BASIC CONCEPT:

- Excise Tax is a tax on the production, sale or consumption of a commodity in a country.

➢ Excise Tax
o A hybrid consumption tax with a regulatory overture.
o Imposed only on certain goods or services.
o Applies to goods for domestic consumption.
o A domestic manufacturer of goods subject to excise tax my claim tax credit or tax refund for the excise tax
paid on exported goods.
o Exception (exports subject to excise tax)
▪ Transshipment of alcohol and cigarette into designated ecozones
▪ Extracted mineral products
o Excise taxes are generally levied at the point of production or importation.
o The tax is collected before the goods are removed at the point of production or before the removal of the
goods from Customs.
o Exception – (collection at the point of sale)
▪ cosmetic surgery
▪ mineral products

APPLICABILITY:
- On goods manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition;
and
- On goods imported.

TYPES OF EXCISE TAX:

• Specific Tax – refers to the excise tax imposed which is based on weight or volume capacity or any other physical
unit of measurement
• Ad Valorem Tax – refers to the excise tax which is based on selling price or other specified value of the
goods/articles
o Basis of Ad Valorem Tax:
▪ Locally produced goods - gross selling price (the wholesale price, excluding VAT, at which the
goods are sold).
▪ 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.

MANNER OF COMPUTATION:
• Specific Tax = No. of Units/other measurements x Specific Tax Rate
• Ad Valorem Tax = No. of Units/other measurements x Selling Price of any specific value per unit x Ad Valorem
Tax Rate

MAJOR CLASSIFICATION OF EXCISABLE ARTICLES AND RELATED CODAL SECTION:

1. Alcohol Products (Sections 141-143)
a. Distilled Spirits (Section 141)
b. Wines (Section 142)
c. Fermented Liquors (Section 143)
2. Tobacco Products (Sections 144-146)
a. Tobacco Products (Section 144)
b. Cigars & Cigarettes (Section 145)
c. Inspection Fee (Section 146)
3. Petroleum Products (Section 148)
4. Miscellaneous Articles (Section 149-150)
a. Automobiles (Section 149)
b. Non-essential Goods (Section 150)
c. Non-essential Service (Section 150-A) - (RA 10963 [TRAIN Law))
d. Sweetened Beverages (Section 150-B) - (RA 10963 [TRAIN Law])
5. Mineral Products (Sections 151)

PERSONS LIABLE TO EXCISE TAX:

In General:
a. On Domestic or Local Articles
• Manufacturer
• Producer (If goods are removed in their place of production without payment of the excise tax, the
owner or person having possession thereof shall be liable to the tax.)
• Owner or person having possession of articles removed from the place of production without the
payment of the tax

b. On Imported Articles
• Importer
• Owner
• Person who is found in possession of articles which are exempt from excise taxes other than those
legally entitled to exemption (When goods are exempted by an exempt person and are
subsequently sold to another non-exempt buyer, the latter shall pay for the excise tax otherwise
due thereon on the importation).

Others:
➢ On Indigenous Petroleum
• Local Sale, Barter or Transfer
o First buyer, purchaser or transferee
• Exportation
o Owner, lessee, concessionaire or operator of the mining claim

EXCISE TAX-FREE IMPORTATION BY EXEMPT PERSONS:

- The importation of products into tax and duty-free shops, freeport zones, and special economic zones.
- Exception - this exemption does not apply to sin products and automobiles IF exclusively used within ecozones.

Introduction of tax-free articles into the customs territory

- When tax-free articles are subsequently introduced into the customs territory, this is a technical importation subject
to excise tax.

EXPORT OF EXCISABLE GOODS:

- Exported goods subjected to excise tax may be claimed as:
a. Tax refund
b. Tax credit
- Except for coal and coke, mineral products, however, shall not be creditable or refundable even if the mineral
products are actually exported. Even if it is for foreign consumption, it is imposed to compensate for the
environmental destruction arising from their extraction or production.

TIME OF PAYMENT:
In General
• On domestic products
o Before removal from the place of production
o Exception: Extracted mineral – 15 days after the end of the calendar quarter when such
products are removed.
• On imported products
o Before release from the customs' custody

Timing of Excise Taxation:

Taxable at the point of
Excisable article or 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
1. Environmental tax (or green tax) - imposed on products that cause harm to the environment when
produced or extracted or used.
Examples:
a. Petroleum products
b. Quarry resources
c. Minerals products
2. Sumptuary tax - imposed to restrain luxury or extravagance. It is also referred to as vanity tax.
Examples:
a. Intrusive cosmetic surgery
b. Automobiles and yacht
c. Jewelry
3. Sin tax - imposed on the consumption of sin products or those known to pose health risks. It is also known
as health tax.
Examples:
a. Alcoholic beverages
b. Tobacco products such as cigars and cigarettes

B. Excise tax as a consumption tax

- Actually, it is a pre-consumption tax.
- It is usually levied at the point of production or importation, except excise tax on minerals and cosmetic surgery
which is levied at the point of sale.

C. Excise tax is an indirect tax

- It is levied upon producers or importers with the understanding that they will pass on the same to the consumers.

D. Excise tax as an additional business tax

- It is imposed as an additional tax to the usual business tax (VAT or Percentage tax).

E. Excise tax as specific and ad valorem tax

- Excise taxes imposed in the Philippines are primarily specific taxes but there are also ad valorem impositions and
a combination of them.

Differences between excise tax and the other business tax

Excise Tax Other Business Tax
An indirect tax levied at the point of production or Levied only at the point of sale.
importation.
Typically, a specific or per unit tax. Purely ad valorem tax.
Covers the production or import or sale of a narrower Covers the sale of almost all products and services
range of products or services. including those already subjected to excise tax.
It imposes heavier tax rates. Fairly reasonable business taxes.
May subject even non-business producers It covers only It covers only those engaged in business.
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. Consumption tax
2. Imposed based on selling price (only for excise taxes which are imposed ad valorem)
3. Indirect tax

EXCISE TAX RATES:

A. ALCOHOL PRODUCTS
NEW TAX RATES based on Republic Act No. 10351 Remarks
PARTICULARS
2013 2014 2015 2016 2017 2018
 onwards
A. DISTILLED SPIRITS, AD VALOREM & SPECIFIC TAX
1) AD VALOREM TAX RATE - Based
on the Net Retail Price (NRP) per
proof (excluding the excise and 15% 15% 20% 20% 20% 20%
value-added taxes);
and
Effective 1/1/2016, the
specific tax rate shall
2) SPECIFIC TAX - Per proof liter Php20 Php20 Php20 Php20.80 Php21.63
be increased by 4%
every year thereafter
B. WINES, per liter of volume capacity
1) Sparkling wines/ champagnes,
where the NRP (excluding the excise
and VAT) per bottle of 750ml volume
capacity, regardless of proof is:
Php500.00 or less Php250 Php260 Php270.40 Php281.22 Php292.47
More than Php500.00 Php700 Php728 Php757.12 Php787.40 Php818.90
Effective 1/1/2014, the
2) Still wines and carbonated wines
specific tax rate shall
containing 14% of alcohol by volume Php30.00 Php31.20 Php32.45 Php33.75 Php35.10
be increased by 4%
or less
every year thereafter
3) Still wines and carbonated wines
containing more than 14% (of
Php60.00 Php62.40 Php64.90 Php67.50 Php70.20
alcohol by volume) but not more
25% of alcohol by volume
4) Fortified wines containing more
Taxed as distilled spirits
than 25% of alcohol by volume
C. FERMENTED LIQUORS, per liter of volume capacity
1) If the NRP (excluding excise and Effective 1/1/2018, the
VAT) per liter of volume capacity is: specific tax rate shall
Php 50.60 and below Php15.00 Php17.00 Php19.00 Php21.00 Php23.50 be increased by 4%
More than Php 50.60 Php20.00 Php21.00 Php22.00 Php23.00 Php23.50 every year thereafter
2) If brewed and sold at Effective 1/1/2014, the
microbreweries or small specific tax rate shall
Php28.00 Php29.12 Php30.28 Php31.50 Php32.76
establishments such as pubs and be increased by 4%
restaurants, regardless of the NRP every year thereafter
NOTE:
IN CASE OF FERMENTED LIQUORS AFFECTED BY THE "NO DOWNWARD RECLASSIFICATION " PROVISION, THE 4%
INCREASE SHALL APPLY TO THEIR RESPECTIVE APPLICABLE TAX RATES

Net retail price

- The price at which the distilled spirits is sold on retail in at least 5 major supermarkets in Metro Manila.
- The price at which the distilled spirit is sold in at least 5 major supermarkets in the region if sold outside Metro
Manila.
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.

B. TOBACCO PRODUCTS
NEW TAX RATES based on Republic Act No. 10351 Remarks
PARTICULARS 2018
2013 2014 2015 2016 2017
onwards
A. TOBACCO PRODUCTS, per kilogram
1. Tobacco Products
(a) Tobacco twisted by hand or reduced into a Effective
condition to be consumed in any manner other Php1.75 Php1.82 Php1.89 Php1.97 Php2.05 1/1/2014,
than the ordinary mode of drying and curing; the specific
(b) Tobacco prepared or partially prepared with or tax rate shall
without the use of any machine or instrument or Php1.75 Php1.82 Php1.89 Php1.97 Php2.05 be increased
without being pressed or sweetened; and by 4% every
(c) Fine-cut shorts and refuse, scraps, clippings, year
Php1.75 Php1.82 Php1.89 Php1.97 Php2.05 thereafter
cuttings, stems, midribs and sweepings of tobacco;
2. Chewing tobacco unsuitable for use in any other
Php1.50 Php1.56 Php1.62 Php1.68 Php1.75
manner
B. CIGARS, per cigar
3. Cigars Effective
(a) Based on the NRP per cigar (excluding the 1/1/2014,
20% 20% 20% 20% 20% the specific
excise and value-added taxes), and
tax rate shall
be increased
(b) Per cigar Php5.00 Php5.20 Php5.41 Php5.62 Php5.85 by 4% every
year
thereafter
C. CIGARETTES, per pack
NEW TAX RATES based on RA No. 10963 (TRAIN Law)
January January
January 1, July 1, 2018
1, 2020 1, 2022
PARTICULARS 2018 until until January 1, 2024
until until
June 30, December onwards
December December
2018 31, 2019
31, 2021 31,2023
1. Cigarettes packed by hand Php32.50 Php35.00 Php37.50 Php40.00

Effective 1/1/2024,
the specific tax rate
shall be increased by
2. Cigarettes packed by machine Php32.50 Php35.00 Php37.50 Php40.00 4% every year
thereafter

INSPECTION FEE - There shall be collected inspection fees on leaf tobacco, scrap, cigars, Cigarettes and other
manufactured tobacco and tobacco products as follows:
PRODUCT TYPE INSPECTION FEE
(1) Cigars P 0.50 per thousand pieces or fraction thereof
(2) Cigarettes P 0.10 per thousand sticks or fraction thereof
(3) Leaf Tobacco P 0.02 per kilogram or fraction thereof
(4) Scrap and other manufactured tobacco P 0.03 per kilogram or fraction thereof

C. PETROLEUM PRODUCTS
EFFECTIVITY (RA 10963-TRAIN Law)
PRODUCT TYPE
January 1, 2018 January 1, 2019 January 1, 2020
(a) Lubricating oils and greases, including but not limited to base Php9.00 Php10.00
stock for lube oils and greases, high vacuum distillates, aromatic
extracts and other similar preparations, and additives for
lubricating oils and greases, whether such additives are petroleum
based or not, per liter and kilogram respectively, of volume
capacity or weight
(a.1) Locally produced or imported oils previously taxed but are
Php8.00
subsequently reprocessed, re-refined or recycled, per liter and
kilogram of volume capacity or weight.
(b)Processed gas, per liter of volume capacity
(c)Waxes and petrolatum, per kilogram
(d)Denatured alcohol to be used for motive power, per liter of
volume capacity
(e)Asphalt, per kilogram
(f)Naphtha, regular gasoline, pyrolysis gasoline and other similar Php9.00 Php10.00
products of distillation, per liter of volume capacity
Php7.00
(g)Unleaded premium gasoline, per liter of volume capacity

(h)Kerosene, per liter of volume capacity Php3.00 Php4.00 Php5.00

(i)Aviation turbo jet fuel, aviation gas, per liter of volume capacity Php4.00 Php4.00 Php4.00
(j)Kerosene when used as aviation fuel, per liter of volume capacity
(k)Diesel fuel oil, and on similar fuel oils having more or less the Php4.50 Php6.00
same generating power, per liter of volume capacity
(l)Liquified petroleum gas used for motive power, per kilogram
(m)Bunker fuel oil, and on similar oils having more or less the same Php2.50
generating power, per liter of volume capacity
(n)Petroleum coke, per metric ton
(o)Liquified petroleum gas, per kilogram Php1.00 Php2.00 Php3.00
(p)Naphtha and pyrolysis gasoline, when used as raw material in Php0.00 Php0.00
the production of petrochemical products or in the refining of
petroleum products, or as replacement fuel for natural-gas-fired-
combined cycle power plant, in lieu of locally-extracted natural gas
during the non-availability thereof, per liter of volume capacity Php0.00
(q)Liquified petroleum gas, when used as raw material in the
production of petrochemical products, per kilogram
(r)Petroleum coke when used as feedstock to any power
generating facility, per metric ton

Petroleum products used as raw materials in the manufacture of other petroleum products or as fuel for power plants are
not taxable.

D. MINERALS AND MINERAL PRODUCTS

PRODUCT TYPE TAX RATES (RA 10963-TRAIN Law)

Coal and coke (Domestic and Imported) January 1, 2018 - Php50.00

January 1, 2019 - Php100.00
January 1, 2020 - Php150.00
and onwards
Nonmetallic Minerals and Quarry Resources (Locally Four percent (4%) based on the actual market value of the
extracted or produced) gross output thereof at the time of removal
Nonmetallic Minerals and Quarry Resources (Imported) Four percent (4%) based on the value used by the Bureau
of Customs (BOC) in determining tariff and customs duties,
net of excise tax and value-added tax
Locally-extracted natural gas and liquefied natural gas Exempt
All Metallic Minerals (locally extracted or produced copper, Four percent (4%) based on the actual market value of the
gold, chromite and other metallic minerals) gross output thereof at the time of removal
Imported copper, gold, chromite and other metallic Four percent (4%) based on the value used by BOC in
minerals determining tariff and customs duties, net of excise tax and
value added tax
On indigenous petroleum Six percent (6%) of the fair international market price
thereof, on the first taxable sale, barter, exchange or such
similar transaction, such tax to be paid by the buyer or
purchaser before removal from the place of production. The
phrase “first taxable sales, barter, exchange or similar
transaction’' means the transfer of indigenous petroleum in
its original, state to a first taxable transferee. The fair
international market price shall be determined in
consultation with appropriate government agency.
For the purpose of this Subsection, “indigenous
petroleum” shall 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."
NOTE:
In the case of mineral concentrates not traded in commodity exchanges in the Philippines or abroad, such as copper
concentrate, the actual market value shall be the world price quotations of the refined mineral products content thereof
prevailing in the said commodity exchanges, after deducting the smelting, refining and other charges incurred in the
process of converting the mineral concentrates into refined metal traded in those commodity exchanges.

On minerals and mineral products sold or consigned abroad, the actual cost of ocean freight and insurance shall be
deducted from the tax base.

Small Scale Miners

- RA 11256 exempts registered small scale miners and accredited traders who are selling gold to the Bangko Sentral
ng Pilipinas (BSP) from paying income tax and excise tax. Note also that the sale of gold to the BSP is also exempt
from business tax.
- Pursuant to RA 11256, gold which is sold, or eventually sold to the BSP, shall be exempt from the payment of excise
tax. If the excise tax due thereon is paid prior to the sale of the gold to the BSP, the taxpayer may file a claim for
refund with the Commissioner of Internal Revenue.
- All gold sold to the BSP by accredited traders shall be presumed to have been purchased by said traders from small-
scale miners. (Sec 4, RA 11256)

E. AUTOMOBILES AND OTHER MOTOR VEHICLES

NET MANUFACTURER'S PRICE/IMPORTER'S SELLING PRICE* TAX RATES (RA 10963 (TRAIN Law)
OVER UP TO RATE
0 Php600,000 4%
Php600,000 Php1,000,000 10%
Php1,100,000 Php4,000,000 20%
Php4,000,000 over 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 shall be exempt on excise tax on automobiles.
3. Pick-ups

F. NON-ESSENTIAL GOODS
• Twenty percent (20%) based on the wholesale price or the value of importation used by the Bureau of
Customs in determining Tariff and Customs Duties, net of Excise and Value-Added taxes
1. Jewelry
2. Perfume and toilet waters
3. Yachts and other vessels intended for pleasures or sports.

G. SWEETENED BEVERAGES (RA 10963-TRAIN Law)

PRODUCT TAX RATE
Per Liter of Volume
Capacity
Using purely caloric sweeteners, and purely non-caloric sweeteners, or a mix of caloric and Php6.00
non-caloric sweeteners
Using purely high fructose corn syrup or in combination with any caloric or non-caloric Php12.00
sweetener
Using purely coconut sap sugar and purely steviol glycosides Exempt

Filing of Return and Payment of Excise Tax:

1. For locally manufactured: A separate return (BIR Form No. 2200-S) shall be filed for each place of production with the
concerned RDO where the Head Office is registered before removal from place of production.
2. For imported: the importer shall apply for an Authority to Release Imported Goods (ATRIG) with Excise Large Taxpayers
Regulatory Division (ELTRD), BIR National Office and pay the corresponding excise tax before release from customs
custody.
However, for imported raw materials which will be used in the production of excisable sweetened beverages, the
excise tax due thereon shall be paid before removal of the finished goods from the place of production.

Exclusions: the following products are not subject to excise tax:

1. All milk products, including plaint milk, infant formula milk, follow-on milk, growing-up milk, powdered milk, ready-to-
drink milk, flavored milk and fermented milk.
Milk products refers to products obtained by any processing of milk, which may contain food additives, and other
ingredients functionally necessary for the processing.
2. Soymilk and flavored soymilk shall refer to products, the main ingredients of which are the soybean and/or soy
derivatives (e.g., soybean flour, soybean concentrates, soybean isolates or defatted soya) and water which are
produced without fermentation process.
3. 100% Natural Fruit Juices – original liquid resulting from the processing of fruit, the liquid resulting from the
reconstitution of natural fruit juice concentrate, or the liquid resulting from the restoration of water or dehydrated
natural juice that do not have added sugar or caloric sweetener. If there is sugar or sweetener added at any amount,
the product shall be considered excisable depending on the kind of sweetener added and its corresponding rate.
4. 100% Natural Vegetable Juices
5. Meal Replacement and Medically Indicated Beverages – any liquid or powder drink/product for oral nutritional therapy
for persons who cannot absorb or metabolize dietary nutrients from food or beverages, or as a source of necessary
nutrition used due to a medical condition and an oral electrolyte solution for infants and children formulated to prevent
dehydration due to illness; and
6. Ground coffee, instant soluble coffee, and pre-packaged powered coffee products.

Transfer of Raw Materials: manufacturers of sweetened beverages subject to excise tax shall not be allowed to
transfer or remove raw materials from the 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 (ETRD).

Transfer of Semi-Processed Goods: semi-processed goods, such as syrups/puree/concentrates sold to fast food
chains where such are mixed with carbonated water and dispensed through soda vending or juice dispensing machines,
shall be considered as finished goods subject to excise tax, notwithstanding that the same are in their semi-processed
state. The excise tax shall be computed using a pre-determined formula in arriving at the equivalent yield in liters of
volume capacity submitted by the manufacturer as approved by the FDA.

H. INVASIVE COSMETIC PROCEDURES - (RA 10963-TRAIN Law)

SERVICE Tax Rate
Performance of Services on Invasive Cosmetic Procedures 5%

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 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.

“Gross Receipts” shall mean the total amount of money or its equivalent representing the contract price or service fee,
including deposits applied as payments for services rendered and advance payments actually or constructively received
for services performed or to be performed for another person, but excluding the 5% excise tax and VAT.

Exclusions: the excise tax on non-essential services shall NOT apply to:

1. Procedures necessary to ameliorate a deformity arising from or directly related to a congenital or developmental defect
or abnormality, a personal injury resulting from an accident or trauma, or disfiguring disease, tumor, virus or infection.
2. Cases and treatments covered by the National Health Insurance Program.
3. Non-Invasive Cosmetic Procedures

Plastic Surgery shall refer to a surgical specialty or procedure concerned with the restoration, construction,
reconstruction, or improvement in the form, function and appearance of body structure that are missing, defective,
damaged, or misshapen. It encompasses both reconstructive and aesthetic surgery.

Cosmetic Surgery shall refer to a type of plastic surgery that aims to improve a person’s appearance, through invasive
cosmetic procedures, surgeries and body enhancements directed solely on improving, altering or enhancing the person’s
appearance and do not necessarily promote the proper functions of the body or prevent or treat illness or disease.
Cosmetic surgery can be performed on all areas of the head, neck and body. Since the treated areas function properly,
cosmetic surgery is elective.

Invasive Cosmetic Procedure shall refer to a cosmetic surgery that is carried out by entering the body through the
skin or through a body cavity or anatomical opening, but with the smallest damage possible to these structures. Invasive
Cosmetic Procedures shall include, but not limited to:

1. Liposuction
2. Mammoplasty
3. Breast lift
4. Buccal Fact Removal
5. Buttocks Augmentation
6. Chin Augmentation
7. Facelift/Neck lift
8. Thread Lift
9. Embedded Protein Threads
10. Hair Restoration/Transplantation
11. Eyelid Surgery
12. Vaginal Plastic Surgery
13. Abdominoplasty or Tummy Tuck
14. Auto Grafting
15. Rhinoplasty/Alar Trimming
16. Otoplasty

Non-Invasive Cosmetic Procedure shall refer to a conservative treatment that does not require incision into the body
or the removal of tissue, or when no break in the skin is created and there is no contract with mucosa, or skin break, or
internal body cavity beyond a natura or artificial body orifice. Non-Invasive Cosmetic Procedures shall include but not be
limited the following:

1. Acupuncture Rejuvenation Therapy

2. Air Dissector
3. Botulinum Toxin Injection/Treatment
4. Collagen Induction Therapy
5. Dermal Fillers (Crosslinked and non-crosslinked)
6. Non-surgical facelifting and skin tightening using radio frequency, ultrasound, infrared
7. Carbon dioxide fractional laser resurfacing
8. Laser and light treatments
9. Body Treatments and Contouring Procedures
10. Cleanings and Facials
11. Peelings (Face and Body)
12. Injectables and Weight Management Treatment

Who Will File the Estate Tax Return: any person, whether natural or juridical, performing the non-essential service
shall be liable to pay the 5% excise tax thereon using BIR Form No. 2200-C (Excise Tax Return on Invasive Cosmetic
Procedures) together with the Monthly Summary of Cosmetic Procedures Performed as an attachment thereto.

Deadline: 10 days following the close of the month.

Invoicing Requirement: Every person subject to the 5% excise tax shall issue an Official Receipt (OR) for services
performed whether invasive/non-invasive showing the following information:

1. The total amount the patient/client pays or is obliged to pay to the service provider including the excise tax and VAT, if
applicable, provided:

a. The amount of VAT shall be a separate line item in the RR (the VAT base is inclusive of the 5% excise tax)
b. Discounts given shall be indicated in the OR, otherwise the same shall not be allowed as a deduction from gross
receipts;
c. If the procedure performed is non-invasive and/or invasive but considered exempt from excise tax, the term
“EXEMPT FROM EXCISE TAX” shall be shown on the OR;
d. If the services performed involves both invasive (whether excisable or exempt) and non-invasive (not excisable)
procedures, a separate OR may be used for the excisable and non-excisable services rendered.
ILLUSTRATION FROM THE BIR (RR No. 2-2019):

Where the invasive cosmetic procedure is performed in a clinic or any place outside of a hospital

To improve her body shape, Miss X decided to undergo liposuction procedure and sought the services of “Dok Salamat”, a
clinic operated outside the hospital and owned by Melo Medical Group, Inc. Dok Salamat charged Miss X the amount of
P50,000, inclusive of VAT but exclusive of excise tax. How much will be the total amount that Miss X will pay?

Answer: P52,500, computed as follows:

Original Price (inclusive of VAT) P 50,000

Gross Receipts, net of VAT (P50,000/112%) P 44,642.85
Add: 5% excise tax (P44,642.85 * 5%) 2,232.15
12% VAT [(P44,642.85+2,232.15) * 12%] 5,625
Total Amount to be collected from Miss X P 52,500

Note:
1. The 5% excise tax is based on the amount of receipts, exclusive of both VAT and excise tax.
2. The amount of VAT is based on the receipts, inclusive of the excise tax.
3. The amount of excise tax will be recorded both as an expense and a liability (for remittance purposes).
4. Only the service income of P46,875 will be recorded as revenue.

Although the computation may have been flawed, considering that the BIR merely divided the gross receipts by 112% to
compute for the amount net of VAT, but the VAT amount considered initially was based only on the receipts.

If the amount is inclusive of both 12% VAT and 5% excise tax, then the computation as per BIR will be as follows:

Original Price (inclusive of VAT and excise) P 50,000

Gross Receipts, net of VAT, inclusive of excise (P50,000/112%) P 44,642.85
Gross Receipts net of both excise and VAT (P44,642.86/105%) P 42,517.01
Add: 5% excise tax (P42,517.01 * 5%) 2,125.85
12% VAT [(P42,517.01+2,125.85) * 12%] 5,357.14
Total Amount to be collected from Miss X P 50,000

Where the procedure is performed within a hospital

Same facts as in previous the above, except this time Miss X had another invasive cosmetic procedure done by Doctor P, an
individual practitioner operating a clinic inside a hospital. The Hospital bills of Miss X, included other fees (e.g., supplies and
fees for the use of operating room and hospital facilities) in the amount of P20,000 in addition to the fees charged by Doctor
P of P50,000 (inclusive of 12% VAT, excluding excise) for the services performed.

Billings by Hospital (VAT-exempt) P 20,000.00

Excise Tax (5%) 1,000.00
Doctor’s Fees (P50,000/112%) 44,642.86
Excise Tax (5%) 2,232.14
VAT (12% * P44,642.86+2,232.14) 5,625.00
Total Amount to be collected from Miss X P 73,500