VAT

VAT defined.

When first introduced last 01 January 1988, VAT means the tax on the value added by every seller to his purchases of goods or services; as well as on importation of goods into the Philippines, whether for personal or business use.

Note: Importation is not actually a sale of goods, or sometimes not even a business activity, yet it is covered by the VAT business tax. This is because the VAT is actually a consumption tax levied on sales to be borne by consumers with sellers acting simply as tax collectors. And, as the origin of importation is from a foreign seller which is outside Phil. jurisdiction, the consumption tax (VAT) is instead paid directly by the importer.

VAT on importation of goods, regardless of value (no threshold)

  1. The term 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 persons, entities or agencies. When goods imported into the Philippines by VAT-exempt persons, entities, or agencies are subsequently sold, transferred or exchanged in the Philippines to non-exempt persons or entities, the latter shall be considered the importers thereof who shall be liable for the value-added tax on such importation. The tax due on such importation shall constitute a lien on the goods, superior to all charges or liens, irrespective of the possessor of said goods.
  2. Tax rate – 12%, starting 02/01/06
  3. Tax base:
  4. Based on the total value used by the Bureau of Customs in determining tariff and customs duties (dutiable value) plus customs duties, excise taxes, if any, and other legitimate charges, prior to the removal of the goods from the customs custody.
  5. Based on landed cost when customs duties are determined on the basis of quantity or volume of the goods imported. By landed cost is meant the invoice cost, freight, insurance, customs duties, excise taxes, if any, and other legitimate charges, prior to the removal of the goods from customs custody.

Formats of Computation

  1. In general:

Total value for tariff and customs duties                                            xxx

Add:

Customs duties                                                      xxx

Excise tax                                                                xxx

Other charges prior to release of good from

customs custody                                               xxx                             xxx

Tax base                                                                                                      xxx

VAT rate                                                                                                       12%

VAT on importation                                                                                  xxx

 

  1. Where the customs duties are determined on the basis of quantity or volume of the goods:

Total landed cost                                                                                                            xxx

Add:

Customs duties                                                                                         xxx

Excise tax                                                                                                    xxx

Other charges prior to release of goods from customs custody      xxx                xxx

Tax base                                                                                                                        xxx

VAT rate                                                                                                                          12%

VAT on importation                                                                                                      xxx

 

  1. Examples of other charges or fees prior to release of goods from the Bureau of Customs:
a. Insurance g. Wharfage dues
b. Freight h. Arrastre charges
c. Postage i. Brokerage fees
d. Commission j. Stamps
e. Interest k. Processing fees
f. Bank charges  

 

 

Note: Payment – the VAT is to be paid prior to the release of the goods imported from the customs custody.

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About PAM Academy Founder

Newbie Mentor and one of the influential author in the Philippines setting. His also the founder of PAM Academy and Developer of PAM PSE TRACKER application.
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