EPARTMENT OF ACCOUNTANCY

HOLY ANGEL UNIVERSITY

EXCISE TAX
EXCISE TAX
- Is a hybrid consumption tax with a regulatory
overture. It is imposed only on certain goods or
services.
- Generally levied at the point of production or
importation
- Normally applies when the goods are intended for
Domestic Consumption.
- If exported, the manufacturer or producer of the
goods subjected to excise tax may claim tax credit or
tax refund for the excise tax paid.
SCOPE OF EXCISE TAX
limited only to certain goods with the exception
of cosmetic surgery – the only service currently subject
to excise tax. On other countries, even vices such as
gambling or morally damaging activities as
prostitution are taxed.
List of Excisable Articles and Services in the Philippines
A. Alcohol Products
B. Tobacco Products
C. Petroleum Products
D. Mineral Products
E. Miscellaneous Articles
F. Non-essential Services
Timing of Excise Taxation
Excisable article or Taxable at the point of
service
Import Production Sale

Alcohol Products Yes Yes

Tobacco Products Yes Yes
Petroleum Products Yes Yes
Mineral Products Yes Yes
Automobiles Yes Yes
Non-essential goods Yes Yes
Sweetened beverages Yes Yes
Non-essential services Yes
NATURE OF PHILIPPINE EXCISE TAX

A. Excise Tax as a regulatory tax

I. Environmental Tax
II. Sumptuary Tax
III. Sin Tax
B. Excise Tax as an indirect tax
C. Excise Tax as a consumption tax
D. Excise Tax as an additional business tax
E. Excise Tax as specific and ad valorem tax
 Differences between excise tax and the other business tax
Excise Tax Other Business Tax
Indirect Tax levied at the point of production or Levied only at the point of sale
importation
Specific or per unit tax Purely ad valorem tax
Covers the production or import of sale of narrower Sale of almost all products and services
range of products or services
Imposes heavier tax rates Fairly reasonable
May subject even non-business producers Covers only those engaged in business
A revenue tax with a regulatory overture as it intends to Purely levied to raise revenue
curb health risks, or social, moral, or environmental
wrongs
Similarities of excise tax and the other business tax
1. Generally a consumption tax
2. Imposed on selling price
3. Indirect taxes
Types of Excise Tax
1. Specific Tax
2. Ad valorem Tax
BASIS OF AD VALOREM TAX
Locally produced goods
locally produced goods imposed with ad valorem
tax is subject to tax on Gross Selling Price

Manufacturer’s or producer’s sworn statement

is required
manufacturer 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
the manufacture or production plus expenses incurred or
to be incurred until the goods are finally sold.
BASIS OF AD VALOREM TAX

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
TAX COMPLIANCE
REQUIREMENTS
Who are the persons liable to excise tax?
For domestically produced excisable article

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 service in the Philippines for domestic sale or
consumption, and importers of excisable goods.
TAX COMPLIANCE
REQUIREMENTS
Who are the persons liable to excise tax?

Exception rule:
1. The excise tax on INDIGENOUS PETROLEUM, NATURAL GAS
OR LIQUEFIED NATURAL GAS is payable by the following
persons:

If the goods is:

For local sale – the taxpayer is the FIRST BUYER or ASSIGNEE
For export sale – The OWNER, CONCENSSIONAIRE or OPERATOR
OF THE MINING CLAIM

2. Removal without payment

If goods are removed in the their place of production without
payment of the excise tax, the owner or the person having
possession thereof shall be liable to the tax.
TAX COMPLIANCE
REQUIREMENTS
Who are the persons liable to excise tax?
For imported excisable article
General rule: The Importer
The excise tax shall be paid by the owner-
importer of the imported goods.

Exception rule: The non-exempt buyer

When goods are exempted by an exempt person is
subsequently sold to another non-exempt buyer, the
latter shall pay for the excise tax otherwise due thereon
on the importation
TAX COMPLIANCE
REQUIREMENTS
When to file and Pay Excise Tax?
Domestically produced excisable products
General rule: Before removal
The excise tax is payable before removal of the domestic goods
from the place of production.

Exception rule: Mineral or mineral products

The excise tax on locally produced or extracted mineral or mineral
products is payable within 15 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.
TAX COMPLIANCE
REQUIREMENTS
When to file and Pay Excise Tax?

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 the following general rules:
For excisable products that is
Domestically produced Imported
Who is the taxpayer?
- General rule Producer Importer
When to pay?
- General rule Before removal from Before removal from
production Customs
EXCISE TAX-FREE IMPORTATION
BY EXEMPT PERSONS

The importation of products into tax and duty-free

shops, Freeport zones, and special economic zones shall
not be subject to excise taxes since they are considered
foreign territories. Consumption of 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.
 EXPORT OF EXCISABLE GOODS
When goods locally produced or manufactured are removed and actually exported
without returning to the Philippines, any excise tax paid thereon may be claimed as:
1. Tax refund or
2. Tax credit

Exception: Mineral Products

The excise tax on mineral products, except coal and coke shall not be creditrable 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
A. EXCISE TAX ON ALCOHOL PRODUCTS
Alcohol Products Excise Tax Rates for 2019*
Distilled spirits Per proof liter P23.40
NRP 20%
Sparkling wines/ Champagnes NRP per 750ml bottle: P500 or 316.33
less
More than 500 885.73
Still wines and carbonated wines 14% alcohol by volume or less 37.96/L
More than 14% but not more 75.92/L
than 25%
Fermented liquors If brewed and sold at pub and 35.43/L
restaurants
Others 25.42/L

*the specific tax rates are subject to 4% annual adjustment every January 1 of each year
Net Retail Price
Net Retail Price shall mean the price at which the distilled spirits is sold on retail in
atleast 5 major supermarkets in Metro Manila. For distilled spirits marketed outside Metro
Manila, NRP shall mean the price at which the distilled spirit is sold in at least 5 major super
markets in the region
Proof Liter
means a liter of proof spirits. A proof means 50% of alcohol content. Thus 70 proof
means 70/2 or 35% alcohol content.

Distilled Spirits
the substance known as ethyl alcohol, ethanol or spirits of wine, including dilutions,
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. 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.
Wines
normally have carbon dioxide on them due to fermentation process. Carvon Dioxide is
normally released when yeast and sugar mix making the wine bubbly, sparkling or fizzy, thus the
term “sparkling” wines. Sparkling wines have sugar and yeast on them which makes them bubbly
due to continuous fermentation even after bottling. Wines with Carbon Dioxide 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.

Fermented Liquors
includes beer, lager beer, ale, porter and similar products except tuba, basi, tapuy and
similar products.
Conditional Tax-Free Removal of Alcohol Products
1. Removal of wines and distilled spirits for treatment of
tobacco leaf
2. Removal of spirits for rectification
3. Removal of fermented liquor to bonded warehouses
4. Removal of damaged liquors
 B. EXCISE TAX ON TOBACCO PRODUCTS
Tobacco Products Tax Rates
Tobacco twisted by hand or reduced into a P2.20/kg as of January 1, 2019
condition to be consumed in any manner other
than the ordinary mode of drying and cutting

Tobacco prepared or partially prepared with or

without the use of any machine or instruments or
without being pressed or sweetened

Fine-cut shorts and refuse, scrips, clippings,

cuttings, stems and sweepings of tobacco

On tobacco specially prepared for chewing so as to P1.89/kg as of January 1,2019 *

be unsuitable for use in any other manner

*subject to 4% yearly increase thereafter

B. EXCISE TAX ON TOBACCO PRODUCTS

Cigars, per cigar

-ad valorem tax 20% on net retail price
-specific tax 6.32/cigar as of January 1, 2019*
Cigarettes, per pack Packed by hand Packed by machine
July 1, 2018 to Dec 31, 2019 P35/pack P35/pack
Jan 1, 2020 to Dec 31, 2021 P37.50/pack P37.50/pack
Jan 1, 2022 to Dec 31, 2023 P40/pack P40/pack

*subject to 4% yearly increase thereafter starting January 1, 2024

 C. EXCISE TAX ON PETROLEUM PRODUCTS
Petroleum Product Tax Rate Unit of Measure
2019 2020
Lubricating oils and greases including but not limitedP9.00 P10.00 Liter & kilogram
to basestocks 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
Naptha, regular gasoline, pyrolysis gasoline and 9.00 10.00 Liter of volume
other similar products of distillation
-if used as raw materials in the production of 0.00 0.00
petrochemicals or as a replacement fuels for power
plants
C. EXCISE TAX ON PETROLEUM PRODUCTS
Petroleum Product Tax Rate Unit of measure
2019 2020
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 0.00 0.00
facilities
Petroleum products to be used as raw materials

Petroleum products used as raw materials in the manufacture of

otter petroleum products or as fuel for power plants are not taxable.

Bioethanol 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
Excise tax paid on the purchase of basestock (bunker) in the manufacture of
excisable articles forming part thereof shall be credited against the excise tax due
thereon. Any excess tax paid on raw materials resulting from the manufacturing,
blending, processing, storage and handling losses shall not give rise to a tax refund or
credit
Used in production or Used as replacement fuels
processing of products for power plants
subject to excise tax
Naptha, gasoline and other Exempt Exempt
similar products
Liquefied petroleum gas Exempt Exempt
Petroleum coke --- Exempt
Bunker Fuel Taxable but creditable ---
Mandatory marking of all petroleum products

Imported or locally manufactured petroleum such as but not limited to

unleaded premium gasoline, kerosene and diesel fuel oil are required to be
marked after the taxes and duties thereon have been paid

- Random Field test

- Confirmatory Test
Sale of Petroleum Products to exempt entities

Petroleum products sold to the following are exempt from

excise tax:
1. International Carriers
2. Entities exempted under tax triaties, conditional on
reciprocal tax exemption treatment
3. Entities which are exempt from direct and indirect tax
D. EXCISE TAX MINERALS
Mineral Product Domestically produced Imported
Coal and Coke P50/MT effective Jan 1, 2018
P100/MT effective Jan 1, 2019
P150/MT effective Jan 1, 2020
Non-metallic minerals and 4% 4%
quarry resources
Copper, gold, chromite and 4% 4%
other metallic minerals
Indigenous Petroleum 6%
Natural gas and liquefied Exempt
natural gas
Indigenous Petroleum
include locally extracted mineral oil, hydrocarbon gas, bitumen, crude asphalt, mineral
gas and all other similar or naturally associated substances with the exception of coal, peat,
bituminous shale and/or stratified mineral deposits
Minerals
all naturally occurring inorganic substances wheter solid, liquid, gaseous or any
intermediate state.

Mineral Products
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 the mineral lands.
Quarry Resources
any common stone or other common mineral substances as the Director of the Bureau of
Mines and Geo-science may declare to be quarry resources such as but not restricted to mal,
marble, granite, volcanic ciders, basalt, tuff and rock phosphate; provided, that they contain no
metal or metals or other valuable minerals in economically workable quantities.
Coke
is a fuel with high carbon content derived from the anaerobic distillation of coal or oil.
Ad Valorem tax on Mineral Products

1. Excise tax on metallic and non-metallic minerals.

if domestically produced- based on actual market value of the gross output
upon removal
if imported-based on value used by the BOC in determining the tariff and
customs duties, net of excise tax and VAT

2. Excise Tax on indigenous petroleum

based on the fair international market price on the first taxable sale, barter or
exchange
Small Scale Miners

RA 11256 exempts registered small scale miners and accredited traders who are
selling gold to Bangko Sentral ng Pilipinas from paying income tax and excise tax.

Import of minerals
Exceptionally subject to excise tax upon the basis used by the Bureau of Customs in
computing customs duties
 E. EXCISE TAX ON MISCELLANEOUS ARTICLES

Automobiles
refer to any four or more wheeled motor vehicle regardless of seating capacity which is
propelled by gasoline, diesel, electricity or other motive power.
utility vehicles and special purpose vehicles shall not be considered automobiles

Ad Valorem tax on manufactured or imported automobiles

Manufacturer’s or importer’s selling price* Tax Rate
Up to P600,000.00 4%
P600,000.00 to P1,000,000.00 10%
P1,000,000.00 to P4,000,000.00 20%
Over P4,000,000.00 50%
*net of excise tax and VAT
Exception to the excise tax rates
1. Hybrid Vehicles shall be subject to 50% of the applicable excise tax
2. Purely electric vehicles and shall be exempt on excise tax on automobiles
3. Pick-ups

Net Manufacturer’s or Importer’s selling price

Refers to the price, net of excise tax and VAT at which locally
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)
Imported Vehicle not for sale
Shall be subject to the excise tax on the total landed value, including transaction
value, customs duty and all other charges.
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
depreciated cost
A 10% depreciation expense shall be provided but not in excess of 50% of the original
cost or value
 Tax Exempt Removals of Automobiles
1. Removal of Export
No excise tax shall be imposed on vehicles removed for export, subject to the following conditions:
a. Permit to Export
b. Direct delivery to vessel
c. Proof of exportation
d. Exporter’s bond
2. Delivery of tax-exempt persons or entites
Tax-exempt persons or entities include:
a. Embassies of foreign government, subject to the principle of reciprocity
b. tax-exempt organizations, such as the ADB and IRRI
c. 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
Tax Exempt Removals of Automobiles
3. Removals for delivery and exclusively within the Freeport zone
Directly imported into the legislated Freeport zones from abroad or
purchased from establishments located within the customs territory for use
exclusively within the Freeport zone shall be exempt from the imposition of
the excise tax

4. Removal of automobiles for test run

Should an automobile be removed for test run, prior notice of the test
should be given to the 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.
E. EXCISE TAX ON MISCELLANEOUS ARTICLES
Non-Essential Goods
A 20% ad valorem tax is imposed upon the following non-essential goods:
1. Jewelry
2. Perfume and toilet waters
3. Yatchs and other vessels intended for pleasure or sports

The following are not jewelry and hence exempt:

1. Surgical and dental instruments
2. Silver-plated wares
3. Frame 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
E. EXCISE TAX ON MISCELLANEOUS ARTICLES

Non-Essential Services
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.
 E. EXCISE TAX ON MISCELLANEOUS ARTICLES
Sweetened Beverages
Refers to non-alcoholic beverages of any constitution that are pre-packed and sealed in
accordance with the FDA standards, that contain caloric and non-caloric sweeteners added by the
manufacturers. Includes:

Sweetened juice drinks Energy and sports drinks

Sweetened tea Flavored water
All carbonated beverages Cereal and grain beverages
Other powdered drinks not classified as Other non-alcoholic beverages that
milk, juice, tea and coffee contain sugar
 E. EXCISE TAX ON MISCELLANEOUS ARTICLES

Sweetened Beverages

Product Description Tax Rate (per liter)

Using purely caloric sweeteners, and purely non-caloric P6.00
sweeteners or a mix of them
Using purely high fructose corn syrup or in combination P12.00
with any caloric or non-caloric sweetener
Using purely coconut sap sugar and purely steviol Exempt
glycosides
Exempt Products from Excise Tax
The following shall not be subject to the excise tax on sweetened beverages:
1. All milk products
2. Soymilk and flavoured soymilk
3. 100% natural fruit juices
4. 100% natural vegetable fruit juices
5. Meal replacement and medically indicated beverages
6. Ground coffee, instant soluble coffee, and pre-packed powdered
coffee products
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.
Transfer of semi-processed goods
considered as finished goods subject to excise tax.
Beverages consumed within the place of production
shall be subject to the payment of excise tax by the manufacturer.
Export of Sweetened Beverages
Sweetened beverages intended for export may be removed from the place of production
without the prepayment of excise tax, subject to the following conditions:
1. Shipment permit
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”
Reference
• Business and Transfer Taxation
2019 edition by Rex Banggawan