What is Excise Tax?
Excise tax is a tax charged on specific goods or services. It's not a general tax like income tax
or VAT—it only applies to certain items like tobacco, alcohol, fuel, and some luxury goods or
services.
It applies to:
1. Goods made in the Philippines (for sale, use, or distribution locally);
2. Imported goods; and
3. Certain services done in the Philippines (like cosmetic procedures).
It’s on top of VAT, meaning if a product is subject to excise tax, VAT is still added afterward.
Types of Excise Tax
There are two types:
1. Specific Tax
○ Based on quantity (e.g., per liter, per pack, per kilo).
○ Formula:
Number of units × Specific tax rate
2. Ad Valorem Tax
○ Based on value or selling price of the product.
○ Formula:
Number of units × Selling price × Ad valorem tax rate
What Kinds of Products Are Taxed (Excisable Articles)?
These are grouped into major classifications:
1. Alcohol Products
○ Distilled spirits, wines, beers, etc.
2. Tobacco Products
○ Regular tobacco, cigars, cigarettes
3. Petroleum Products
○ Gasoline, diesel, etc.
4. Miscellaneous Articles
○ Cars (especially luxury), non-essential goods (like jewelry), sweetened drinks,
and cosmetic surgeries (non-essential services)
5. Mineral Products
○ Like gold, copper, or other minerals mined in the Philippines
Who Pays Excise Tax?
● If the goods are local (made in the PH): The manufacturer or producer pays.
● If imported: The importer or owner pays.
● If someone has excise-taxed goods without paying the tax (and they’re not legally
exempt), they’re also liable.
For specific products like petroleum and natural gas, the tax is paid by whoever first buys,
exports, or transfers the item.
Alcohol Products and Excise Tax (Sections 141–143 of the Tax Code)
Alcohol products are one of the major items subject to excise tax in the Philippines. Here's
how the terms are defined:
Key Terms You Should Understand
1. Alcohol Products
These include different types of alcoholic drinks like beer, wine, whisky, gin, rum,
vodka, etc.
2. Fermented Liquors
○ These are drinks like beer, lager, ale, and porter.
○ They’re taxed whether made in big factories or small places like pubs or
microbreweries.
○ Exception: Traditional drinks like tuba, basi, and tapuy are not included in this
definition.
3. Proof Spirits
○ A technical term for liquor with a specific alcohol content.
○ If a drink has ½ of its volume as pure alcohol at a certain temperature, it's
considered "proof spirit."
4. Distilled Spirits
○ These are drinks like whisky, brandy, gin, rum, vodka—anything made by
distillation (not just fermentation).
○ This includes mixtures or diluted versions of ethyl alcohol from any source.
5. Net Retail Price (NRP)
○ This is the actual retail price (in stores) of the product excluding excise tax
and VAT.
○ It's important because some alcohol excise taxes (especially Ad Valorem) are
based on the NRP.
○ The NRP must be reported by the manufacturer/importer and verified by the BIR,
which checks prices twice a year.
Why These Definitions Matter
The type of alcohol (beer, wine, distilled spirits) and its NRP or alcohol content affect how
much excise tax will be charged.
● Beer (fermented liquors) is usually taxed using specific tax (based on volume).
● Distilled spirits may be taxed using both specific and ad valorem taxes.
● Knowing the proof or NRP helps determine the tax amount correctly.
Example Calculation (Distilled Spirits):
Suppose:
● NRP = ₱100 per proof liter
● Year = 2023
Ad Valorem Tax = ₱100 × 22% = ₱22
Specific Tax = ₱59.00
Excise Tax Due = ₱22 + ₱59 = ₱81
A. TYPES OF PRODUCTS COVERED
1. Heated Tobacco Products (HTPs)
○ Tobacco consumed by heating, not burning
○ May include gels or liquids that produce aerosol when heated
2. Vapor Products
○ Includes liquids/solids/gels with or without nicotine
○ Used in Vapor Devices to create aerosol without combustion
Sample Computation:
A 30ml bottle of nicotine salt vape juice purchased in 2023:
● Excise tax per ml = ₱52.00
● ₱52 × 30 ml = ₱1,560.00 total excise tax
FLOOR PRICE (Minimum Selling Price)
● The minimum price a product can be sold for, based on:
○ Production/Landed Cost of the cheapest brand
○ + Excise Tax
○ + VAT
Formula:
Minimum Floor Price = Cost + Excise Tax + VAT
MANUFACTURER'S OR IMPORTER'S SWORN
STATEMENT
Who must submit:
All local manufacturers or importers of:
● Vaporized Nicotine Products
● Non-Nicotine Products
● Novel Tobacco Products
Required Contents of the Sworn Statement:
1. Manufacturer/Importer Info:
○ Name, Address, TIN, Assessment Number
2. Brand Information:
○ Root Brand Name + Complete Brand Name (with modifiers)
3. Product Specifications:
○ Size, weight, packaging details
4. Distribution Area:
○ Regions where the brand will be sold
5. Wholesale Price:
○ Per case, gross & net of VAT and excise tax
6. Suggested Retail Price (SRP):
○ Per pack/pod/bottle, gross & net of VAT and excise tax
7. Production/Import Cost Breakdown:
○ Includes materials, labor, overhead, marketing, admin costs
8. Applicable Excise Tax Rate
9. Excise & VAT Computation:
○ Per unit (pack, pod, bottle)
When to Submit:
● Initial Registration: Attach sworn statement to BIR registration forms
● Regular Updates: Submit every June and December
● If There’s a Price or Cost Change:
Submit an updated sworn statement at least 5 days before:
○ Removal from the factory, or
○ Release from customs
MANUFACTURER’S & IMPORTER’S SURETY BOND
Initial Bond:
● Amount: ₱100,000
Adjustment After 6 Months:
● If excise tax paid in the first 6 months > ₱100,000:
Bond must be increased to twice the total excise tax paid.
Bond for Succeeding Years
Applicable After the First Year of Operation
After the initial 6-month period and for each following year, the required bond amount is
computed as follows:
Standard Rule:
● The bond must be equal to the total excise tax paid in the preceding calendar year.
🔸 Example: If a manufacturer paid ₱500,000 in excise tax in 2024, then their
required bond for 2025 is ₱500,000.
Special Rule – For Prepayment or Advance Deposit Schemes:
If the taxpayer opts to prepay tax (like making advance deposits), the bond amount is not
based on actual taxes paid, but instead on a prescribed schedule under RR 14-2022.
ad valorem tax schedule on automobiles as provided under Section 149 of the Tax Code,
as amended by the TRAIN Law, which took effect on January 1, 2018:
This section explains the tax treatment for different types of vehicles:
1. Hybrid vehicles will be taxed at 50% of the usual excise tax rates for automobiles.
2. Electric vehicles and pick-ups are completely exempt from excise tax.
The section also defines key vehicle categories:
● Automobile: Any vehicle with 4 or more wheels, powered by gasoline, diesel, electricity,
or another power source. However, buses, trucks, cargo vans, jeepneys, and
special-purpose vehicles (like ambulances or cement mixers) are not considered
automobiles for this tax purpose.
● Truck/cargo van: Vehicles designed to carry goods, and pick-ups are considered trucks.
● Jeepney/jeepney substitutes: These are unique Filipino vehicles, usually made from
surplus parts or brand-new chassis, and are used for public transport with special
seating.
● Bus: A vehicle used for public transport that weighs over 4 tons and is designed for
mass transportation.
● Single cab chassis: A vehicle with a basic engine and chassis, typically having only two
doors and one row of seats.
● Special purpose vehicle: Vehicles made for specific industrial purposes (e.g., fire
trucks, cement mixers) and not for personal or recreational use.
● Hybrid electric vehicle: A vehicle that uses both electricity and another fuel (like
gasoline or diesel), and can start moving using just electric power.
Additionally:
● Imported vehicles not for sale will be taxed based on their total landed value (including
customs duties and other charges).
● Vehicles used only in a freeport zone are exempt from excise tax.
In short, hybrid vehicles get a reduced tax, electric vehicles and pick-ups are tax-free, and
certain vehicle categories are defined for tax purposes.
1. Non-Essential Goods (20% Tax):
○ Jewelry, pearls, precious stones, and items made from or ornamented with
precious metals (like gold, platinum, and silver): This includes imitation
jewelry, but excludes items like dental gold or surgical instruments. The tax
applies to items such as opera glasses and lorgnettes.
○ Perfumes and toilet waters: These products are subject to the 20% tax.
○ Yachts and pleasure vessels: Boats and other vessels used for sports or
leisure are taxed at 20%.
2. Non-Essential Service - Invasive Cosmetic Procedures (5% Tax):
○ Invasive cosmetic procedures, surgeries, and body enhancements that are
aimed solely at improving appearance (and not for health or disease treatment)
are taxed at 5% of the gross receipts. This tax does not apply to procedures
necessary to correct deformities from congenital issues, accidents, or disease. It
also does not apply to treatments covered by the National Health Insurance
Program.
3. Sweetened Beverages (Php 6.00 or Php 12.00 per Liter):
○ Beverages that contain caloric sweeteners (like sucrose, glucose, or fructose)
or non-caloric sweeteners (like aspartame or sucralose) are taxed based on the
type of sweetener used:
■ Php 6.00 per liter: Beverages with purely caloric or non-caloric
sweeteners.
■ Php 12.00 per liter: Beverages that use high fructose corn syrup
(HFCS), whether mixed with other sweeteners or not.
■ Exempt: Beverages made with coconut sap sugar or steviol
glycosides (like stevia).
4. Definition of Sweetened Beverages (SBs): These include:
○ Sweetened juice drinks, tea, carbonated drinks, flavored water, energy drinks,
powdered drinks (not milk, juice, tea, or coffee), cereal beverages, and any other
non-alcoholic drinks with added sugar.
In short, non-essential goods like jewelry, perfumes, and yachts are taxed at 20%, while
cosmetic procedures for appearance (but not health) are taxed at 5%. Sweetened beverages
are taxed at varying rates depending on the type of sweetener.
This section of the Tax Code outlines the tax rates for various types of minerals and mineral
products, as amended by the TRAIN Law (Republic Act 10963). Here are the key points:
1. Coal and Coke (Domestic and Imported):
○ Taxed at Php50.00 per metric ton starting January 1, 2018, Php100.00 per
metric ton starting January 1, 2019, and Php150.00 per metric ton starting
January 1, 2020 and onwards.
2. Nonmetallic Minerals and Quarry Resources:
○ Locally Extracted or Produced: Taxed at 4% of the actual market value of the
gross output at the time of removal.
○ Imported: Taxed at 4% based on the value used by the Bureau of Customs
(BOC) in determining tariff and customs duties, net of excise tax and VAT.
3. Locally-Extracted Natural Gas and Liquefied Natural Gas:
○ Exempt from tax.
4. All Metallic Minerals (Locally Extracted or Produced):
○ 4% based on the actual market value of the gross output at the time of removal.
5. Imported Metallic Minerals (e.g., Copper, Gold, Chromite):
○ 4% based on the value used by the Bureau of Customs (BOC) in determining
tariff and customs duties, net of excise tax and VAT.
6. Indigenous Petroleum (e.g., mineral oil, gas, bitumen):
○ 6% of the fair international market price on the first taxable sale, barter,
exchange, or similar transaction. The tax is paid by the buyer before the product
leaves the place of production.
○ Indigenous petroleum includes natural substances like mineral oil and gas, but
excludes coal, peat, and bituminous shale.
7. Tax Base for Mineral Concentrates:
○ If not traded on commodity exchanges, the tax base is the world price quotations
of the refined mineral content, minus smelting and refining costs.
8. Exports of Minerals and Mineral Products:
○ For minerals sold abroad, the actual cost of ocean freight and insurance is
deducted from the tax base.
In short, the tax rates vary based on the type of mineral, whether it is locally extracted or
imported, and whether it is exported. Taxes are based on the market value or customs value,
and there are specific rules for petroleum and mineral concentrates.
This section of the Tax Code outlines the administrative provisions for filing and paying excise
tax on domestic products:
1. Persons Liable to File a Return:
● Every person liable to pay excise tax must file a separate return for each place of
production. The return should include:
○ A description and quantity or volume of products to be removed.
○ The applicable tax base.
○ The amount of tax due.
● For indigenous petroleum, natural gas, or liquefied natural gas, the first buyer,
purchaser, or transferee is responsible for paying the excise tax on local sales, barters,
or transfers.
● For exported products, the owner, lessee, concessionaire, or operator of the
mining claim is liable to pay the excise tax.
● If domestic products are removed without paying the excise tax, the owner or the person
in possession of the products will be liable for the tax.
2. Time for Filing the Return and Payment of the Tax:
● General Rule: The excise tax return must be filed before the removal of domestic
products from the place of production.
● Nonmetallic minerals, mineral products, or quarry resources: The return must be
filed upon removal of the products from the locality where they were mined or extracted.
● Locally produced or extracted metallic minerals or mineral products: The return
must be filed within 15 days after the end of the calendar quarter during which the
products were removed. In this case, the taxpayer must file a bond approximating the
excise tax due for the quarter’s removals.
● Imported mineral or mineral products (both metallic and nonmetallic): The excise tax
must be paid before the products are removed from customs custody.
In short, the tax must be filed and paid at different points depending on the type of product and
its status (domestic or imported). Generally, it must be paid before or at the time of product
removal from production or customs custody, with some provisions allowing for filing and
payment within specific time frames after removal.
(3) Place of Filing and Paying Excise Tax:
● Normally, the excise tax return must be filed and paid at:
○ Authorized agent banks
○ Revenue Collection Officers
○ City or Municipal Treasurers
● Exceptions (allowed by the Secretary of Finance upon the Commissioner’s
recommendation):
○ Different filing schedules may be set for certain taxpayers based on how much
product they remove and other factors.
○ Different payment methods (like prepayment or advance deposit systems) may
be allowed.
● For minerals and quarry resources:
○ If the mine site is different from the processing or production site, the tax
must be filed and paid at the Revenue District Office (RDO) where the mining
or extraction happens.
○ For metallic minerals processed abroad, tax must also be paid at the RDO
where the minerals were mined or extracted.
(1) Determining Gross Selling Price (GSP) for Ad Valorem Tax:
● Gross Selling Price (GSP) = Wholesale price (excluding VAT) at the place of
production or via sales agents to the public.
● If the manufacturer also sells the goods at wholesale through another business they
own or have a stake in, the wholesale price there is used as the GSP.
● If that price is less than the cost of making and selling the goods, the government will
add a reasonable profit margin to compute the correct GSP.
In summary: excise tax returns are generally filed and paid at authorized collection points, but
exceptions exist for certain industries like mining. For products subject to ad valorem tax, the
government uses the wholesale price (excluding VAT) at the place of production—or a price that
ensures a fair profit—to compute the tax.
(1) When Wholesale Price is Too Low
If the wholesale price of a product is less than the cost of making it (including all expenses)
plus a 10% profit, then the BIR will add the missing amount to make sure the gross selling
price reflects a fair value for tax purposes.
(2) Manufacturer’s Sworn Statement
Manufacturers or producers must regularly submit a sworn statement to the BIR. This
document shows:
● The kinds of products they make
● Their gross selling prices
● Their costs and expenses up to the point of final sale
This helps the BIR verify if the correct excise tax is being paid.
(3) Credit or Refund for Excise Tax on Exported Goods
If a product that was taxed locally is actually exported (and does not return to the
Philippines), the excise tax can be refunded or credited, as long as:
● You submit proof of export
● You received payment in foreign currency
Exception: For mineral products (except coal and coke), no refund or credit is allowed
even if they are exported.
Excise Tax on Imported Articles
● Importers must pay excise tax before the goods are released by Customs.
● If someone possesses excise-taxed goods without paying tax (and is not legally
exempt), they must pay the tax.
Tax rate: Imported goods are taxed at the same rates as locally made products, unless
stated otherwise.
Tax-Free Imports Sold Locally
If a tax-free item (brought in by an exempt person or group) is sold or transferred to a
non-exempt person, the buyer is now treated as the importer and must pay all applicable
taxes.
