VAT on Importation

IMPORTATION

• Purchase of goods including services by

Philippine residents from non-resident sellers.
• Form of domestic consumption (subject to
consumption tax).

Types of Consumption Tax on Importation

1. VAT on importation - importation of goods

2. Final withholding VAT - purchase of services
from non-residents.
• VAT on importation is payable to the Bureau of Custom
whenever there is imporation of goods.
• The VAT is paid prior to the withdrawal of the goods from
the Customs warehouse.
• The withholding VAT is 12% of the payment for services
rendered by non-residents.
Exempt Importations:
A. Food Security
B. Personal and professional things
C. Education
D. Cooperative
E. Transport Operations
F. Others
 Exempt Importations - Food Security

Exempt imporations for human consumption

1. Agricultural or marine food products in original state
2. Livestock and poultry, fertilizer, seeds and feeds
3. Breeding stock and genetic materials
It must be emphasized that the exemption is limited to agricultural or
marine food proucts in their original state.

The importation of the following agricultural or marine food products

is exempt:
1. Grapes, apples, oranges and othe fruits
2. Vegetable, tea, ginseng
3. Rice, corn, coffee beans and other edible farm products
4. Marine foods such as fish and crustaceans
5. Poultry and livestock
6. Milk, eggs, meat for human consumption
 Meaning of “in original state”

The term “in original state” means unprocessed.

However, an agricultural or marine food product is still
considered in its original state and unprocessed even if it
undergone simple process of:
a. preparation for the market
b. preservation, or
c. packaging, including advanced technological means
of packaging.
Examples of acts of prepartion include the following:
a. Boiling c. Husking e. Stripping
b. Broiling d. Roasting f. Grinding

Examples of acts of preservation for the maket include:

a. Freezing c. Salting
b. Drying d. Smoking
Examples of advanced technological means of packaging
which do not alter the nature of agricultural or marine food
products being “in original state”
a. Shrink wrapping in plastics
b. Vacuum packaging
c. Tetra-packing
d. Other similar packaging methods
Hence, the following agricultural or marine food products
are considered in their original state and are exempt:
a. Husked rice f. Copra
b. Corn grits g. Dried fish
c. Raw cane sugar h. Sundried fruits
d. Roasted coffee beans i. Ground meat
e. Ordinary salt j. Smoked fish
Processed Agricultural or Marine Food Products

Processed agricultural or marine food products pertain to

those which have undergone changes in their chemical
compositions or haveu undergone complex processing or
treatment.
Examples of processed agricultural or maine food products:
a. Refined sugar d. Canned sardines or mackarel
b. Wine or vinegar e. Vegetable or coconut oil
c. Butter f. Soy

Importation of these goods are subject to VAT on

 Illustration:

Hardy Corporation imported the following goods:

Lumber P 500,000
Canned tuna and sardines 800,000
Frozen meat 700,000
Wheat 200,000
Flour 100,000
How much is exempt from VAT on imporation?

P900,000
 Marine or agricultural inputs intended for the production
of marine or agricultural food products which are ultimately
for human consumption are likewise exempt.

The importation of fertilizers, seed, seedlings, fingerlings,

fish, prawn, livestock and poultry, feeds including ingridients
used in manufacture of finished feeds are exempt since
they are ultimately intended for the production of food
products for human consumption.
 Illustration:

Simaron Corporation imported the following agricultural

implements:
Urea Fertilizer P 800,000
Cargil corn seeds 400,000
Pesticides 600,000
Herbicides 800,000
How much is exempt from VAT on imporation?

P1,200,000
Exempt Importations - Personal and Professional

Importations of Personal and Professional things

1. Importation of personal and household effects belonging ti
residents of the Philippines returning from abroad and non-resident
citzens coming to resettle in the Philippines.

2. Importation of 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.
Condition for exemption:
1. The goods belong to persons who come to settle in the
Philippines.
2. The goods must accompany the person upon arrival or within 90
days before and after their arrival.
3. There must be evidence to show that the change of residence is
bona fide.
4. The importation is not a vehicle, machinery or other equipment
used in manufacture, or merchandise of any kind in commercial
quantity.
 Illustration:

Mr. Siman was employed abroad as an OFW. He went

abroad bringing with him personal effects such as clothes,
pieces of personal jewelry and gadgets aggregating
P300,000 in value. When his contract ended, he returned to
the Philippines bringing with him the same effects which
now have aggragete value of P280,000.

How much is subject to VAT on importation?

P0
 Illustration:

Mrs. Kookai, a Philippine resident, purchased used

clothing and shoes abroad worth P30,000 to be sold in her
“wagwagan” sales outlets in the Philippines.

How much is subject to VAT on importation?

P30,000
 Illustration:

Mrs. Lovely, a non-resident Filipino businesswoman,

owns a machine in her business in France. She de-
commissioned the machine worth P50,000 to be transferred
to her business in the Philippines

How much is subject to VAT on importation?

P50,000
 Illustration:

While in Dubai, Mrs Waca bought a car and 10 pieces

brand new iPhone X from her salaries as OFW. When her
contract ended, Mrs. Waca brought the car and the 10
iPhone X into the Philippines.

Which are subject to VAT on importation?

Both
Exempt Importation - Transport Operations
1. Importation or lease of vessels and aircraft, including engine,
equipment and spare parts thereof whether for domestic or
international transport.
2. Importation of life-saving, safety and rescue equipment for
shipping transport operations, and equipment, machinery,
spareparts, steel or other metal plates to be used in any merchant
marine vessel for domestic trade.
3. Importation of fuel, goods and supplies by persons engaged in
international shipping or air transport operations.
 Illustration:

Royal Transport Group has land, sea and air transport

operations. To beef-up its operations, the group decided to
import the following vehicles:
a. 5 units of Daewoo bus
b. 1 airplane
c. 2 ships
Which are exempted from VAT on importation?

B and C
 Illustration:

Malaysian Ferries is an international shipping carrier with

shipping routes from the Philippines and other foreign
countries. It imported to the Philippines fuels and supplies
to be used in its shipping operations

Which are exempted from VAT on importation?

Both fuels and supplies

 Illustration:

Pinoy Airline imported jet fuel from Iraq at a total cost of

P50,000,000. 40% of the importation shall be used for
domestic airline operations while 60% shall be used for
international air transport operations

How much is subjected to VAT on importation?

P20,000,000
Exempt Importations - Cooperative
Importation of cooperatives of direct farm inputs,
machineries and equipment, including their spare parts.

Conditions for Exemption

1. The cooperative must be an agricultural cooperative duly
registered and in good standing with CDA
2. Importation involves direct farm inputs, machineries and
equipment and including their spare parts to be used directly and
exclusively in the production or processing of their produce.
 Illustration:

Abra Farmer's Coop. imported the following equipment:

a. Tractors and threshers to be used by the cooperative
b. Plows and water pumps to be resold to members
c. Fertilizers and hybrid seeds to be sold by the cooperative
d. Herbicides and pesticides to be used by the cooperative
e. Cars for the use of cooperative directors and officers
Which are exempted from VAT on importation?

A, C and D
 Illustration:

A mining cooperative imported an ozone generator and

an ultrafine ore grinding machine for its gold recovery plant.

Which are exempted from VAT on importation?

None
Presumption of VATABILITY
Importation is generally subject to VAT unless it can be
proven as exempt. The burden of proof in establishing VAT
exemption rests upon the taxpayer.

Subsequent Sale by Exempt Persons to Non-exempt

Persons
When an exempt importer subsequently sells his exempt
importation to a non-exempt person, the non-exempt buer
shall be subject to VAT on importation.
 Illustration:

Arado Coop, a farming cooperative, imported ten tractors

with acquisition cost of P180,000 each. Subsequently,
Arado Coop sold four tractors to Mr. Laco, a farmer.

How much is subject to VAT on importation?

P720,000
 Illustration:

A cooperative imported frozen meat from China. It

subsequently sold all of thhis to Philippine consumers.

How much is subject to VAT on importation?

None
 VAT on Importation

Tax Basis of VAT on Importation

 12% of the total landed cost of the importation, other than
those listed as exempt importations

Composition of landed cost:

1. Dutiable value
2. Custom duty
3. Excise tax, if any
4. Other in-land costs (bank charge, brokerage fee, arrastre charge,
wharfage due, customs DST and import processing fee
 Technical Importation

Technical importation refers to the purchase of non-

Ecozone Philippine residents from Philippine Ecozone-
registered enterprises.

By legal fiction, ecozones ar considered foreign territories.

Hence, the purchase from Economic zones is subject to
VAT on importation.
 Technical Importation

• Sale of goods by a PEZA-registered enterprise to a buyer

in the Philippines
• The buyer is treated as an importer and the sale shall be
charged the corresponding VAT.

Illustration
Winshield Corporation, a PEZA locator, sold scrap metals to
Recycle Induatries Corporation, a custom territory buyer
(buyer outside the Ecozone).
 Withholding VAT on Import of Services

The purchase of services from non-reidents is an

importation of service which is subject to “withholding VAT”.

In the case of sales of services by non-residents, the

regulation requires the resident buyers to “withhold” the VAT
whihch is presumed to have been passed-on by the non-
resident seller.
 Illustration:

Phil Mines imported an ozone generator at a total landed

cost of P1,200,000. The foreign seller provided installation
services which billed for $5,000 equivalent to P220,000.

How much is subject to VAT on importation?

P144,000