102,492.00
Fortified wine
Specific tax (30% x 80 x 12) x P23.40 6,739.20
Ad valorem (P120 x 80 x 12) x 20% 23,040.00 29,779.20
Total excise tax 344,846.40

Note:
1. The excise tax on champagne applies for 750ml bottle regardless of proof.
2. The champagne’s net retail price is higher than P500, computed as follows:
Ultimate retail price P1,600
Divide by: VAT inclusive rate 112%
Selling price net of VAT P1,428.57
Less: Excise tax 885.73
Indicated net retail price P542.84

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 FERMENTED LIQUORS
 Fermented liquors includes beer, lager beer, ale, porter and similar products, except tuba, tapuy and similar products.

REVIEW QUESTIONS

Problem 1: (Fermented liquors) Beer Serbesa ferments beer from imported malt or ale and sells them in 500-ml bottles at
P32/bottle final retail price. The beers are sold in cases containing 24 bottles each. 300 cases of beers are produced in March 2019.

Required: Compute the excise tax.

Total cases produced 300

Multiply by: bottles per case 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 25.42
Total excise tax 91,512

Problem 2: (Fermented liquors) DDD ferments liquors from sugar cane which it ages in antique Guzi jars. The product called
“bas” is branded as “Yummy Basi” and is marketed at P500/gallon.

Required: Compute the total excise tax.

Basi is not subject to excise tax.

Conditional Tax -free Removal of 1. Removal of wines and distilled spirits for treatment of tobacco leaf
Alcohol Products 2. Removal of spirits for rectification
3. Removal of fermented liquor to bonded warehouses
4. Removal of damaged liquors

Denaturation of alcohol When wines and distilled spirits are to be used for the treatment of tobacco leaf by
manufacturers of cigars and cigarettes, this is not human consumption; hence, tax free,
but such wines and distilled spirits must first be suitable denatured.

Denatured alcohol of not less than 1800 proof (90% absolute alcohol) when suitably
denatured and rendered unfit for oral intake is exempt from excise tax. Denatured
alcohol used for motive power shall be taxed as petroleum products.

Alcohol rendered unfit for oral intake after denaturation but restored fit for oral intake
after undergoing fermentation, dilution, purification, mixture or any other similar
processes shall be subject to tax as alcohol products.

Rectification of spirits Spirit requiring rectification may be removed from the place of production to another
establishment for purposes of rectification without prepayment of taxes but this
requires submission of a joint bond by the distiller and the rectifier conditioned on the
rectifier’s payment of the excise tax on the rectified alcohol. No loss for rectification
and handling shall be allowed. The rectifier shall pay the excise tax on such losses.
Rectifiers using spirits with unpaid excise taxes shall be liable for the payment of the
excise tax thereon.

Removal of fermented liquors to Fermented liquors may be removed or transported from the brewery or other place of
bonded warehouses manufacture to a bonded warehouse used by him exclusively for storage or sale in bulk
of fermented liquor, not less than 1,000 liters at one removal without prepayment of
the tax under a permit which shall be granted by the CIR.

Removal of damaged liquors When fermented liquor has become sour or otherwise damaged so as to be unfit for use
as such, brewers may sell and after securing a special permit from the CIR, remove the
same without the payment of tax thereon, in cask or other packages, distinct from
those ordinarily used for fermented liquors, each containing not less than 175 liters with
a note of their contents permanently affixed thereon.

TOBACCO PRODUCTS
2. Tobacco Products (Sections 144-146)

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a. Tobacco Products (Section 144)

b. Cigars & Cigarettes (Section 145)

c. Inspection Fee (Section 146)

Excise Tax on Tobacco Products

Five Excisable Articles

 1. Tobacco Products
 2. Heated Tobacco Products
 3. Vapor Products
 4. Cigars
 5. Cigarettes

Tobacco Products
 1. Tobacco twisted by hand or reduced into a condition to be consumed in any manner other
than the ordinary mode of drying and curing;
 2. Tobacco prepared or partially prepared with or without the use of any machine or instruments
or without being pressed or sweetened except as otherwise provided hereunder; and
 3. Fine-cut shorts and refuse, scraps, clippings cuttings, stems and sweepings of tobacco except
as otherwise provided hereunder.

Heated Tobacco Products

 1. These refer to tobacco products that may be consumed through other means sufficiently to
release an aerosol that can be inhaled, without burning or any combustion of the tobacco.
 2. Heated tobacco products include liquid solutions and gels that are part of the product and are
heated to generate an aerosol.
 3. These refer to tobacco products that may be consumed through heating tobacco, either
electrically or through other means sufficiently to release an aerosol that can be inhaled, without
burning or any combustion of the tobacco.

Vapor Products
 Vapor products also includes electronic nicotine and non-nicotine delivery systems
(ENDS/ENNDS) which are combinations of non-tobacco containing e-liquids or refills which
contain up to 65mg/ml of nicotine in the e-liquid or refill and an electronic delivery device to
produce an aerosol, mist or vapor that users inhale by mimicking the act of smoking.

Cigars
 “Cigars” mean all rolls of tobacco or any substitute thereof, wrapped in leaf tobacco that are
consumed via combustion of the tobacco.

Cigarettes
 “Cigarettes” mean all rolls of finely-cut leaf tobacco, or any substitute therefor, wrapped in
paper or in any other material that are consumed via combustion of the tobacco.

Rates of Excise Tax

Tobacco Products
Tobacco P2.95/kg
Cigar 20% of net retail price + P5.85/piece
Heated tobacco products P10 per pack of 20 units or packaging combinations of not
more than 20 units.

Cigarettes (packed by hand or machine)

Year Tax
2020 P45
2021 P50
2022 P55
2023 P69
2024 Shall be increased by 6% through RRs

Vapor Products
Quantity Tax
0.00 mL to 10.00 mL P10
10.01 to 20.00 mL P20
20.01 mL to 30.00 mL P30
30.01 mL to 40.00 mL P40
40.01 mL to 50.00 mL P50
More than 50.00 mL P50 + P10 for every additional 10.00 mL

Importation to Freeport Zones

 GR: Exempt
 XPN: Cigarettes, cigar, alcoholic products. Even if destined for tax and duty – free shops: still subject to excise taxes.
 XPN to XPN: Government-owned and operated duty-free shops.

Cigar and Cigarettes

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  Cigars means all rolls of tobacco or any substitute thereof, wrapped in a leaf tobacco.
 Cigarettes means all rolls of finely-cut leaf tobacco, or any substitute thereof, wrapped in paper or in any other materials.
 Duly registered cigarettes packed by machines shall only be packed in twenties and other packaging combinations of not
more than twenty.

Removal of tobacco products Tobacco products entirely unfit for chewing or smoking may be removed tax-free for
without prepayment agricultural or industrial use. Stemmed leaf tobacco, fine-cut shorts, refuse of fine-cut
chewing tobacco, scraps, cuttings, clippings, stems or midribs, and sweepings of tobacco
may be sold in bulk as raw material by one manufacturer directly to another without
payment of the tax.

Stemmed leaf tobacco means leaf tobacco which has the stem or midrib removed and
does not include broken leaf tobacco.

No tobacco products manufactured in the Philippines and produced for export shall be
removed from their place of manufacture or exported without posting a bond of an export
bond equivalent to the amount of the excise tax thereon if sold domestically. Tobacco
products for export may be transferred from the place of manufacture to a bonded facility,
upon posting of a transfer bond, prior to export.

Tobacco products imported into the Philippines and destined for foreign countries shall not be
allowed entry without posting a bond equivalent to the amount of custom duty, excise tax
and VAT due thereon if sold domestically.

REVIEW QUESTIONS

Problem 1: (Cigar and Cigarettes) In May 2019, GGG Company produced a total of 8,000 kilos of dried tobacco leaves from its
plantation and processed the same into cigarettes.

The processing resulted to the following:

Product Packs Pieces / pack Net retail price
Cigar 1,000 10 P200 / pack
Cigarette 6,000 20 P100 / pack

1,000 kilos of the dried leaves failed strict quality control and are discarded to be sold as loose leaf tobacco to consumers for
P100/kilo.

All of the products will be withdrawn for sale in domestic supermarkets except for 1,500 cigarette packs which are ordered exported
by a foreign customer.

Required: Compute the total excise tax.

Cigar:
-Ad valorem tax = 1,000 packs x P200/pack x 20% 40,000
-Specific tax = 1,000 packs x 10 pcs x P6.32 / pcs 63,200
Cigarette: 6,000 packs x P35/pack 210,000
Loose tobacco: 1,000 kgs x P2.20/ kg 2,200
Total excise tax 315,400

Note:
1. The sale of loose tobacco to end users is subject to excise tax.
2. Loose tobacco leaf is exempt when the same is used in the manufacturing of tobacco products which will ultimately be
subject to the excise tax.
3. GGG Company shall pay excise tax for the withdrawal of the 1,500 cigarettes pack for export. It shall claim tax refund or
tax credit upon showing proof of actual exportation.

PETROLEUM PRODUCTS
3. Petroleum Products (Section 148)

Excise Tax – Petroleum Products

Petroleum – It refers to the naturally occurring mixture of compounds of hydrogen and carbon with small proportion
of impurities and shall include any mineral oil, petroleum gas, hydrogen gas, bitumen,
asphalt, mineral wax, and all other similar or naturally-associated substances, with the
exception of coal, peat, bituminous shale and/ or other stratified mineral fuel deposits.

Petroleum Products – It refers to products formed in the case of refining crude

petroleum through distillation, cracking, solvent refining and chemical treatment coming
out as primary stocks from the refinery.

Payment

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  The VAT and Excise taxes which are due on all petroleum and petroleum products that are imported and/or
brought directly from abroad to the Philippines, including Freeport and Economic Zones, shall be paid by the
importer thereof to the BOC.

Other Matters
 All storage facilities shall be registered with the BIR (Section 4, RR No. 2-2012)

Rates of Excise Tax

Tax Rate Unit of measure
Petroleum product 2019 2020
Lubricating oils and greases including but not limited to base P9.00 P10.00 Liter and kilogram
stocks 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 other similar 9.00 10.00 Liter of volume
products of distillations
 If used as raw materials in the production of 0.00 0.00
petrochemicals or as a 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 petrochemical products 0.00 0.00
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 ton
 If used as feed stocks to power generation facilities 0.00 0.00

Petroleum products to be used as raw materials

 Petroleum products used as raw materials in the manufacture of other petroleum products or as fuel for power plants are
not taxable.
 Examples:
1. Naphtha and pyrolysis gasoline used as raw materials in the manufacture of petrochemicals or as replacement fuels
for power plants
2. Liquefied petroleum gas used in the production of petrochemicals
3. Petroleum coke used as feed stocks to power generation facilities
 Biothenal products to be 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 The excise tax paid on the purchase of base stock (bunker) in the manufacture of
excisable articles and forming part thereof shall be credited against the excise tax due
thereon. Any excess of excise tax paid on raw materials resulting from manufacturing,
blending, processing, storage and handling losses shall not give rise to a tax refund or
credit.

Note:
Used in production or Used as replacement
processing of products fuels for power plants
subject to excise tax
Naphtha, gasoline and Exempt Exempt
other similar products
Liquefied petroleum gas Exempt Exempt
Petroleum coke - Exempt
Bunker fuel Taxable but creditable -

Mandatory marking of all petroleum Imported or locally manufactured petroleum products such as but not limited to unleaded
products premium gasoline, kerosene, and diesel fuel oil are required to be marked after the taxes
and duties thereon have been paid.

Products found in the domestic market which do not contain the marker or which contain
markets but are diluted beyond the acceptable percentage approved by the Secretary of
Finance shall be presumed that the same were withdrawn with the intention to evade the
payment of taxes and duties due thereon.

Random field test will be periodically conducted in the warehouses, storage tanks, gas
stations and other retail outlets to inspect the quality and quantity of fuel to check
incidence of fuel trafficking. Field testing are required to be properly filmed and video-
taped and documented.

P a g e | 17
 A confirmatory test will be rendered on tested unmarked, adultered, or diluted fuel to
validate the findings of the field test. Confirmatory fuel test certificates issued by fuel
testing facilities shall be valid for any legal purposes from the date of issue and shall
continue admissible and conclusive evidence before any court.

Sale of Petroleum Products to Petroleum products sold to the following are exempt from excise tax:
Exempt Entities 1. International carriers
2. Entities exempted under tax treaties, conditional on reciprocal tax exemption
treatment
3. Entities which are exempt form direct and indirect tax

Petroleum products sold to international carriers must be stored in bonded storage tank
and may be disposed of only in accordance with the regulations by the Secretary of
Finance upon recommendation of the CIR.

REVIEW QUESTIONS

Problem 1: (Petroleum) CCC pumps crude oil from its oilfield and feed them to its oil refinery which transform the crude oil into
various petroleum products.

The following were produced by the plant from a batch of crude oil in 2019:
Gasoline 45,000 liters
Aviation gas; 5,000 liters is kept in bonded storage tanks for sale to international carriers 9,000 liters
Diesel fuel 25,000 liters
Bunker fuel 3,000 liters
Asphalt 5,000 kilos
Naphtha; 200 liters used in refining of petroleum products 500 used in producing plastic products; 1,200 liters
the lance is sold

Required: Compute the total excise tax.

Gasoline (45,000 liters x P10/liter) 450,000

Aviation gas (9,000 - 5,000) x P4 /liter 16,000
Diesel (25,000 liters x P4.5/liter) 112,500
Bunker fuel (3,000 liters x P4.5/liter) 13,500
Asphalt (5,000 kilos x P9/kilo) 45,000
Naphtha (1,200 - 200 - 500) x P9 4,500
Total excise tax 641,500

Note:
1. Petroleum products sold to international carriers is exempt subject to the requirement that they must be stored in bonded
storage tank and will be disposed only to accordance with rules and regulations.
2. Naphtha used in refining or in the production of other petrochemical products or used as fuel of power plants shall not be
subject to excise tax.

Problem 2: Assume further that CCC used the 3,000 liter of the bunker fuel to produce 4,000 grease oil by mixing it with several
additives.

The 4,000 grease oil is no longer subject to excise tax since it is produced from a base stock (bunker fuel) on which excise tax is
already paid. (Sec. 148 (a), NIRC)

Problem 3: Assume CCC subsequently exported 21,000 liters of the gasoline and 10,000 of the diesel fuel.

The proportionate excise tax paid on these items shall be claimed as tax credit or tax refund upon showing proof of their actual
importation.

MINERAL PRODUCTS
Excise Tax on Mineral Products

Three Taxable Goods

 1. Minerals
 2. Mineral products
 3. Quarry resources

Minerals – They shall mean all naturally occurring inorganic substances (found in nature) whether in solid, liquid, gaseous, or any
intermediate state.

Mineral products – They shall mean things produced and prepared in a marketable state by simple treatment processes such as
washing or drying, but without undergoing any chemical change or process or manufacturing by the lessee, concessionaire or
owner of mineral lands.

Quarry Resources – They mean any common stone or other common mineral substances as the Director of the Bureau of Mines

P a g e | 18
and Geo-Sciences may declare to be quarry resources.
1. Marl 8. Conglomerate 15. Limestone
2. Marble 9. Coral 16. Red burning clays for pottery and bricks
3. Granite 10. Sand 17. Rhyolite
4. Volcanic cinders 11. Diatomaceous earth 18. Sandstone
5. Basalt 12. Diorite 19. Serpentine
6. Tuff and rock phosphate 13. Decorative stones 20. Shale and
7. Andesite 14. Gabbro 21. Volcanic glass

Note: They contain no metal or metals or other valuable minerals in economically workable quantities.

Persons Liable
 1. Lessees, concessionaires, owners or operators of mines, processors of minerals, licensees or permittees of quarry/mines,
producers or
 2. Should minerals, mineral products, or quarry resources be removed from the minesite and/or place of production without
the payment of the tax, the owner or person having possession thereof shall be liable.

Rates of Excise Tax

 All rates are rates beginning 2020.
Selling price Tax
Coal and coke P150/metric ton
Nonmetallic minerals and quarry resources
Copper and other metallic minerals 4% of MV or dutiable value
Gold and chromite
Indigenous petroleum 6% of market price

Note: RR No. 6-2012, which imposes a 2% excise tax rate on metallic minerals, is no longer applicable.

Exemption
 Locally extracted natural gas and liquefied natural gas
Excise Tax Credit
 When goods locally produced or manufactured are removed and actually exported,
whether so exported in their original state or as ingredients or parts of any
manufactured goods or products, any excise tax paid thereon shall be credited or
refunded upon
 1. Submission of the proof of actual exploration and
 2. Receipt of the corresponding foreign exchange payment
 Note: This does not apply to mineral products.

Timing of ET for Minerals

 Before removal (Section 130 (A)(2), NIRC; Section 5 (C)(1), RR No. 13-1994)
 20 days after the end of the quarter (Section 130 (A)(2), NIRC; Section 5 (C), RR No. 13-1994)

Ad valorem tax on mineral products

1. Excise tax on metallic and non-metallic minerals
If domestically produced, the excise tax is based on the actual market value of the gross output upon removal. If imported, it is
based on value used by the BOC in determining tariff and customs duties, net of excise tax and VAT.

The gross output shall be interpreted as the actual market value of minerals or mineral products, or of bullion from each mine or
mineral land operated as a separate entity without any deduction from mining, milling, refining, as well as transporting,
handling, marketing or any other expenses.

2. Excise tax on indigenous petroleum

The excise tax on indigenous petroleum is based on the fair international market price on the first taxable sale, barter or
exchange of such similar transaction or the transfer of indigenous petroleum in its original state to a first taxable transferee.

REVIEW QUESTIONS

Problem 1: (Ad valorem on mineral products) During the month, FFF Mining Company mined a total of 500 tons of gold-copper
concentrates. The concentrates were assayed to contain 0.008% gold and 18% copper. FFF Mining Company usually exports its
concentrates.

The market value of the following in the London Metals Exchange (LME) were:
Gold price $1,493 / troy ounce
Copper $5,700 / ton

Each troy ounce is 31.10348 grams. Each ton is 1,000,000 grams. The US Dollar is trading P52/P1

Required: Compute the excise tax.

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 Gold:
Total concentrates in tons 500
Multiply by: Gold content 0.008%
Gold in tons 0.04
Multiply by: 1,000,000 grams/ton 1,000,000
Gold in grams 40,000
Multiply by : Gold price/grams ($1,492 / 31.10348) $48
$1,920,000
Multiply by: Peso-Dollar exchange rate 52
Gold price in Peso ₱99,840,000

Copper:
Total concentrate in tons 500
Multiply by: 18%
Copper in tons 90
Multiply by: $/ton $5,700
Copper price in dollar $513,000
Multiply by: Peso-Dollar exchange rate 52
Copper price in Peso ₱26,676,000
₱126,516,000
Multiply by: Excise tax rate 4%
Excise tax 5,060,640

Problem 2: Assume the same data in Problem 1 except that FFF Mining sells its concentrate to its subsidiary company, GGG
Refinery. GGG Refinery smelted and refined the concentrate yielding 3,100 troy ounce of pure gold and 96 tons of refined copper.

FFF Mining Company shall pay the same tax as computed in Problem 1. Being a separate taxable person, GGG Refinery shall be
separately imposed the following excise tax on the refined minerals:

Gold:
Refined gold in troy ounce 1,300
Multiply by : Dollar price / troy ounce $1,493
Dollar price of the goold $1,940,900
Multiply by: Peso-Dollar exchange rate 52
Gold price in Peso ₱100,926,800

Copper:
Refined copper in tons 96
Multiply by: $/ton $5,700
Copper price in dollar $547,200
Multiply by : Peso - Dollar rate 52
Copper price in eso 28,454,400
Market value of gross output 129,381,200
Multiply by: Excise tax rate 4%
Excise tax 5,175,248

Note: What is the minerals were refined by FFF Mining Company itself?
Only one tax shall be imposed. FFF Mining Company shall only pay P5,175,248.

Small Scale Miners

 RA 11256 exempts registered small scale miners and accredited traders who are selling gold to the Bangko Sentral ng
Pilipinas (BSP) from paying income tax and excise tax. Note also that the sale of gold to the BSP is also exempt from
business tax.
 Pursuant to RA 11256, gold which is sold, or eventually sold to the BSP, shall be exempt from the payment of excise tax. If
the excise tax due thereon is paid prior to the sale of the gold to the BSP, the taxpayer may file a claim for refund with the
Commissioner of Internal Revenue.
 All gold sold to the BSP by accredited traders shall be presumed to have been purchased by said traders from small-scale
miners. (Sec. 4, RA 11256)

REVIEW QUESTIONS

Problem 1: Mr. Allan is an operator of a small-scale mining claim. His groups produced a total of 3,400 grams of gold nuggets and
discs with specific gravity of 17.5 (roughly 90% purity). He sold the gold production to the BSP. Upon final assay, the BSP made a
final settlement as follows:
Gold P6,900,000
Silver 200,000
Total P7,100,000

Required: Compute the total excise tax.

The sale of gold is exempt but the sale of silver is taxable. The excise tax shall be computed as follows:

P a g e | 20
Sale of silver P200,000
Multiply by: 4%
Excise tax P8,000

Problem 2: Mr. Allan is a BSP-registered gold trader. He bought several kilos of gold and sold them as follows:
Buyer Amount
Bangko Sentral ng Pilipinas P8,100,000
Jewelers 2,400,000
Gold collectors 1,200,000

Required: Compute the total excise tax.

Sale of gold to jewelers 2,400,000

Sale of gold to collectors 1,200,000
Total taxable sales 3,600,000
Multiply by: Excise tax rate 4%
Excise tax 144,000

Import of minerals Note that imported minerals is exceptionally subject to excise tax upon the basis
used by the Bureau of Customs in computing customs duties (i.e. dutiable value).

MISCELLANEOUS ARTICLES
5. Miscellaneous Articles (Section 149-150)

a. Automobiles (Section 149)

b. Non-essential Goods (Section 150)

c. Non-essential Service (Section 150-A) - RA 10963 [TRAIN Law))

d. Sweetened Beverages (Section 150-B)-(RA 10963 [TRAIN Law])

EXCISE TAX – AUTOMOBILE

Automobile – It shall refer to any four (4) or more-wheeled motor vehicle regardless of seating capacity, which is propelled by
gasoline, diesel, electricity or any other motive power.

Exemptions
 1. Bus
 2. Jeepney
 3. Truck
 4. Special purpose vehicles
 5. Single cab chassis and pick-ups
 6. Purely electric vehicle

Note that hybrid vehicles are 50% exempt from excise taxes on automobiles.

Other Exemptions
 1. Removals for export
 2. Delivery to tax-exempt persons or entities (e.g., embassies, ADB)
 3. Removals for delivery and use exclusively within the Freeport Zone
 4. Removals for test run

Rates of Excise Tax

Selling price Tax rate
Up to P600,000 4%
Over P600,000 to P1,000,000 10%
Over P1,000,000 to P4,000,000 20%
Over P4,000,000 50%

Computational Notes
 1. Selling price is net of VAT.
 2. In no case shall the SP be less than the amount computed as follows: 80% x (SRP – Excise Tax – VAT)
Sec. 5, RR No. 25-2003
 3. SP shall always include the value of car air conditioner, radio and mag wheels including the cost of installation thereof
whether or not the same were actually installed in the automobile.

REVIEW QUESTIONS

Problem 1: GGG Cars manufactures various automobile models. It completed the following units:

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Model Class Wholesale price Produced Sold
A SUV – gasoline P800,000 8 6
B Pick-up truck – diesel 1,200,000 7 5
C Electric car 3,000,000 5 4
D Bus – diesel 5,000,000 4 2
E Sports car - hybrid 7,000,000 4 3

Required: Compute the excise tax

Model Price Qty Total wholesale Tax rate Excise Tax

A 800,000 8 6,400,000 10% 640,000
B 1,200,000 7 8,400,000 0% -
C 3,000,000 5 15,000,000 0% -
D 5,000,000 4 20,000,000 0% -
E 7,000,000 4 28,000,000 50%/2 8,000,000
Total 8,640,000

Note:
1. The excise is based on units produced not on the units sold. The VAT on the sale shall be based on the units sold.
2. Electric vehicles and pick-up are exempt. Hybrid vehicles are subject to half-tax.

Problem 2: BBB Company manufactures cars and motorbikes powered solar energy or by a combined gasoline and hydrogen
generated from hydrolysis. During the month, BBB Company completed a unit each of its car and motorbike model.
Wholesale
Hybrid water car P2,000,000
Hybrid water bikes 800,000
Solar car 4,000,000

Required: Compute the total excise tax

Hybrid water car P2,000,000

Multiply by: Excise tax rate 20%
Excise tax P400,000

The solar car is electrical powered vehicle and hence exempt. The water bike does not fit into the definition of automobile being a
two-wheeled vehicle. Sad to say, the water car does not fit into the current definition of a “hybrid car”.

Net manufacturer’s or Importer’s This refers to the price, net of excise tax and VAT at which locally
selling price manufactured/assembled or imported automobiles are offered for sale to dealers, or the
public directly or through their sales agents, as reflected in the manufacturer’s or
importer’s sworn declaration or in their sales invoice, whichever is higher.
Minimum prices The net manufacturer’s or importer’s selling price shall include the value of air
conditioning unit, radio and mag wheels including the installation cost thereof whether
or not the same is actually installed in the automobile.

The net manufacturer’s selling price shall not be less than:

1. 80% x (Suggested retail price – excise tax – VAT); and
2. 110% x (Cost of manufacture or import + selling expenses)

The suggested retail price shall not be less than the actual selling price of the
automobile when sold in the market.

REVIEW QUESTIONS

Problem 1: AAA manufacturers mid-size SUV’s which is exclusively sold through accredited dealers or resellers. AAA declared the
cars with a manufacturer’s wholesale price of P900,000 and paid tax of 10% or P90,000 per car. The car is offered by resellers to
the public at a suggested final retail price of P1,545,600. The standard cost to produce the unit is P700,000 while cost to sell is 20%
of cost.

Required: Compute the deficiency excise tax.

P a g e | 22
 Declared manufacturer's selling price 900,000

Suggested retail price of dealers or resellers 1,545,600

Divided by: 112%
Selling price inclusive of excise tax but after VAT 1,380,000
Less: Excise tax paid (90,000)
Suggested retail price, net of excise tax and VAT 1,290,000
Multiply by: 80%
80% Price Limit 1,032,000

Unit cost to produce 700,000

Cost to sell (P700,000 x 20%) 140,000
Total cost 840,000
Mark-up rate 110%
Cost plus limit 924,000

The manufacturer’s net selling price shall be based on the higher the 80% price limit, thus the correct excise tax shall be established
as follows:

Manufacturer's presumed selling price 1,032,000

Multiply by: Tax rate at price 20%
Excise tax 206,400
Less: Excise tax paid (90,000)
Deficiency excise tax 116,400

Problem 2: Assume the same information in the above problem, except that AAA declared the car at P1,010,000 and paid 20%
excise tax of P202,000.

Required: Compute the deficiency excise tax.

Declared manufacturer's selling price 1,010,000

Suggested retail price of dealers or resellers 1,545,600

Divided by: 112%
Selling price inclusive of excise tax but after VAT 1,380,000
Less: Excise tax paid (202,000)
Suggested retail price, net of excise tax and VAT 1,178,000
Multiply by: 80%
80% Price Limit 942,400

Unit cost to produce 700,000

Cost to sell (P700,000 x 20%) 140,000
Total cost 840,000
Mark-up rate 110%
Cost plus limit 924,000

Manufacturer's presumed selling price 942,400

Multiply by: Tax rate at price 20%
Excise tax 188,480
Less: Excise tax paid (202,000)
Overpayment (13,520)

The P1,010,000 manufacturer’s declared price shall be used since it is higher. No assessment for deficiency excise tax shall be
imposed.

Imported vehicle not for sale Imported vehicles not for sale shall be subject to the excise tax on the total
landed value, including transaction value, customs duty and all other charges.

REVIEW QUESTIONS

Problem 1: BBB imported an automobile for personal use which had the following costs:
Purchase price P2,000,000
Other cost to bring goods in the Philippines 300,000
Other inland costs, other than customs duties 200,000

The importation is subject to 30% custom duties and 20% excise tax.

Required:
1. Compute the custom duties.
2. Compute the excise tax.

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3. Compute the VAT importation.

Purchase price 2,000,000

Other cost to bring goods in the Philippines 300,000
Transaction value 2,300,000
Multiply by: 30%
Custom duties 690,000

Purchase price 2,000,000

Other cost to bring goods in the Philippines 300,000
Other in-land costs 200,000
Custom duties 690,000
Total landed value 3,190,000
Multiply by: 20%
Excise tax 638,000

Purchase price 2,000,000

Other cost to bring goods in the Philippines 300,000
Other in-land costs 200,000
Custom duties 690,000
Excise tax 638,000
Landed cost 3,828,000
Multiply by: 12%
VAT on importation 459,360

Technical Importation Automobiles imported by exempt persons such as ecozone locators, the same is not
subject to excise tax. When the same is subsequently sold to taxable persons, the
same shall be subject to excise tax at the higher of the consideration paid and the
depreciated cost.

A 10% depreciation expense shall be provided but not in excess of 50% of the
original cost or value.

REVIEW QUESTIONS

Problem 1: BBB, an ecozone locator, sold 2 company cars to Olongapo Company for P900,000 each. Details about the two cars
were as follows:
Car model Landed cost Years in service
Mazda 3 P1,400,000 4 years
Ford Expedition P3,000,000 6 years

Required:
1. Compute the total excise tax.
2. Compute the VAT importation.

The presumptive import costs for purposes of the excise tax on the importation to be paid by Olongapo Company shall be:
Minimum Selling price Tax basis
Mazda 3 1,400,000 60% 840,000 900,000 900,000
Ford Expedition 3,000,000 50% 1,500,000 900,000 1,500,000

The excise tax shall be computed as follows:

Mazda 3 900,000 10% 90,000

Ford Expedition 1,500,000 20% 300,000
Total excise tax 390,000

The VAT on importation to be paid:

Mazda 3 900,000
Ford Expedition 1,500,000
Total 2,400,000
Excise tax 390,000
Presumed landed cost 2,790,000
Multiply by: VAT rate 12%
VAT on importation 334,800

Tax Exempt Removals of 1. Removal for export

Automobiles 2. Delivery to tax-exempt persons or entities
3. Removals for delivery and exclusively within the Freeport zone
4. Removal of automobiles for test run

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Removal for export No excise tax shall be imposed on vehicles removed for export, subject to the following conditions:
1. Permit to export – to be applied in writing from the CIR immediately before removal
2. Direct delivery to vessel – automobiles for export must be loaded directly to the
vessels or means of transportation carrying them outside the Philippines
3. Proof of exportation – to be submitted within 30 days from the date of removal
4. Exporter’s bond – may be required when deemed necessary by the BIR.

Delivery to tax-exempt Tax-exempt persons or entities include:

persons or entities 1. Embassies of foreign government, subject to the principle of reciprocity
2. Tax exempt organizations, such as the ADB and IRRI
3. Other tax-exempt entities covered by tax treaties, conventions or international
agreements to which the Philippines is a signatory, subject to the principle of reciprocity.

Manufacture’s assemblers or importers of automobiles are allowed to sell to persons or entities

without prepayment of ad valorem tax, subject to the following conditions:
1. Application by the tax-exempt customer or importer in writing for the approval of
exemption
2. Favorable indorsement from the concerned government agency such as the Department
of Foreign Affairs (DFA) for embassies
3. Written approval of the CIR
4. Authenticated true copy of the purchase order indicating the description of the
automobiles to be purchased, the chassis and engine number, and the place and location
of the point of delivery.
5. The approval shall be on a per-transaction basis.

Tax credit or tax refunds If tax exempt persons purchased automobiles in which the excise tax thereon is paid or where the
ad valorem tax is erroneously or illegally collected, such tax exempt person may file a tax refund
or tax credit with the CIR.

Removal for delivery and Automobiles imported directly into the legislated freeport zones from abroad or purchased from
exclusively within the establishments located within the customs territory for use exclusively within the freeport zone
Freeport zone shall be exempt from the imposition of the excise tax.

Removal of automobiles for Should an automobile be removed for test run, prior notice of the test should be given to the
test run appropriate BIR Office that may allow the test run; provided, that the unit under the test run shall
be returned to the plant on the same day.

In the event that the manufacturer/assembler failed to return the said unit to the
manufacturing/assembly plant within the prescribed period, the ad valorem tax otherwise due
thereon shall be immediately due and demandable.

EXCISE TAX ON OTHER NON-ESSENTIAL GOODS

Excisable articles
 1. Perfumes
 2. Toilet waters
 3. Yachts
 4. Other vessels intended for pleasure or sports

Rate of excise tax

 20% based on the wholesale price or the value of importation used by the BOC.

EXCISE TAX ON JEWELRY

Excisable Articles
 1. Fine Jewelry
 2. Imitation Jewelry

Fine jewelry
 1. Articles of personal adornment made on precious metals, stones, pearls or combinations thereof: (e.g., rings,
bracelets, necklaces, brooches, earrings, watch-chains, fobs, pendants, tie, pins, cuff links, combs, tiaras, dress-studs,
religious or other medals or insignia).
 2. Articles made of precious metals, with or without stones for personal use of a kind normally carried in the pocket,
handbag or (in one’s person: e.g., cigarette cases, powder boxes, chain purses, cachou boxes).

Imitation jewelry – Articles falling under fine jewelry but made of base metals and/or materials other than precious metals; of
imitations of gemstones, of natural materials; and/or combination thereof. Base metals refer to iron and steel, copper nickel,
aluminum, lead, zinc, tin and articles thereof, and other base metals and their articles.

Rate of excise tax

 20% based on the wholesale price or the value of importation used by the BOC.

Exception
 A “Qualified Jewelry Enterprise” is exempt
 1. Production and sale of jewelry
 2. Importation of raw materials and supplies, such as but not limited to gemstone and precious metals, or imitations

P a g e | 25
 thereof, for use in its manufacture or production of fine or imitation jewelry, or for disposition to another Qualified Jewelry
Enterprise for the latter’s use in the manufacture or production of fine or imitation jewelry.

Qualified Jewelry Enterprise

 Accredited by the BOI
 Entitled to additional 50% deduction on training expense based on a training scheme approved by TESDA.

All goods commonly and commercially known as jewelry, whether real or imitation, pearls, precious, semi-precious stones and
imitations thereof; goods made of, or ornamented, mounted or fitted with, precious metals or imitations thereof or ivory, opera
glasses and lorgnettes.

Precious metals include platinum, gold, silver and other metals of similar or greater value. Imitation include platings and alloys of
such metals.

The following are not jewelry and hence exempt:

1. Surgical and dental instruments
2. Silver-plated wares
3. Frames or mountings for spectacles or eyeglasses
4. Dental golds or gold alloys and other precious metals used in filling, mounting or fitting of the teeth.

REVIEW QUESTIONS

Problem 1: AAA Inc. manufactures perfumes, precious jewelry, fashion bags and clothes. It produced the following during the
month:
Wholesale price Suggested retail price
Perfumes P6,000,000 P12,000,000
Jewelry 8,000,000 15,000,000
Fashion bags 1,500,000 4,000,000
Designer 4,000,000 11,000,000

Required: Compute the excise tax.

Perfumes 6,000,000 20% 1,200,000

Jewelry 8,000,000 20% 1,600,000
Total excise tax 2,800,000

Note: That fashion bags and designer clothes though pricy are not currently subjected to excise tax.

Problem 2: BBB Enterprise imported the following luxury vehicles and vessels:
Landed cost Selling price
Hybrid yacht P12,000,000 P21,000,000
Hybrid sports car 5,000,000 12,000,000

Required: Compute the excise tax.

Yacht 12,000,000 20% 2,400,000

Sports car 12,000,000 50% 50% 3,000,000
Total excise tax 5,400,000

Yacht is taxed as non-essential goods whereas the sports car is taxable as an automobile. Imported yacht are taxable on landed
costs whereas imported vehicles are taxable on importer’s selling price. There is no half-tax rule on non-essential goods.

EXCISE TAX ON COSMETIC SURGERY

Cosmetic Surgery – It refers to a type of plastic surgery that aims to improve a
person’s appearance, through invasive cosmetic procedures, surgeries, and body
enhancements directed solely on improving, altering, or enhancing the person’s
appearance and do not necessarily promote the proper functions of the body or prevent or
treat illness or disease.

Invasive Cosmetic Surgery – It refers to a cosmetic surgery that is carried out by

entering the body through the skin or through a body cavity or anatomical opening,
but with the smallest damage possible to these structures.

Note: Only invasive cosmetic surgery are subject to excise tax. Non-invasive procedures are exempt.
Invasive Cosmetic Surgery Non-invasive Cosmetic Surgery
Facelift Air Dissector
Necklift Laser/Light Treatment
Injectables

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A tax of 5% on gross receipts derived from the performance of services, net of excise tax and VAT, on invasive cosmetic
procedure, surgeries, and body enhancement directed solely towards improving, altering or enhancing the patient’s appearance and
do not meaningfully promote the proper function of the body or prevent or treat illness or disease

Invasive Cosmetic Procedure shall refer to a cosmetic surgery that is carried out by entering
the body through the skin or through a body cavity or anatomical opening, but with the smallest
damage possible to these structures. Invasive Cosmetic Procedures shall include, but not be
limited to the following:
1. Liposuction
2. Mammoplasty
3. Breastlift
4. Buccal Fat Removal
5. Buttocks Augmentation
6. Chin Augmentation
7. Facelift/Necklift
8. Thread Lift
9. Embedded Protein Threads
10. Hair Restoration/Transplantation
11. Eyelid Surgery
12. Vaginal Plastic Surgery
13. Abdominoplasty or Tummy Tuck
14. Auto Grafting
15. Rhinoplasty/Alar Trimming
16. Otoplasty

Non-Invasive Cosmetic Procedure shall refer to a conservative treatment that does not require
incision into the body or the removal of tissue, or when no break in the skin is created and there is
no contact with mucosa, or skin break, or internal body cavity beyond a natural or artificial body
orifice. Non- Invasive Cosmetic Procedures shall include, but not be limited to the following:
1. Acupuncture Rejuvenation Therapy
2. Air Dissector
3. Botulinum Toxin Injection/ Treatment
4. Collagen Induction Therapy
5. Dermal Fillers (Crosslinked and non-crosslinked)
6. Non-surgical facelifting and skin tightening using radio frequency, ultrasound, infrared
7. Carbon dioxide (CO2) fractional laser resurfacing
8. Laser and light treatments
9. Body Treatments and Contouring Procedures
10. Cleanings and Facials
11. Peelings (Face and Body)
12. Injectables and Weight Management Treatment

Exemptions
 1. Procedures necessary to ameliorate
 1.1 a deformity arising from or directly related to a congenital or developmental defect or abnormality
 1.2 a personal injury resulting from an accident or trauma, or
 1.3 disfiguring disease, tumor, virus or infection.
 2. Cases and treatments covered by the National Health Insurance Program
 3. Non-Invasive Cosmetic Procedures are excluded from the coverage.

Timing of ET for CPs

 10 days following the close of the month (Section 5.2, RR No. 2-2019)
 The tax return (BIR Form 2200-C)

Compliance Requirements
 1. Submission of Monthly Summary of Cosmetic Procedures Performed
 2. Separate OR may be issued if professional performed both invasive or non-invasive cosmetic procedure

REVIEW QUESTIONS

Problem 1: Dr. Bec Bec Belo conducted several operational procedures and treatment on Betay Zander, an interest sensation idol.

The following amounts were agreed before any VAT and Excise Taxes:
Orthognathic surgery P800,000
Breastlift 200,000
Cataract surgery 100,000
Liposuction 140,000
Ultraviolet skin tanning 60,000
Teeth brace for underbites correction 40,000

The orthognathic surgery was intended to correct her facial deformity. The skin tanning procedure was intended to give her the hot
“Morena” looks.

Required: Compute the excise tax

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 Breastlift 200,000
Liposuction 140,000
Total 340,000
Multiply by: 5%
Total excise tax 17,000

Problem 2: Ms. A decided to undergo a liposuction procedure and sought the services of Doc V. Doc V charges Ms. A P50,000 for
the services rendered.

Scenario 1: The procedure is conducted in a clinic outside a hospital

Required:
1. Prepare the necessary journal entry if the P50,000 fee is agreed inclusive of VAT but exclusive of excise tax.
2. Prepare the necessary journal entry if the P50,000 fee is agreed inclusive of both VAT and excise tax.

Case 1: The P50,000 fee is agreed inclusive of VAT but exclusive of excise tax.
Orginal price, inclusive of VAT 50,000
Divide by: 112%
Gross receipts 44,642.86
Add: 5% Excise tax (P44,642.85 x 5%) 2,232.14
12% VAT (P44,642.86 + P2,232.14) x 12% 5,625.00
Total amount to be collected from Miss A 52,500.00

Doc V shall record the following in his book:

Cash 52,500.00
Excise tax expense 2,232.14
Excise tax payable 2,232.14
Output VAT 5,625.00
Service income 46,875.00

Note: The service income is inclusive of the excise tax

Case 2: The P50,000 fee is agreed inclusive of both VAT and excise tax
Orginal price, inclusive of VAT 50,000
Divide by: 112%
Gross receipts 44,642.86
Divide by: 105%
Gross receipts, net of VAT and excise tax 42,517.01
Add: 5% Excise tax (P42,517.01 x 5%) 2,125.85
12% VAT (P42,517 + P2,125.85) x 12% 5,357.14
Total amount to be collected from Miss A 50,000.00

Doc V shall record the following in his book:

Cash 50,000.00
Excise tax expense 2,125.85
Excise tax payable 2,125.85
Output VAT 5,357.14
Service income 44,642.86

Scenario 2: The procedure is conducted in a hospital.

Assume that the liposuction procedure is done by Doc V, an individual practitioner operating a clinic inside a hospital. Assume that
the hospital charged P20,000 for hospital supplies, and the use of the facilities and operating room aside from the P50,000
professional fee of Doc V which is agreed to be inclusive of VAT but exclusive of excise tax.

Required:
1. Journal entry of the hospital.
2. Journal entry of Doc V.

The total billing for Miss A shall be computed as follows:

Hospital fees:
Billings by hospital 20,000.00
Add: 5% excise tax 20,000 5% 1,000.00
Total 21,000.00

Professional fees:
Gross receipts 50,000.00 112% 44,642.86
Excise tax 44,642.86 5% 2,232.14
12% VAT 46,875.00 12% 5,625.00
Total charges of Doc V 52,500.00

Total amount to be collected from Miss A 73,500.00

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Remember that hospital services are exempt from VAT, except those rendered by professionals.

The hospital shall record the following in its books:

Cash 21,000.00
Excise tax expense 1,000.00
Excise tax payable 1,000.00
Service income - non-VAT 21,000.00

Cash 52,500.00
Payable to Doc V 45,803.58
Excise tax payable for Doc V 2,232.14
Expanded withholding tax payable 4,464.28

The amount to be released from Doc V is computed as:

Doc V shall record the same in his books:

Accounts receivable 45,803.58

Excise tax expense 2,232.14
Prepaid tax expense 4,464.28
Service fee 46,875.00
Output VAT 5,625.00

SWEETENED BEVERAGES
Excise Tax on Sweetened Beverages

Sweetened Beverage – refers to non-alcoholic

beverages of any constitution (Liquid, powder, or
concentrates) that are pre-packaged and sealed in
accordance with the Food and Drug Administration
(FDA) standards, that contain caloric and/or non-
caloric sweeteners added by the manufacturers.

Excisable Beverages
 Sweetened juice drink
 Sweetened tea
 Carbonated beverages
 Flavored water
 Energy and sports drinks
 Other powdered drinks
 Cereal and grain beverages
 Other non-alcoholic beverages with added
sugar

Non-excisable Beverages
 All milk products
 100% natural fruit juice
 100% natural vegetable juice
 Meal replacement and medically indicated
beverages
 Coffee

Excise Tax Rate

 Caloric sweetener – P6L
 Non-caloric sweetener – P6L
 Hight fructose corn syrup – P12L

REVIEW QUESTIONS

Problem 1: (Excise tax on sweetened beverages – Carbonated Beverages) Dodo Manufacturing Corporation will remove
from the place of production 100 cases of Super Cola using HFCS and non-caloric sweetener. Each case contains 6 bottles of 1.5
liters each.

Required: Compute the excise tax to be paid before removal.

No. of cases 100

Multiplied by Number of bottles per case x 6
Total Number of bottles 600
Multiplied by content per bottle x 1.5L
Total Volume in Liters 900 L
Multiplied by Specific Tax Rate P12.00

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Total Excise Tax to be paid before removal P10,800

Problem 2: (Excise tax on sweetened beverages – Powdered Juice) Sweety Import Corp. will remove from customs custody
50 cases of Four Seasons Powdered Juice using caloric and non-caloric sweetener containing 144 packs by 25 grams. Each 25 grams
pack can make 1 Liter (per serving suggestion appearing on the label).

Required: Compute the excise tax to be paid before removal.

No. of Cases 50
Multiplied by no. of packs per case X 144
Total no. of packs 7,200
Multiplied by serving suggestion per pack in liters of volume X 1L
Total Volume in Liters 7,200 L
Multiplied by Specific Tax Rate X P6.00
Total Excise Tax to be paid before removal P43,200.00

Exempt products from The following shall not be subject to the excise tax on sweetened beverages:
Excise Tax 1. All milk products, including plain milk, infant formula milk, follow-on milk, growing up milk,
powdered milk, ready-to-drink milk, flavored milk, and fermented milk
2. Soymilk and flavored soymilk
3. 100% natural fruit juices
4. 100% natural vegetable fruit juices
5. Meal replacement and medically indicated beverages
6. Gourd coffee, instant soluble coffee, and pre-packed powdered coffee products.

Milk products refers to products obtained by processing of milk, which may contain food additives,
and other ingredients functionally necessary for the processing. Dairy products are not synonymous
with products and hence taxable.

Transfer of raw materials Manufacturers of sweetened beverages subject to tax shall not be allowed to transfer or remove raw
materials from place of production, except when the transfer or removal thereof is intended for
further processing to its other registered production or toll-manufacturing plants and shall be
accompanied by an Excise Tax Removal Declaration (ETRD).

Raw materials shall refer to chief substance or ingredients of any constitution such as liquids, syrups,
powder, concentrates for the production of sweetened beverages but shall not include packaging
materials and supplies.

Transfer of semi- The transfer of semi-processed goods such as syrups, puree, concentrates sold to fast food chains
processed goods 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 Sweetened beverages that are produced or manufactured and are subsequently consumed within the
within the place of place of production shall be subject to the payment of excise tax by the manufacturer.
production
Export of sweetened Sweetened beverages intended for export may be removed from the place of production without the
beverages prepayment of excise tax, subject to the following conditions:

1. Shipment permit - A permit per shipment shall be secured from the BIR office where the taxpayer
is required to be registered as an excise taxpayer.

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”

Note:

BIR Form No. 2200-A Excise Tax Return for Alcohol Products
Description
This return shall be filed in triplicate by the following:
1. Manufacturer or producer of locally manufactured or produced alcohol products; and
2. Owner or person having possession of the alcohol products which were removed from the place of
production without the payment of excise tax.
Filing Date
For each place of production, a separate return shall be filed and the excise tax shall be paid before
removal of the alcohol products from the place of production.
For EFPS Taxpayers,
The filing of return and payment of excise tax due thereon shall be in accordance with the provisions
of existing applicable revenue issuances.

BIR Form No. 2200-AN Excise Tax Return for Automobiles and Non-Essential Goods
Description
This return shall be filed in triplicate by the following:
1. Manufacturer, producer or assembler of locally manufactured/produced/assembled automobiles;
2. Manufacturer or producer of locally manufactured or produced non-essential goods such as

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 jewelries, perfumes, toilet water, yachts and other vessels intended for pleasure or sports;
3. Buyer or transferee of automobile not previously taxed and subsequently sold or transferred by the
tax-exempted seller; and
4. Owner or person having possession of the above articles which were removed from the place of
production without the payment of excise tax.
Filing Date
For each place of production, a separate return shall be filed and the excise tax shall be paid before
removal of the abovementioned products from the place of production.
For EFPS Taxpayers,
The filing of return and payment of excise tax due thereon shall be in accordance with the provisions
of existing applicable revenue issuances.

BIR Form No. 2200-C Excise Tax Return for Cosmetic Procedure
Description
This return shall be filed in triplicate by any person, whether natural or juridical, performing invasive
cosmetic procedures, surgeries, and body enhancements directed solely towards improving, altering,
or enhancing the patient’s appearance and do not meaningfully promote the proper functions of the
body or prevent or treat illness or disease and liable to pay excise tax.
Filing Date
This excise return shall be filed and the excise tax due, if any, shall be paid at the same time within
ten (10) days following the close of the month.
For eFPS Taxpayers
The filing of return and payment of excise tax due thereon shall be in accordance with the provisions
of existing applicable revenue issuances.

BIR Form No. 2200-M Excise Tax Return for Mineral Products
Description
This return shall be filed in triplicate by the following:
1. Owner, lessee, concessionaire or operator of the mining claim;
2. First buyer, purchaser or transferee for local sale, barter, transfer or exchange of indigenous
petroleum, natural gas or liquefied natural gas; and
3. Owner or person having possession of the minerals and mineral products which were mined,
extracted or quarried without the payment of excise tax.
Filing Date
For each place of production, a separate return shall be filed and the excise tax shall be paid upon
removal of the mineral products from the place of production. In the case of locally produced or
extracted minerals or quarry resources where the mine site or place of extraction is not the same as
the place of processing or production, the return shall be filed and the excise tax paid to the Revenue
District Office having jurisdiction over the locality where the same are mined, extracted or quarried.
On locally produced or extracted metallic mineral or mineral products, the person liable shall file a
return and pay the tax within fifteen (15) days after the end of the calendar quarter when such
products were removed, subject to the filing of a bond in an amount which approximates the amount
of excise tax due on the removals for the said quarter.
For EFPS Taxpayers,
The filing of return and payment of excise tax due thereon shall be in accordance with the provisions
of existing applicable revenue issuances.

BIR Form No. 2200-P Excise Tax Return for Petroleum Products
Description
This return shall be filed in triplicate by the following:
1. Manufacturer, or producer of locally manufactured, produced or refined petroleum products;
2. Any person engaged in blending, reprocessing, re-refining or recycling of previously taxed
petroleum products;
3. Importer or purchaser who resells or uses kerosene as aviation fuel;
4. Any person using denatured alcohol for motive power; and
5. Owner or person having possession of petroleum products, which were removed, from the place of
production without the payment of excise tax.
Filing Date
For each place of production, a separate return shall be filed and the excise tax shall be paid before
removal of the petroleum products from the place of production.
For EFPS Taxpayers,
The filing of return and payment of excise tax due thereon shall be in accordance with the provisions
of existing applicable revenue issuances.

BIR Form No. 2200-T Excise Tax Return for Tobacco Products
Description
This return shall be filed in triplicate by the following:
1. Manufacturer or producer of locally manufactured or produced tobacco products;
2. Wholesaler, manufacturer, producer, owner or operator of the redrying plant, as the case may be,
with respect to the payment of inspection fee on leaf tobacco, scrap, cigars, cigarettes and other
tobacco products; and
3. Owner or person having possession of tobacco products which were removed from the place of
production without the payment of excise tax.
Filing Date
For each place of production, a separate return shall be filed and the excise tax due shall be paid
before removal of the tobacco products from the place of production.
For EFPS Taxpayers
The filing of return and payment of excise tax due thereon shall be in accordance with the provisions
of existing applicable revenue issuances.

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BIR Form No. 2200-S Excise Tax Return for Sweetened Beverages
Description
This return shall be filed in triplicate by the following:
1. Manufacturer or producer of locally manufactured or produced sweetened beverages; and
2. Owner or person having possession of sweetened beverages which were removed from the place of
production without the payment of excise tax.
Filing Date
For each place of production, a separate return shall be filed and the excise tax due shall be paid
before removal of the sweetened beverages from the place of production.
For EFPS Taxpayers
The filing of return and payment of excise tax due thereon shall be in accordance with the provisions
of existing applicable revenue issuances.

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