CHRIST THE KING COLLEGE

GINGOOG CITY

BACHELOR OF SCIENCE IN ACCOUNTANCY

BUSINESS TAX REPORTING HANDOUT

Submitted by: Group 3

Submitted to: Mr. Grant Kenneth D. Flores

April 26, 2024

 EXCISE TAX

Excise Tax – It is a hybrid consumption tax with a regulatory overture.

- It is sometimes referred to as “sin taxes”, are imposed on certain articles either to
promote health, or to discourage purchase of certain articles to protect the environment.
- It is a tax on the production, sale or consumption of a commodity in a country.
APPLICABILITY:

• On goods manufactured or produced in the Philippines for domestic sale or

consumption or for any other disposition; and

• On goods imported.

SCOPE OF EXCISE TAX

- Limited only to certain goods with the exception of cosmetic surgery – the only service
currently subject to excise tax.

List of Excisable Articles and Services in the Philippines

1. Alcohol products – such as distilled spirits, wines and fermented liquors
2. Tobacco products – such as cigars and cigarettes
3. Petroleum products – such as gas, gasoline, diesel, wax, lubricant oils and greases,
kerosene, naphtha, denatured alcohol, coke, asphalt and bunker fuel oil
4. Mineral products – whether as metallic or non-metallic minerals and quarry resources
5. Miscellaneous articles – such as automobiles, non-essential goods like jewelry, perfume
and yacht, and sweetened beverages like soft drinks and sweetened drinks
6. Non-essential services – such as cosmetic surgery

Timing of Excise Taxation

- Excisable article or service is taxable at the point of Import and Production, except for
Mineral products and Non-essential services which are taxable at the point of sale.

Nature of Philippine Excise Tax

A. Excise Tax as a Regulatory tax
1. Environmental tax - known as green tax
 2. Sumptuary tax – also known as vanity tax
3. Sin tax – known as health tax
B. Excise tax as an indirect tax
C. Excise tax as a consumption tax
D. Excise tax as an additional business tax
Business registration Tax to pay
VAT taxpayer VAT and excise tax
Non-VAT taxpayer Percentage tax and excise tax

E. Excise tax as specific and ad valorem tax

Differences between excise tax and other business tax

Excise Tax Other Business Tax
- Levied at the point of production - Levied at the point of sale
- Specific or unit tax - Purely ad valorem tax
- Covers the production or import or - Covers the sale of almost all products
sale of narrower range of and services including those already
products/services subjected to excise tax
- Imposes heavier tax rates - Imposes reasonable tax rates
- May subject even non-business - Covers only those engaged in
producers business
- Intends to curb health risks, or social, - Purely levied to raise revenue
moral, or environmental wrongs

Similarities of excise tax and other business tax

1. Excise tax is generally a consumption tax similar to other business taxes.
Thus, the export of the goods is both exempted from excise or business

2. Excise tax which are imposed ad valorem are similar to business taxes which are also
imposed based on selling price.

3. Excise tax and business tax are both classified as indirect taxes since it is normally passed on
by sellers to consumers.

Types of Excise Tax

1. Specific tax – if based on weight or volume capacity or any other physical unit of
measurement;
2. Ad Valorem tax – if based on selling price or other specified value.
 Gross Selling Price of Goods Subject to Ad Valorem Tax

1) The price, excluding the VAT, at which the goods are sold at wholesale or through
sales agents;
2) If the manufacturer also sells the goods at wholesale in another establishment of
which he is the owner, the wholesale price in the latter establishment shall be the
gross selling price;
3) 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. (Sec. 131(B), NIRC)
Note: Manufacturer’s or producer’s sworn of statement is required

TAX COMPLIANCE REQUIREMENTS

WHO ARE THE PERSONS LIABLE TO EXCISE TAX?

1. In general

a. On Domestic or Local Articles

● Manufacturer
● Producer
● Owner or person having possession of articles removed from the place or 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

2. Others

On indigenous Petroleum

• Local Sale, Barter or Transfer – First Buyer, purchaser or transferee

• Exportation – Owner, lessee, concessionaire or operator of the mining claim

Time of Payment

• On Domestic products – before removal from the place of production

• On Importer products – before release from the custom’s custody

EXCISE TAX-FREE IMPORTATION BY EXEMPT PERSONS

- The importation of products into tax and duty-free shops, Freeport zones, and special economic
zones shall not be subject to excise taxes since they are considered foreign territories.
-
 Exception: Exemption does not apply to sin products such as cigars, cigarettes, distilled spirits,
fermented liquors and wines

Introduction into the customs territory refers to the sale or transfer of tax- free articles to
persons outside tax and duty-free shops, Freeport zones and special economic zones.

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

EXPORT OF EXCISABLE GOODS

When goods locally produced or manufactured are removed and actually exported without returning to
the Philippines, any excise tax paid thereon may be claimed as:

a. Tax refund, or

b. Tax credit

This applies whether the goods are exported in their original state or as ingredients or parts of any
manufactured goods or products. Note that the excise tax is levied only on domestic consumption. (Sec.
130(D), NIRC)

Exception: Mineral products

The excise tax on mineral products, except coal and coke, shall not be creditable or refundable even if
the mineral products are actually exported.

Excise tax on minerals is apparently imposed to compensate the environmental destruction arising from
their or extraction or production, as such the excise tax applies even if the goods are for foreign
consumption.

EXCISE TAX ON ALCOHOLIC PRODUCTS

3 categories of Alcohol products subject to excise tax

1. Distilled spirits
2. Wines
3. Fermented liquors
Illustration: Distilled spirits

Stabilo Brewery produce Gin bilog with 70 proof 750-ml bottle sold at a Net Retail Price of 120/bottle. During the period it produced 10,000
bottles.

Excise tax is computed as:

Alcohol content with 70 proof (70/2) 35%

Total alcohol content in liters (35% x .75L x 10,000 bottles) 2,625

Total proof liter = 2625 x 2 5250

Specific Tax (5250 proof liter x 66) 346,500

Ad Valorem Tax (10,000 x P120/bottle) x 22% 264,000__

Total Excise Tax 610,500

Illustration: Wines

Alawabalo winery produces various wines packed in cases of 12 bottles. It produced the following during a month in 2019:

Class Bottle SRP Total case produced

Sauvignon Blanc 750ml 3000 30 cases

Carbonated wine 750ml 250 100 cases

Fortified wine 1L 300 50 cases

Excise tax shall be computed as:

Sauvignon Blanc: (30 cases x 12 bottles/case x 885.73) 318,862.80

Carbonated wine: (100 cases x 12 bottles x 750ml/1000ml) x 75.92 68,328

Fortified wine:

- Specific tax (30% x 50 x 12) x 23.40 4,212

- Ad Valorem tax (300 x 50 x 12) x 20% 36,000___ 40,212______

Total excise tax 427,402.80

Illustration: Fermented liquors

Diwata company ferments product known as Porter beer from imported malt and sells them in 750 ml bottles at 75/bottle final retail price. The
beers are sold in cases that contain 12 bottles each. 800 cases of beer are produced in October 2024.

Excise tax is computed as:

No. of case produced 800

Multiply: bottle per case 12_____

Total bottles 9,600

Multiply: ml/bottle 750____

Total ml produced 7,200,000

Divide: ml/L 1,000___

Total liters produced 7,200

Multiply: Excise tax per liter 43______

Total excise tax 309,600

Conditional tax-free removal of alcohol products

1. Removal of wines and distilled spirits for treatment of tobacco leaf

2. Removal of spirits for rectification
3. Removal of fermented liquor to bonded warehouses
4. Removal of damaged liquors

EXCISE TAX ON TOBACCO PRODUCTS

- No tobacco products manufactured in the Philippines and produced for export shall be removed
from their place of manufacture or exported without posting a bond of an export bond
equivalent to the amount of the excise tax thereon if sold domestically.

Particulars NEW TAX RATES based on RA 11467

Jan 1, 2020 Jan 23, Jan. 2021 Jan. 2022 Jan. 2023 Jan. 2024
2020
Heated Php 10.00 Php 25.00 Php 27.50 Php 30.00 Php 32.50 Specific tax
Tobacco rate shall
Products be
increased
by 5% every
year
effective
2024

Particulars NEW TAX RATES based on RA 11467

Jan 1, 2020 Jan. 2021 Jan. 2022 Jan. 2023 Jan. 2024
Cigars
Ad Valorem 20% 20% 20% 20% 20%
(a) Based on
the Net
retail price
per cigar
(excluding
the excise
and value-
added
taxes), and
(b) Per cigar Php 6.57 Php 6.83 Php 7.10 Php 7.38 Specific tax rate shall be
increased by 5% every year
effective 2024
 Particulars NEW TAX RATES based on RA 11467

Jan 1, 2020 Jan. 2021 Jan. 2022 Jan. 2023 Jan. 2024
1.Cigarettes Php 45.00 Php 50.00 Php 55.00 Php 60.00 Specific tax rare shall be
packed by increased by 5% every year
hand or effective 2024
machine

INSPECTION FEE - There shall be collected inspection fees on leaf tobacco, scrap, cigars, Cigarettes and
other manufactured tobacco and tobacco products.

EXCISE TAX ON PETROLEUM PRODUCTS

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

Used in production or Used as replacement fuels for

processing of products subject power plants
to excise tax
Naphtha, gasoline and other Exempt Exempt
similar products
Liquefied petroleum gas Exempt Exempt
Petroleum coke - Exempt
Bunker fuel Taxable but creditable -

Sale of Petroleum Products to Exempt Entities

Petroleum products sold to the following are exempt from excise tax:

1. International carriers
2. Entities exempted under tax treaties, conditional on reciprocal tax exemption treatment
3. Entities which are exempt from direct and indirect tax

Petroleum products sold to international carriers must be stored in bonded storage tank and may be
disposed of only in accordance with the regulations by the Secretary of Finance upon recommendation
of the CIR.