Excise Tax

EXCISE TAXES = In addition to VAT, excise taxes apply to goods manufactured or produced in the Philippines
for domestic sales or consumption or for any other disposition, and goods imported.
= these goods manufactured or imported under this category are classified as either “sin products” or “non-
essential goods”.
= it is a hybrid consumption tax which are generally levied at the point of production or importation
= cosmetic surgery is 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.
Types of Excise Taxes:
1) Specific Taxes – based on weight, volume,, capacity or any other physical unit of measurement of the
goods
2) Ad valorem taxes – based on the selling price or other specified value of the goods.
List of Excisable Articles and Services in the Philippines

TAXABLE AT THE POINT OF
ARTICLE OR SERVICE IMPORT PRODUCTION SALE
1) Alcohol Products (distilled spirits, wines and fermented Yes Yes -
liquors)
2) Tobacco Products (cigars and cigarettes) Yes Yes -
3) Petroleum Products (gas, gasoline, diesel, wax, lubricants, Yes Yes -
Oils and greases, kerosene, naphtha, denatured alcohol,
coke, asphalt and bunker fuel oil)
4) Mineral Products (metallic or non-metallic minerals and Yes - Yes
Quarry resources)
5) Automobiles Yes Yes -
6) Non-Essential Goods (jewelry, perfume, yacht and sweetened
Beverages like softdrinks, and sweetened drinks) Yes Yes -
7) Non-Essential Services (Cosmetic Surgery) - - Yes
Nature of Philippine Excise Tax

A. Excise tax as a regulatory tax
1. Environmental tax – it is imposed on products which causes harm to the environment when
produced or extracted or used. It is also known as Green Tax. Examples: petroleum products,
quarry resources and minerals products.
2. Sumptuary Tax – it is imposed to restrain luxury or extravagance. It is also referred to as Vanity Tax.
Examples: Intrusive Cospetic Surgery, Automobiles, Yacht Jewelry
3. 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 alcohol beverages and tobacco products.
B. Excise tax as Indirect tax – it is levied upon producers or importers with the understanding that it will pass
on the same to the consumers.
C. Excise tax as a Consumption tax – it is usually levied at the point of production or importation except excise
tax on minerals and cosmetic surgery which are levied at the point of sale.
D. Excise tax as an additional business tax – it is an addition to Percentage tax and VAT.
E. Excise tax as Specific and Ad valorem tax
Basis of Ad valorem Tax

= locally produced goods imposed with ad alorem 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.
Illustration 1
ABC Company produced 1,000 units of excisable goods that has a total wholesale value of P 1,120,000
inclusive of VAT. If sold in retail, the goods would earn P 1,400,000. The goods are subject to a 20% ad
valorem tax. Compute the excise tax.
Wholesale Invoice price 1,120,000
Divide by 112%
Wholesale price 1,000,000
Multiply by 20%
Excise tax 200,000
Illustration 2
A manufacturer of excisable goods subject to 20% excise tax made the following declaration in filing its excise
tax return for goods produced:
Wholesale invoice price 8,500,000
Production cost 7,500,000
Cost to sell 1,500,000
The excise tax shall be computed as follows:
Production cost 7,500,000
Cost to sell 1,500,000
Total costs 9,000,000 Total cost is higher than the wholesale price
Minimum Margin (10% x 9,000,000) 900,000
Tax base 9,900,000
Multiply by 20%
Excise tax 1,980,000
=========
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.
Illustration 2
C Enterprises imported excisable goods, subject to 10% excise tax and 20% customs duties. Data relating to
the imported articles were as follows:
Purchase price 4,000,000

Other Inland Costs 1,000,000
Domestic wholesale price, net of VAT 9,000,000
The excise shall be computed as:
Wholesale price 9,000,000
Multiply by 10%
Excise tax 900,000
========
WHO ARE THE PERSONS LIABLE TO EXCISE TAX? As a general rule,
1) For domestically produced excisable articles = PRODUCER
2) For imported excisable article = IMPORTER

Excise Tax

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EXCISE TAXES = In addition to VAT, excise taxes apply to goods manufactured or produced in the Philippines

List of Excisable Articles and Services in the Philippines

Nature of Philippine Excise Tax

Basis of Ad valorem Tax

Purchase price 4,000,000

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