ISU MODULE TEMPLATE

Subject: BUSINESS TAXATION

Title of the Module
Chapter 5: Value-Added Tax on Importation of Goods
VAT on Importation of Goods
Importation is the act of bringing goods and merchandise into a country from a foreign country.
It is deemed complete when the duties upon the merchandise have been paid or returned to be paid at a port of entry and the
legal permit for withdrawal shall have been granted or in case said merchandise is free of duty, until it has left the jurisdiction of
customs. (Sec. 1248, Revised Administrative Code)
Importer refers to any person who brings goods into the Philippines, whether or not made in the course of trade or
business. It includes non-exempt persons or entities who acquire tax free imported goods from exempt person, entities or
agencies. (RR 16-2005)

Transactions subject
There shall be levied, assessed and collected on every importation of goods a value added tax whether the importation is for (1)
sale, (2) for use in business, or (3) for personal use

Tax rate and tax base

The tax rate to be imposed shall be twelve percent (12%) based on the total value used by the Bureau of Customs in
determining tariff and custom duties, plus custom duties, excise taxes, if any, and other charges, such as postage, commission
and similar charges prior to the release of the goods from the customs custody.
The payment of tax shall be made by the importer prior to the release of such goods from customs custody.
Where the customs duties are determined on the basis of the quantity or volume of the goods, the value-added tax shall be based
on the landed cost plus excise taxes, if any.
Landed cost consist of invoice amount, custom duties, freight insurance and other charges. If the goods imported are subject to
excise tax, the excise tax shall form part of the tax base.

Illustration: Importation
Inday Sarah imported goods from Russia. The following are the data relative to such importation:
For Sale Own Use
Invoice amount ($1.00 = P52) $ 9,500 $ 3,000
Dutiable value 11,200 5,200
Custom duties P10,500.00 P3,100.00
Freight 6,000.00 2,800.00
Insurance 8,000.00 2,500.00
Other charges 12,500.00 4,000.00
Facilitation fee 10,000.00 -
Freight from custom house to warehouse net of
VAT 6,000.00 2,300.00

After 20 days, the goods intended for sale were sold to Andrew E. for P812,000.
Compute the VAT payable on the:
1. importation if the tariff and custom duties were based on volume or quantity
2. sale if the input tax is based on quantity of goods imported.
Illustration: Importation
Tito Vic, a VAT registered person had the following data on importation of goods from Ukraine:

Purchase price of goods in Ukraine 1,000,000.00

Freight and insurance premiums 200,000.00

Customs duties (10% of invoice cost plus
insurance) freight and
120% of
Other import charges and expenses before the release of customs
Selling price of the above goods (exclusive of
goods from customs custody duties
tax) 3,200,000.00

Compute the following:

1. VAT due on importation
2. VAT due on the sale

Transfer of goods by tax exempt persons

In the case of goods imported into the Philippines by VAT-exempt persons, entities or agencies which are subsequently sold,
transferred or exchange in the Philippines to non-exempt persons or entities, the latter shall be considered the importers thereof
and shall be liable for the VAT due on such importation.
The tax due on such importation shall constitute a lien on the goods superior to all charges or liens on the goods, irrespective of
the processor thereof (Sec. 107 (B), NIRC)

Illustration:
Bongbong, a tax exempt person, imported goods from Japan, later, he sold them to Leni, a non-exempt person. Who
shall be liable to pay the tax?

Illustration:
“Nirvana” cigar, classified as non-essential article was imported for sale. The particulars of which are as follows. Exchange rate
is $1 = P40.00
Value of importation as determined by the BOC $ 15,000
Freight and insurance P 20,000
Custom duties 20,000
Other expenses prior to the release of goods 10,000
Excise tax 20%
Facilitation fee 5,000
Transfer costs from customs to importer’s warehouse 25,000
Selling price of the goods imported P 1,500,000

How much is the applicable excise tax?

How much is the vat on importation?
How much is the vat payable?

Value on importation 600,000

Freight and insurance P 20,000
Custom duties 20,000
Other expenses prior to the release of goods 10,000
Total P650,000
Excise tax rate 20%
Excise tax P130,000
Total cost before excise tax P650,000
Excise tax P130,000
Total landed costs P780,000
X vat rate 12%
Input vat on importation P93,600

Total creditable input tax

On importation P93,600
On transfer costs P25,000 x 12% P 3,000
Total creditable input tax P 96,600

Vat payable on sale (1,500,000 x 12%) P180,000

Total creditable input vat P 96,600
Vat payable P 83,400