How to Calculate Import Tax and Duty in the Philippines

Are you preparing to import goods into the Philippines and want to find out how much your shipment will cost in import tax? As per The Philippines Customs Law, all imported goods coming into the country are subject to payment of duties, taxes, and other local charges.

In this article, we’ll navigate the intricacies of import tax laws in the Philippines and explain how to calculate import tax and duties for your specific shipment.

Essential factors for calculating Import tax in the Philippines

What are import taxes and duties?

Import taxes and duties are paid on goods being imported into the Philippines. The Philippines Bureau of Customs authority oversees the tax. 

When importing goods, it is important to prepare the necessary documents and declare the correct value to the customs agents overseeing the clearance of the goods. Duties are calculated based on the total value of goods being shipped. If import taxes are not paid, the shipment will not be released into the Philippines.

Keep in mind that different types of regulations and requirements can apply depending on the type of goods you plan on importing. For more information, take a look at this guide on importing goods into the Philippines. 

What taxes are applied to imports in the Philippines? 

Taxation is a complicated matter, as many factors will affect the total amount owed for any shipment. The Philippines Customs system is based on the Standard International Trade Classification (SITC) of the United Nations. 

When calculating customs tax in the Philippines, several different types of tax may apply:

Tax Type	Description	Affected goods
Value Added Tax (VAT)	Equivalent to 12% of the total landed cost (production, shipment, delivery) of goods.	Applied to every type of good.
Excise Tax	A tax that applies only to specific types of goods and types of licensed activities. The rate varies depending on the commodity.	Alcohol, Tobacco, Petroleum products, Mineral products, Automobiles, Jewelry, Perfume, Toilet water, Yachts and vessels intended for pleasure or sport, etc.
Payment Ad Valorum Tax	The Ad Valorem Tax rate depends on the quality or content of the products. It is derived from the current assessed value and not the import value.	Alcohol, Tobacco, Automobiles, Jewelry
Warehouse Processing Charges (WPC)	A fixed amount tax is applied to the handling of shipments. There are two types: Storage charges and Warehouse handling charges	Non-document imports or document imports heavier than 10 kilograms
Bulk and Break Bulk Cargo fee	Part of a cargo clearance enhancement program for the bulk and breakbulk cargo. The type of good determines the fee.	Liquids, Chemicals, Petroleum products, Dry cargoes (grain), and all other cargoes shipped in bulk or break-bulk (such as wood, steel, etc.)

Other important considerations for tax calculation on imported goods 

If you are planning to ship goods from a foreign country into the Philippines, some additional points must be considered. On top of the tax types mentioned previously, there are two essential factors to keep in mind while calculating the import tax and duty of an import in the Philippines:

1. Tariff classification code:  Designated to the goods by customs officials. These are an internationally standardized coding system referred to as “Harmonised System” or “HS codes” for short. HS codes determine a good’s classification and are used for monitoring imports and calculating the applicable customs tax rates.
2. Preferential trade agreements: These are agreements between certain countries that aim to facilitate the importing of specific goods deemed of economic value through the reduction of import taxes. 

These factors will not only facilitate the calculation of taxes for your specific shipment into the Philippines but will also avoid potential delays or penalties when your goods clear customs. Check out this article on customs clearance in the Philippines for more details.

How to calculate duty and sales tax in the Philippines

Calculate your import duty and sales tax (VAT) 

The import taxes and duty will be calculated based on the complete shipping value of the import. This includes the cost of your imported goods, the cost of transport freight, and the cost of insurance that can be taken out on your shipment. For tax calculation, these are combined under cost, insurance, and freight (CIF).

The VAT is fixed at 12%, but duty rates range between 0 and 65%. These are determined by the classification of the goods being imported. To calculate the import duty, you must consult the Philippine Tariff Commission’s Tariff finder for the applicable rate.

Calculation for Import Duty (USD)	% * USD = USD
Calculation for VAT (USD)	% * (Duty + CIF)
Total Import and Duty Tax (USD)	Duty + VAT

Example:

If the CIF value of the imported goods is USD 20,000, the Import Duty is 5%, and the VAT is 12%. Then the duty/taxes calculation is:

Import Duty = 5% * USD 20,000.00 = USD 1000.00

VAT             = 12% * (USD 20,000.00 + USD 1000.00) =  USD 2520.00

Total Import Duty and Tax = USD 1000.00 + USD 2520.00 = USD 3520.00

Monitor changes in the import tax in the Philippines

It is important to stay up to date with changes that are made to trade laws and regulations in the Philippines. Currently, Importing to the Philippines is easier as the tariffs have been removed on approximately 99% of all goods from ASEAN trading partners due to the ASEAN Trade and Goods Agreement (ATIGA).

The highest customs tariff rates apply to products derived from sugar and cereal products. However, a rule of thumb is that higher tariffs are overall implemented on imported manufactured goods if they compete with locally produced items. Especially when in comparison to those without any or low local competition.

The Government’s main idea behind the applied duty rates is to follow domestic and global economic developments. This protects local producers, especially in the sectors concerning manufacturing and agriculture. Flux in the Philippines’ economy can therefore have an impact on your potential imports.

Streamline your import plans with an Importer of Record 

Importing goods into the Philippines is an intricate process and every associated cost will impact the import tax you will have to pay once your shipment reaches customs. Emerhub’s IOR service offers you an experienced consignee who can reduce your risk and overall costs through its expertise in Philippine import legislation and its pre-established shipping solutions.

Our team of advisors can help you every step of the way to ensure that your goods get delivered promptly and cost-effectively. Schedule a call with one of our advisors via the form below to learn how we can help your business!