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TAX-501 - Lecture notes 221212
Business Finance (University of Caloocan City)
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ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY
CPA Review Batch 41  May 2021 CPA Licensure Examination  Week No. 5
A. Tamayo  G. Caiga  C. Lim  K. Manuel  E. Buen
TAXATION
TAX-501: EXCISE TAXES
A. Definition of excise tax
Excise taxes apply to taxes on goods manufactured or produced in the Philippines for domestic sales or
consumption or for any other disposition and to things imported as well as services performed in the
Philippine, which tax shall be in addition to the value-added tax.
B. Concept and nature of excise taxes
1. Considered
These excise taxes may be considered taxes on production as they are collected only
taxes on
from the manufacturers and producers.
production
2. An indirect tax
Basically excise tax is an indirect tax, excise taxes are directly levied upon the
manufacturer or importer upon removal of the taxable goods from its place of
production or from the customs custody.
These taxes, however, may be actually passed on to the end consumer as part of the
transfer value or selling price of the goods sold, bartered or exchanged.
C. Goods and services subject to excise tax
Excise taxes apply to:
1. Goods subject
a) goods manufactured or produced in the Philippines for domestic sales or
to excise taxes
consumption or for any other disposition,
b) things imported, as well as
c) services rendered in the Philippines
Excise
a)
b)
c)
d)
e)
f)
g)
2. Kinds of excise
taxes
3. Examples of
specific tax
4. Examples of ad
valorem tax
5. Manner of
Computation of
Excise Tax
taxes specifically apply to:
Alcohol products,
Tobacco products,
Petroleum products,
Miscellaneous articles such as automobiles and non-essential goods,
Non-essential services,
Sweetened beverages, and
Mineral products
The excise tax imposed herein shall be in addition to the value-added tax imposed.
'Specific tax' - an excise tax imposed and based on weight or volume capacity or any
other physical unit of measurement.
'Ad valorem tax - an excise tax imposed and based on selling price or other specified
value of the good.'
a) Excise tax on Cigarettes Packed by Hand
b) Excise tax on Cigarettes Packed by Machine
c) Excise tax on petroleum products
d) Excise tax on mineral products
e) Excise tax on sweetened beverages
a) Excise tax on alcoholic products
b) Excise tax on cigars
c) Excise tax on automobiles
d) Excise tax on non-essential services
a) Specific tax = Units x Specific tax rate
b) Ad valorem tax = Units x SP/unit x Ad valorem tax rate
D. Filing of Return and Payment of Excise Tax on Domestic Products.
1. Persons Liable to File a Return, Filing of Return on Removal and Payment of Tax. Every person liable to pay excise tax shall file a separate return for each place of
a. Persons
Liable to File production setting forth, among others:
a) the description and quantity or volume of products to be removed,
a Return
b) the applicable tax base and the amount of tax due thereon.
In the case of indigenous petroleum, natural gas or liquefied natural gas, the excise tax
shall be paid by the first buyer, purchaser or transferee for local sale, barter or transfer.
Excise tax on exported products shall be paid by the owner, lessee, concessionaire or
operator of the mining claim.
Should domestic products be removed from the place of production without the
payment of the tax, the owner or person having possession thereof shall be liable for
the tax due thereon.
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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-501
Week No. 5: EXCISE TAX
b. Time for
Filing of
Return and
Payment of
the Tax
Unless otherwise specifically allowed, the return shall be filed and the excise tax paid by
the manufacturer or producer before removal of domestic products from place of
production.
Excise tax on locally manufactured petroleum products and indigenous petroleum levied
under Sections 148 (Manufactured Oil and Other Fuels) and 151(A)(4) (Indigenous
Petroleum), respectively, shall be paid:
a) within ten (10) days from the date of removal of such products for the period
from January 1, 1998 to June 30, 1998;
b) within five (5) days from the date of removal of such products for the period
from July 1, 1998 to December 31, 1998; and,
c) before removal from the place of production of such products from January 1,
1999 and thereafter.
Excise tax on nonmetallic mineral or mineral products, or quarry resources shall be due
and payable upon removal of such products from the locality where mined or extracted.
With respect to the excise tax on locally produced or extracted metallic mineral or
mineral products, the person liable shall file a return and pay the tax within fifteen (15)
days after the end of the calendar quarter when such products were removed subject to
such conditions as may be prescribed by rules and regulations to be promulgated by the
Secretary of Finance, upon recommendation of the Commissioner.
For this purpose, the taxpayer shall file a bond in an amount which approximates the
amount of excise tax due on the removals for the said quarter.
c. Place of
Filing of
Return and
Payment of
the Tax
d. Exceptions
The foregoing rules notwithstanding, for imported mineral or mineral products, whether
metallic or nonmetallic, the excise tax due thereon shall be paid before their removal
from customs custody.
Except as the Commissioner otherwise permits, the return shall be filed with and the tax
paid to any authorized agent bank or Revenue Collection Officer, or duly authorized City
or Municipal Treasurer in the Philippines.
The Secretary of Finance, upon recommendation of the Commissioner may, by rules and
regulations, prescribe:
(a) The time for filing the return at intervals other than the time prescribed in the
preceding paragraphs for a particular class or classes of taxpayers after considering
factors such as volume of removals, adequate measures of security and such other
relevant information required to be submitted under the pertinent provisions of this
Code; and
(b) The manner and time of payment of excise taxes other than as herein prescribed,
under a tax prepayment, advance deposit or similar schemes. In the case of locally
produced of extracted minerals and mineral products or quarry resources where the
mine site or place of extraction is not the same as the place of processing or
production, the return shall be filed with and the tax paid to the Revenue District
Office having jurisdiction over the locality where the same are mined, extracted or
quarried: Provided, however, That for metallic minerals processed abroad, the return
shall be filed and the tax due thereon paid to the Revenue District Office having
jurisdiction over the locality where the same are mined, extracted or quarried.
2. Determination of Gross Selling Price of Goods Subject to Ad Valorem Tax
a. Price excluding
Unless otherwise provided, the price, excluding the value-added tax, at which the
VAT
goods are sold at wholesale in the place of production or through their sales agents
to the public shall constitute the gross selling price
b. Manufacturer
If the manufacturer also sells or allows such goods to be sold at wholesale in
also sells or
another establishment of which he is the owner or in the profits of which he has an
allows goods to
interest, the wholesale price in such establishment shall constitute the gross selling
be sold at
price.
wholesale in
another
establishment he
owns
Should such price be less than the cost of manufacture plus expenses incurred until
c. Should price be
the goods are finally sold, then a proportionate margin of profit, not less than ten
less than the
percent (10%) of such manufacturing cost and expenses, shall be added to
cost of
constitute the gross selling price.
manufacture
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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-501
Week No. 5: EXCISE TAX
3. Manufacturer's or Producer's Sworn Statement
Every manufacturer or producer of goods or products subject to excise taxes shall file with the Commissioner
on the date or dates designated by the latter, and as often as may be required, a sworn statement showing,
among other information:
A) the different goods or products manufactured or produced and their corresponding gross selling
price or market value,
B) together with the cost of manufacture or production
C) plus expenses incurred or to be incurred until the goods or products are finally sold.
4. Credit for Excise tax on Goods Actually Exported
a. When goods
locally produced
or
manufactured
are removed
and actually
exported
b. Excise tax on
mineral
products,
except coal and
coke
When goods locally produced or manufactured are removed and actually exported
without returning to the Philippines, whether so exported in their original state or as
ingredients or parts of any manufactured goods or products, any excise tax paid
thereon shall be credited or refunded upon submission of the proof of actual
exportation and upon receipt of the corresponding foreign exchange payment.
The excise tax on mineral products, except coal and coke, imposed under Section
151 shall not be creditable or refundable even if the mineral products are actually
exported.
E. Payment of Excise Taxes on Imported Articles
1. Person liable
a. Excise tax on
imported
articles
b. Tax-free articles
brought or
imported into
the Philippines
by persons,
entities, or
agencies
exempt from
tax
c. Importation of
cigars and
cigarettes,
distilled spirits,
fermented
liquors and
wines into the
Philippines
d. Non-labeling or
re-selling of
certain goods
punishable
e. Destruction of
confiscated
articles
f. Lien on the
article
Excise taxes on imported articles shall be paid by the owner or importer to the
Custom Officers, conformably with the regulations of the Department of Finance and
before the release of such articles from the customs house, or by the person who is
found in possession of articles which are exempt from excise taxes other than those
legally entitled to exemption.
In the case of tax-free articles brought or imported into the Philippines by persons,
entities, or agencies exempt from tax which are subsequently sold, transferred or
exchanged in the Philippines to non-exempt persons or entitles, the purchasers or
recipients shall be considered the importers thereof, and shall be liable for the duty
and internal revenue tax due on such importation
The provision of any special or general law to the contrary notwithstanding, the
importation of cigars and cigarettes, distilled spirits, fermented liquors and wines
into the Philippines, even if destined for tax and duty free shops, shall be subject to
all applicable taxes, duties, charges, including excise taxes due thereon.
Cigars and cigarettes, distilled spirits and wines within the premises of all duty-free
shops which are not labeled as herein above required, as well as tax and duty-free
articles obtained from a duty free shop and subsequently found in a non duty-free
shop to be offered for resale shall be confiscated, and the perpetrator of such nonlabeling or re-selling shall be punishable under the applicable provisions of this
Code.
Articles confiscated shall de destroyed using the most environmentally friendly
method available in accordance with the rules and regulations to be promulgated by
the Secretary of Finance, upon recommendation of the Commissioners of Customs
and Internal Revenue.
The tax due on any such goods, products, machinery, equipment or other similar
articles shall constitute a lien on the article itself, and such lien shall be superior to
all other charges or liens, irrespective of the possessor thereof.
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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
TAX-501
Week No. 5: EXCISE TAX
2. Rate and Basis of the Excise Tax on Imported Articles
Unless otherwise specified imported articles shall be subject to the same rates and basis of excise taxes
applicable to locally manufactured articles.
F. Mode of Computing Contents of Cask or Package
Every fractional part of a proof liter equal to or greater than a half liter in a cask or package containing
more than one liter shall be taxed as a liter, and any smaller fractional part shall be exempt but any
package of spirits, the total content of which are less than a proof liter, shall be taxed as one liter.
G. Exercises
1. On January 15, 2019, Mr. Rico Emilio Nario imported an automobile with importer’s selling price of
P4,500,000. The customs duties on importation amounted to P2,000,000. Total charges before the
goods are released from Customs custody amounted to P500,000.
Question 1 – How much is the excise tax on the importation?
Question 2 – How much is the VAT on importation?
2. On January 15, 2019, Buen Mining Corporation removed 100,000 metric tons of domestic coal and coke
from the locality where mined or extracted. How much is the excise tax, if any?
3. Manuel Wines and Liquors imported distilled spirits and presented the following data:
Net retail price (excluding the excise tax and the value-added tax) per proof
P10
Total proof liter
500,000 proof liter
Question 1 – How much is the ad valorem excise tax?
Question 2 – How much is the specific excise tax?
4. To improve her body shape Paz Seksi decided to undergo procedure and sought the services of Body
Beautiful, a clinic operated outside the hospital and owned by Bello Medical Group, Inc. Body Beautiful
charged Ms. Pax Seksi the amount of P50,000 (inclusive of 12% VAT but exclusive of 5% excise tax) for
the service rendered.
Question 1 – How much is the excise tax?
Question 2 – How much is the VAT?
Question 3 - How much is the total amount to be collected from Ms. Paz Seksi?
5. Using the same data in no. 4, assuming that the amount of P50,000 is inclusive of 12% VAT and 5%
excise tax
Question 1 – How much is the excise tax?
Question 2 – How much is the VAT?
Question 3 - How much is the total amount to be collected from Ms. Paz Seksi?
6. Same facts in no. 4, except this time Ms. Paz Seksi had another invasive cosmetic procedure done by
Dr. Anne Calay, an individual practitioner operating a clinic inside of hospital whose gross annual
receipts exceed the VAT threshold. The hospital bills of Ms. Paz Seksi other fees (e.g. supplies and fees
for use of operating room and hospital facilities) in the amount of P20,000, in addition to the fees
charged by Dr. Anne Calay of P50,000 (inclusive of 12% VAT, excluding 5% excise tax) for the service
performed.
Question
Question
Question
Question
1
2
3
4
–
–
–
-
How much is the VAT-exempt service, if any?
How much is the excise tax?
How much is the VAT?
How much is the total amount to be collected from Ms. Paz Seksi?
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