EXCISE

TAXATION
Adopted from Rex Banggawan
CREATE Law Updated
 Topics Covered

Excise Tax
EXCISE Sin Tax

TAXATION Green Tax

Miscellaneous Items
What is Excise Tax?
Excise tax is a type of consumption tax that also has a regulatory component. It only
applies to certain goods and services.
It generally applies as a consumption tax when the commodities are intended for home
consumption. As a result, products produced or imported for domestic use are taxed,
whereas goods produced for export are exempt. If the items are exported out of the
country, the excise taxed goods' manufacturer or producer may claim a tax credit or
refund for the excise tax paid.
Excise taxes are imposed at the point of manufacture or importing. The tax is collected
either before the goods are removed from the factory or before they are removed from
Customs. Cosmetic surgery and mineral products, on the other hand, are subject to excise
duty at the point of sale.
Scope of Excise Tax:
The Philippine 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:

• Alcohol products
• Tabacco products
• Petroleum products
• Mineral products
• Miscellaneous articles
• Non-essential services
NATURE OF PHILIPPINE EXCISE
TAX:
A. Excise Tax as regulatory tax:
• Environmental tax - It is imposed on products which causes
harm to the environment when produced or extracted or used.
Environmental tax may also be referred to as Green Tax.

Examples are excise tax levied on:

• Petroleum products
• Quarry resources
• Minerals products
A. Excise Tax as regulatory tax:
• Sumptuary tax - It is imposed to restrain luxury or extravagance.
It is also referred to as Vanity Tax.

Examples are excise tax levied on:

• Intrusive cosmetic surgery
• Automobiles and yacht
• Jewelry
A. Excise Tax as regulatory tax:
• 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 tax levied on:

• Alcoholic beverages
• Tobacco products such as cigar and cigarettes

These excise taxes may be imposed on purely punitive grounds or to

raise funds to alleviate the damage caused on the society by the
consumption of the undesirable products.
B. Excise tax as an indirect tax:
• Excise tax is an INDIRECT TAX. It is levied upon the producers
or importers with the understanding that he will pass-on the
same to the consumers.

C. Excise tax is a consumption tax:

• The excise tax is usually levied at the point of production/importation,
except excise tax on 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 additional business tax:
• A business normally pays either percentage tax or value added tax. However, if
it produces or imports excisable goods or sells excisable services, the excise
tax is imposed in additional tax to the usual business tax.
• Thus, business importing or producing excisable goods or selling excisable
services shall be taxed as follows:

Business Registration Tax to pay

Vat taxpayer VAT and ExciseTax

Non-VAT taxpayer Percentage tax and Excise tax

E. Excise tax as an additional business tax:

• Excise taxes imposed in the Philippines are primarily specific

taxes but there are also ad valorem imposition and a mixed of
them.
TYPES OF EXCISE TAX:
• Specific tax - Excise tax imposed based on weight or volume
capacity or any other physical unit of measurement.
• Ad valorem tax - Excise tax imposed on selling price and other
specified value.

Specific sin tax are now indexed 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.
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.

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.
• The sin tax is a 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 purpose of
VT and customs duties. Import of sin products would be
exempt from VAT and customs duties.
 Green Tax or
Environmental Tax
Imposed by the government in order to encourage
people to use eco-friendly and renewable
resources instead and to minimize environmental
degradation.
PETROLEUM
• Zero taxes are imposed for petroleum products used in the production of
petrochemicals or as replacement fuels for power generation facilities.

• Exemption: Sale of petroleum products to

• International Carriers

• Entities exempt under treaties

• Entities exempt from direct or indirect taxes

 PETROLEUM PRODUCTS

Lubricating oils Processed gas Waxes and Denatured alcohol

and greases petroleum for motive power

Naphtha and distilled Unleaded gasoline Aviation turbo Kerosene

gasoline products jet or gas
 Petroleum Diesel fuel & Liquified
products' similar fuels oils petroleum gas

specific tax rates

here:
Asphalts

https://www.bir.gov.ph/index.php/
tax-information/excise-tax.html

Bunker fuel & Petroleum coke

similar fuels oils
MINERALS
• Natural and liquified gases are exempt because they are a cleaner alternative.

• Gold sold to the Banko Sentral ng Pilipinas is exempt from all taxes if sold by registered:
• Small scale miners
• Gold traders
• Minahang Bayan (Cooperative)
 MINERAL PRODUCTS

Coal & coke Non-metallic minerals Metallic minerals Indigenous petroleum

P 150/metric ton effective Jan. 1, 4% tax rate (Domestic or 4% tax rate (Domestic or 6% tax rate (Domestic or
2020 onwards Imported) Imported) Imported)
Illustrative Problem
Phil Mining Company mined a total of 500 tons of gold-copper concentrates. The
concentrates were assayed to contain 0.008% gold and 18% copper. Phil Mining usually
exports its concentrates.

The market value of the following in New York Market Exchange were:
Gold price $ 64,300,000/MT
Copper $ 6,180/MT

*The US Dollar is trading P52/$1.

Required: Compute the excise tax:
a. If Phil Mining sells purely concentrate (50% domestic and 50% export)
b. If Phil Mining is a mining cooperative
Computations:
a. Gold (500 tons x 0.008% x $64,300,000 x P52 x 4%) 5,349,760 Copper (500
tons x 18% x $6,180 x P52 x 4%) 1,156,896
EXCISE TAX 6,506,656

b. Zero (Exempt)
Miscellaneous Items
Intended to limit private expenditure on food and personal
items and protect society against the evil of vanity and
extravagance.
 Excisable Automobiles:

AUTOMOBILES Exception to the excise tax rates:

1.Hybrid vehicles shall be 2.Purely electric vehicles 3. Pickups

- Refers to 4-wheeled and non-utility subject to 50% of the
vehicles like SUVs and sports cars. On the applicable tax rate.
other hand, utility vehicles such as taxi, Manufacturer's or Importer's Selling Price Tax Rate
bus, trucks, and tractors are not included in
this category. Up to P 600,000 4%

P 600,000 to P1,000,000 10%

-Also has a green objective which is to
minimize smoke emission and air pollution
P 1,000,000 to P 4,000,000 20%
in general.
Over P 4,000,000 50%
Illustrative Problem
Eltron Cars manufactures various automobile models. It completes the following units:

Model Class Wholesale Price Produced Sold

BMW X3 SUV- gasoline 3,700,000 8 6
Ford Ranger Pick-up- diesel 1,700,000 7 5
Audi e-Tron Electric Car 4,400,000 5 4
Yutong ZK6876H Bus- diesel 3,500,000 4 2
Porsche Taycan Sports Car- hybrid 7,000,000 4 3
Ducati Multistrada 950 Motorbike 1,000,000 2 1

Required: Compute the excise tax.

Computation:

SUV- gasoline (3,700,000 x 20% x 8) 5,920,000

Sports Car- hybrid (7,000,000 x 50% x 50% x 4) 7,000,000
EXCISE TAX 12,920,000
 Non-essential goods:

NON-ESSENTIAL
GOODS
• Jewelry 2. Perfume 3. Toilet waters 4. Yachts and
other vessels
- Refers to products that are not absolutely
intended for
necessary and are purchased for personal pleasure or
sports
pleasure or vanity.

- A 20% ad valorem tax is imposed on the The following are not considered jewelry and hence
exempt:
non-essential goods
• Surgical and dental
• Silver-plated wares
• Frames or mountings for spectacles or eyeglasses
• Dental golds or gold alloys and other precious metals used in
filling, mounting, or fitting of the teeth.
 NON-
ESSENTIAL Non-essential services:
SERVICES
- Refers to intrusive cosmetic procedures
and body enhancements that is directed
solely to improving, altering, or
enhancing appearance and do not Intrusive cosmetic Bodily enhancements Enhancing appearance
promote proper function of the body or surgery
prevent or treat illness or disease.

-Subject to 5% tax rate.

*Cosmetic products, however, are not taxed due to legal exclusion. It
*Note: Excise tax will still be taxed even
is not stated in the list of non-essential goods.
if it is conducted in entities not subject to
VAT.
Illustrative Problem
Affy Cionado Inc. manufactures perfumes, precious jewelry, fashion bags and clothes. It
produces the following during the month:
Wholesale Price Suggested Retail Price
Perfumes 5,000,000 12,000,000
Jewelry 7,000,000 15,000,000
Fashion Bags 1,500,000 4,000,000
Designer Clothes 4,000,000 11,000,000

Required: Compute the excise tax.

Computation:

Perfume 5,000,000
Jewelry 7,000,000
Taxable Amount 12, 000,000
Multiply: Ad valorem tax rate x 20%
EXCISE TAX 2,400,000
Sweetened beverage includes:
•
•
Sweetened juice drinks
Sweetened tea
SWEETENED
•
•
All carbonated beverages
Energy and sports drink
BEVERAGES
• Flavored water
• Cereal and grain beverages -Non-alcoholic beverage of any
• Other powdered drinks not classified as milk, juice, tea, and coffee constitution (liquid, powder, or
• Other non-alcoholic beverages that contain sugar concentrate) that are pre-packed and
sealed that contain artificial
Exempt goods on excise tax on sweetened beverages:
sweeteners.
• All milk products
• Soymilk and flavored soymilk
• 100% natural fruit juices
*Intended to discourage sugar intake
• 100% natural vegetable fruit juices that results to high blood sugar,
• Meal replacement and medically indicated beverages obesity, and other health conditions.
• Ground coffee, instant soluble coffee, and pre-packed powdered coffee
products
 SWEETENED BEVERAGES TAX RATES
P 6.00 per liter

Products using purely caloric sweeteners, and purely non-caloric sweeteners or a

mix of them

P 12.00 per liter

Products using purely high fructose corn syrup or in combination with caloric or non-
caloric sweetener

Exempt

Products using purely coconut sap sugar and purely steviol glycosides
 Thank you!
by Liezel Vonne Caballero, Arvin Kem Mandalupa,
and Irish Jhane Opao