Value Added Tax on Importation

Importation: purchase of goods or services by Philippine residents from non-

resident sellers
Types of consumption tax on importation:
1. VAT on importation: for the import of goods
: payable to the Bureau of Custom and is paid prior to the withdrawal of the goods
from the Customs warehouse

2. Final withholding VAT: for the purchase of services from non-residents

: is 12% of the contract price for services rendered by non-residents. It is
remitted to the BIR
Comparison between the consumption tax on importation
Vat on importation Final withholding tax
Object consumption Goods services
Imposed upon Importers/buyers Foreign service providers
Statutory taxpayer Importers/buyers Resident purchaser of the service*
Nature Direct consumption tax Indirect business tax
Tax basis Landed cost Contract price
Collecting agency BOC BIR
Timing of payment Before withdrawal of goods After the month of payment
*individuals engaged in business and corporation

IMPORT OF GOODS
EXEMPT IMPORTATION
A. Importation of exempt goods: essential basic necessities
1. Basic human food and related goods
 Agricultural or marine food products in original state
Ex. Fruits, vegetables, tea, ginseng, rice corn, coffee beans and other edible farm
products
Marine foods such as fish and crustaceans
Poultry and live stock
Milk, eggs, meat for human consumption
Original state: the goods must be in their raw form
: ‘simple processing’ includes;
a. Acts of preparation for the market
Ex. Boiling, broiling, husking, roasting, tripping, grinding
b. Acts of preservation
Ex. Freezing, drying, smoking, salting
c. Acts of packaging including advanced technological means of packaging
: goods may still be in their original state even if they are packaged using
advanced technological means such as:
Ex. Shrink wrapping in plastics, vacuum packing, tetra-packing, other similar
packaging methods
 Livestock and poultry of a kind generally used as, or yielding, or producing
foods for human consumption
Ex. Livestock: cow, bulls, calves, pigs, sheep and goats
Poultry: fowls, ducks, geese and turkey
 Breeding stock and genetic materials therefore

2. Books, newspapers and magazines: apparently based upon the necessity of
education and information
Conditions:
a. They must appear at regular intervals with fixed price
b. The sale must not be devoted principally to the publication of paid
advertisement
3. Passengers or cargo vessels and aircrafts, including engine, equipment and
spare parts: domestic or international transport operations
Requirements:
Passengers or cargo vessels: 15 years
Tankers: 10 years
High speed passenger crafts: 5 years
4. Fertilizers, seeds, seedlings and fingerlings, fish, prawn, livestock and
poultry feeds including ingredients used in manufacturing of finished feeds

B. Importation by VAT-exempt persons

1. International shipping or air transport operators on their import of fuel,
goods and supplies: they are not intended to be consumed herein. The consumption is
a foreign consumption rather than domestic consumption

2. Cooperatives of direct farm inputs, machineries, and equipment including

spare parts thereof, to be used directly and exclusively in the production and or
processing of their produce
Conditions:
a. The cooperative must be an agricultural cooperative duly registered and in
good standing with the Cooperative Development Authority (CDA)
b. The importation involves direct farm, inputs, machineries, equipment and
their spare parts to be used directly and exclusively in the production or
processing of their produce

3. PEZA locators on their import of goods and services (Ecozone-locators):

designated places of economic activity for the production of goods and services for
the export market. Economic zones are considered foreign countries and are deemed
outside customs territory

Technical importation: refers to the purchase of non-ecozone Philippine residents

from the Philippines ecozone-registered enterprises

C. Quasi-importation (gamit ng tao)

1. Personal and household effects belonging to residents of the Philippines
returning from abroad and non-resident citizens coming to resettle in the
Philippines: it is a foreign consumption
Conditions:
a. The personal and household effects belong to Philippine residents or non-
residents intending to resettle in the Philippines
b. The goods are exempt from customs duties

2. Professional instruments and implements, wearing apparel, domestic animals,

and personal household effects belonging to persons coming to settle in the
Philippines, for their own use and not for sale, barter, or exchange
Conditions:
a. The goods belong to persons who come to settle in the Philippines
b. The goods must accompany the person upon arrival or within 90 days before or
after his/her arrival
c. There must be evidence to show that the change of residence is bona fide
d. The importation is not a vehicle, machinery or other equipment used in the
manufacture or merchandise of any kind in commercial quantity
D. Importation which are exempt under special laws and international agreement:
to which the Philippines is a signatory
Tax basis of the VAT on importation: computed as 12% of the total landed cost of
the importation
Composition of landed cost:
A. Dutiable value (transaction value)
Such as:
Cost of the goods
Freight
Insurance
Other charges and costs to bring goods herein
B. Other in-land costs
1. Custom duty (dutiable value x exchange rate x rate of duty)
2. Excise tax, if any
3. Other in-land costs, such as
a. Bank charge
b. Brokerage fee
c. Arrastre charge
d. Wharfage due
e. Documentary stamp tax
f. Import processing fees