Value Added Tax on Importation Ferries is an international shipping carrier.
It imported
to the Philippines fuel and supplies to be used in its
IMPORTATION
VAT-Exempt Persons under the NIRC:
Importation refers to the purchase of goods or services
by Philippine residents from non-resident sellers. 1.International shipping or air transport operators
Types of Consumption Tax on Importation 2.Agricultural cooperatives
1.VAT on importation- for the import of goods 3.Ecozone-locators
2.Final withholding VAT- for the purchase of services
from non-residents International shipping or air transport operators
The exemption is limited to the importation of fuel,
IMPORT OF GOODS goods and supplies. Although these goods or supplies
are physically brought into the Philippines, they are not
The importation of goods is either: intended to be consumed herein. They will ultimately
be used in international transport. This consumption is a
1. Exempt importation
foreign consumption rather than domestic
2. Vatable importation consumption.
BOOKS, NEWSPAPERS, MAGAZINE, REVIEW OR Illustration 1
BULLETINS
Malaysian Ferries is an international shipping carrier. It
The VAT exemption on the importation of these goods imported to the Philippines fuel and supplies to be used
is apparently based upon the necessity of education and in its shipping operations. Note that the fuel, goods, or
information. The Philippine constitution requires the supplies will be consumed in the high seas or in foreign
state to give priority to education to foster patriotism territories outside the country. The importation is not a
and nationalism, accelerate social progress, and domestic consumption but a foreign consumption;
promote total human liberation and development. (See hence, it is exempt from VAT.
Sec. 17, Article II, Philippine Constitution) The Philippine
Agricultural cooperatives
Constitution also recognizes the vital role of
communication and information in nation-building. (See The status of agri-coop as VAT-exempt person is limited
Sec. 24 lbid.) to importation of direct farm inputs, machineries and
equipment, including their spare parts (RA 9337)
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.
PASSENGER OR CARGO VESSELS AND AIRCRAFTS
The VAT exemption covers the import of passenger or Ecozone-locators
cargo vessels and aircrafts, including engine, equipment Ecozones are designated places of economic activity for
and spare parts thereof for domestic or international the production of goods or services for the export
transport operations. market. By legal fiction, economic zones are considered
VAT-Exempt Persons under the NIRC: International foreign countries and are deemed outside Customs
shipping or air transport operators territory. Thus, the importation of goods into the
economic zones by tocators is exempt not only from
2. Agricultural cooperatives 3. Ecozone-locators VAT on importation but also from customs duties. The
International shipping or air transport operators KAY exemption from VAT covers any goods, supplies or
odrThe exemption is limited to the importation of fuel, machineries brought into the ecozones by locators.
goods and supplies.
Although these goods or supplies are physically brought
into the Philippines, they are not intended to be Technical Importation
consumed herein. They will ultimately be used in The rules of VAT on importation apply to technical
international transport. This consumption is a foreign importation by consumers in a customs territory from
consumption rather than domestic consumption. persons located in Special Economic Zones (Sec. 4.107-
Illustration 1 Malaysian 1, RR 16-2005). Customs territory refers to the portion
of the Republic of the Philippines outside of designated
special economic zones (Ecozones). (RR2-2005)
"Technical importation" refers to the purchase of non-
Ecozone Philippine residents from Philippine
Ecozoneregistered enterprises. By legal fiction,
ecozones are considered foreign territories. Hence, the
purchase from Economic zones such as but not limited
to, Subic-Ecozone, Zambo-Ecozone and Cagayan-
Ecozone is subject to the VAT on importation.
Illustration 1
Winshield Corporation, a PEZA locator, sold scrap
metals to Recycle Industries Corporation, a customs
territory buyer (i.e., buyer outside the Ecozone).
Recycle Industries shall pay the VAT on importation
directly to the Bureau of Customs (BOC), Winshield
Corporation is not required to impose the VAT on its
sales. However, it must be furnished a copy of the
receipt issued by the BOC for the VAT payment (See BIR
Ruling No. DA-031-2007, January 19, 2007).
Illustration 2
KT, an ecozone locator, imported two machineries for
use in the ecozone. It resold one machinery to $3, a
fellow PEZA-locator, and resold the other to T4, a
person outside the zone.
The importation by the locator shall be exempt. The
sales to $3 shall not be subject to business tax since it is
IMPORT OF SERVICES
deemed a foreign consumption. $3, also an ecozone
locator, shall not likewise be subject to the VAT on The purchase of services from non-residents may be:
importation. However, T4, a non-locator, shall pay VAT
on importation on the machinery it purchased from KT. 1. VAT-exempt
2. Subject to specific percentage tax
THE VAT ON IMPORTATION 3. Subject to final withholding VAT
Other importation of goods is subject to VAT regardless
of whether the: 1. importer is engaged or not engaged Illustration 1
in trade or 2. importer is a VAT or non-VAT business
business 3. importation is for business or personal use Eagle Company sought the help of Mr. Putin, a
4. nonresident seller is engaged or not engaged in repairman doing business in Australia, to fix its
business malfunctioning machinery in the Philippines. The
contract price was P1,000,000. Eagle Company shall pay
The dutiable value, also called transaction value, refers P120,000 (12% x P1M) final withholding VAT to the BIR.
to the total value used by the Bureau of Customs in
determining customs duties, such as: Query:
1. Cost of the goods 1.What if Mr. Putin is not engaged in business in
Australia? The contract price is still subject to the 12%
2. Freight final withholding VAT. Mr. Putin is conclusively
3. Insurance presumed engaged in business.
4. Other charges and costs to bring goods herein 2.What if Eagle Company is a non-profit institution? The
contract price is still subject to the 12% final
The dutiable value encompasses all costs incurred in withholding VAT. Even non-profit corporations are
bringing the goods up to the Philippine port and prior to required to withhold.
any other in-land costs of import.
3.What if Eagle Company is an ecozone locator? The
The customs duty is computed as: Dutiable value x contract price will not be subjected to the 12% final
Exchange rate x Rate of Duty withholding VAT because ecozone locators are outside
the country (i.e. non-residents) by legal fiction.
PROBLEMS 5. Mr. Xhi, a non-VAT taxpayer, made the following
domestic purchases of goods:
1.Don Pepito imported a harvester from the United
States with a total cost of P1,100,000 before Customs Purchase of scrap metals from a PEZA-locator P200,000
duties. The importation is subject to 10% Customs Purchase of machine from a VAT supplier 800,000
duties. What is the VAT on importation?
What is the imposable VAT on importation?
a. P158,400
a.P0
b. P 145,200
b. P24,000
c. P 129,600
c. P 96,000
d. P0
d. P 120,000
2. In the immediately preceding problem, assuming that
6. Atlantis Shipping Company imported P 3,000,000
the importation is made by an agricultural cooperative,
worth of vessel fuels and supplies for domestic use. The
what is the VAT on importation?
company earmarked 60% of this for domestic use while
a.P 158,400 40% was reserved for its international operations.
b. P 144,000 What is the VAT on importation?
c. P 129,600 a. P0
d. P0 b. P144,000.
c. P 216,000
3. Mr. Smile, a professional practitioner, imported the d. P 360,000
following:
Calculators and computers for his firm P900,000
7. Mr. Beer, a VAT-registered trader, imported
Books 600,000 equipment with a dutiable value of $40,000 from
abroad. The importation was subject to P100,000 BOC
Total P1,500,000
charges before 10% customs duties on dutiable value.
========= The exchange rate to the Peso was P43.00: $1. Compute
the VAT on importation.
How much is subject to VAT on importation?
a.P218,400.
a.P0
b. P227,040
b. P 900,000
c. P232,400
c. P 1,200,000
d. P239,040
d. P 1,500,000
8. If an importer paid 15% customs duties in the amount
4. Mr. Juan Manuel Marquez arrived in the Philippines of P24,000/plus. P134,000 charges to the Bureau of
with an immigration visa. He had with him the Customs, what is the VAT on importation?
following:
a.P0
Clothing, shoes, and apparel P 100,000
b. P18,960
Professional instruments and implements 150,000
c. P 35,280
Personal car 300,000
d. P38,160
Total costs of personal belongings P 550,000
========
9. Shanum Company had the following data regarding
Compute the total amount subject to VAT on its importation: Invoice price in US Dollars $ 12,000
importation. Other costs to bring goods to the Philippines P
a.P0 145,000)+ 100,000 BOC charges Customs duties is 10%
of dutiable value Peso-Dollar Exchange rate ZAP 42.80:
b. P 200,000 $10 Compute the VAT on importation. a. P0
c. P 300,000 b. P81,643.20
d. P 550,000 c. P91,032.00
d. P98,935.20
