Consumption Tax On Importation

CONSUMPTION TAX ON
IMPORTATION
THE VAT ON IMPORTATION
Importation
Refers to the 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 12%
2. Final withholding VAT- for the purchase of services from non-
residents
Comparison between the consumption on Tax
on Importation
Vat on Importation Final Withholding VAT
Object consumption Goods Services
Imposed upon Importers/buyers Foreign service provider
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 After the month of
goods payment
IMPORT OF GOODS
Either:
1. Exempt importation
2. Vatable importation
EXEMPT IMPORTATION
Necessities not subject to the VAT on importation
1. Agricultural & marine food products
2. Fertilizers, seeds, seedlings
3. Books & any newspaper magazines
4. Passengers or cargo vessels and aircrafts
Agricultural or marine foods products in
original state
Original state or those which undergone simple process.
Advance processing
Examples:
Grapes, apples, oranges
Vegetables, tea ginseng
Rice, corn, coffee beans
Fish, crustaceans
Poultry & livestocks
Milk, eggs & meat for human consumption
Simple processing
a. Acts of preparation for the market
b. Acts of preservation
c. Acts of packaging including advanced technological means of packaging
Examples of simple acts of preparation

Boiling, broiling, husking
Roasting, Stripping, Grinding
Simple acts of preservation

Freezing, Smoking
Drying, Salting
Packaging
1. Shrink wrapping in plastics
2. Vacuum packing
3. Tetra packing
Processed agricultural or marine products
Undergone changes in their chemical compositions or have
undergone complex processing or treatment or are utilizing advance
technologies in their processing
Vatable:
Refined sugar, Wine, vinegar, coconut oil
Canned sardines, Butter, soy, Flour, Marinated milk fish
Ex. Mr. B, a VAT-registered food retailer, imported the following from
China:
Landed cost
Fruits P 250,000
Vegetables 180,00
Frozen meat 50,000
Marinated milkfish 100,000
Compute the VAT on importation.

Farm or fishery inputs
• Marine or agricultural intended for the production of marine or
agricultural food products- VAT exempt
• Seeds, seedlings, breeding stocks and genetic materials are exempt as

well as food of these inputs
> Maintenance of crops, livestock or poultry- pesticides, herbicides,

animal medicines, fishing equipment, fishing boats, tractors, plows,
An agricultural supply dealer imported the following:
Corn grits P 200,000
Hog feeds 350,000
Specialty feeds 300,000
Compute the VAT on importation

Books, newspapers, magazine, review or
bulletins
Conditions for exemption of newspaper, magazine review or bulletin:
1. They must appear at regular intervals with fixed prices for
subscription
2. The sale must not be devoted principally to the publication of paid
advertisements
Not included are school supplies- chalk, board markers, pens,

notebook; pad paper and office supplies
A bookstore company imported the following items:
Landed cost
Books P 350,000
Professional instruments 200,000
School supplies 350,000
Total P 900,000
What is the total VAT on importation?

Passenger or Cargo Vessels & Aircrafts
Import of passenger or cargo vessels & aircraft, including engine,
equipment and spare parts thereof for domestic & international
transport operations
Qualifications: Mandatory vessel retirement program of Maritime

Industry Authority (MARINA).
Passenger or cargo vessels- 15 years
Tankers- 10 years
High speed passenger crafts- 5 years
Which imported product is vatable?
Total Transport Group has land, sea and air transport operations.
To beef up its operations, it imported the ff:
5 units of Daewoo bus

1 unit of aircraft
2 cruise ships
IMPORTATION BY VAT-EXEMPT
PERSONS
Vat-exempt persons are not subject to VAT on importation
An exempt importer subsequently sells his exempt importation to a

non-exempt person, the non-exempt buyer shall be subject to VAT on
importation.
VAT- Exempt persons under NIRC

1. International shipping or air transport operators
2. Agricultural cooperatives
3. Ecozone-locators
INTERNATIONAL SHIPPING or AIR
TRANSPORT OPERATORS
Exemption: LIMITED to importation of FUEL, GOODS & SUPPLIES.
Physically brought into the PH: but will be used in INTERNATIONAL

transport (FOREIGN CONSUMPTION)
VATABLE OR EXEMPT?
1. Malaysian Ferries is an international shipping carrier. It imported to

the Philippines fuel and supplies to be used in its shipping
operations.
2. Pinoy airline imported jet fuel from Iraq at a total cost of P50,000.
40% of the importation is declared for domestic airline operations
while 60% declared for international air transport operations.
3. Lufta airline, an international air carrier, imported jet fuel at a total

cost of P40,000,000. It subsequently sold P10,000,000 of these to a
Feel Air, a domestic air carrier.
AGRICULTURAL COOPERATIVES
Being VAT exempt is limited to importation of direct farm inputs,
machineries & equipment, including their part.
CONDITIONS for EXEMPTION:

1. The cooperative must be an agricultural cooperative duly registered
an in good standing with the Cooperative Development Authority
(CDA)
2. The importation involves direct farm inputs, machineries, equipment
& their spare parts to be used directly and exclusively in the
production or processing of their produce.
Exempted or not?
Abra Farmer’s Cooperative imported the following equipment:
Tractors and threshers to be used by the cooperative P 2,000,000

Plows & water pumps to be resold to members 3,000,000
Fertilizers and hybrid seeds to be sold by the cooperative 1,000,000
Herbicides and pesticides to be used by the cooperative 500,000
Cars for the use of cooperative directors and officers 2,000,000
2. Assume that fertilizers and herbicides in the foregoing illustration is
subsequently sold by Abra Farmer’s Cooperative to Jon Juan, member
farmer. What is the tax consequence of the sale?
3. A credit cooperative imported a computer server from abroad at a

cost of P1,500,000.
4. A mining cooperative imported an ozone generator and an ultrafine

ore grinding machine for its gold recovery plant.
QUASI-IMPORTATION
1. Import of personal and household effects belong to residents of the
Philippines returning from abroad or non-resident citizens coming to
resettle in the Philippines
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 for exemption:

3. The personal and household effect belong to Philippine residents or
non-residents intending to resettle in the Philippines.
4. The goods are exempt from Custom duties.
Vatable or Exempt?
1. Mr. Siman was employed as an OFW. He went abroad taking with
him personal effects such as clothes, pieces of personal jewelry &
gadgets aggregating to P300,000 in value. When his contract
ended, he returned to the Philippines bringing with him the same
effects which now have an aggregate value of P280,000.
2. While employed abrod, Mr. Siman purchased an iphone

worthP30,000. Mr. Siman brought the iphone to the Philippines
when his employment contract ended.
3. Ms. K, a Philippine resident, purchased used clothing & shoes worth
P300,000 from abroad to be sold in her “Ukay-Ukay” sales outlets in the
Philippines. She reserved P50,000 of these for her personal use.
4. Mrs. B, a non-resident Filipino businesswoman, owns a machine in

her business in France. She decommissioned the machine to be
transferred to her business in the Philippines.
Sources:
Business & Transfer Taxation by Rex Banggawan

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CONSUMPTION TAX ON

Examples of simple acts of preparation

Simple acts of preservation

Compute the VAT on importation.

• Seeds, seedlings, breeding stocks and genetic materials are exempt as

> Maintenance of crops, livestock or poultry- pesticides, herbicides,

Compute the VAT on importation

Not included are school supplies- chalk, board markers, pens,

What is the total VAT on importation?

Qualifications: Mandatory vessel retirement program of Maritime

5 units of Daewoo bus

An exempt importer subsequently sells his exempt importation to a

VAT- Exempt persons under NIRC

Physically brought into the PH: but will be used in INTERNATIONAL

1. Malaysian Ferries is an international shipping carrier. It imported to

3. Lufta airline, an international air carrier, imported jet fuel at a total

CONDITIONS for EXEMPTION:

Tractors and threshers to be used by the cooperative P 2,000,000

3. A credit cooperative imported a computer server from abroad at a

4. A mining cooperative imported an ozone generator and an ultrafine

Conditions for exemption:

2. While employed abrod, Mr. Siman purchased an iphone

4. Mrs. B, a non-resident Filipino businesswoman, owns a machine in

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