VAT ON IMPORTATION

Question 1

Abdul Corp. contracted the services of a foreign corporation for 2,000,000 80% of which was rendered abroad and 20% in the Philippines. How shall this importation of service be taxed?

Answer 1

Abdul Corp. shall pay withholding VAT on the entire 2,000,000 contract price. The purchase is a domestic consumption subject to VAT on importation even though the services were totally rendered abroad.

Question 2

What is meant by importation?

Answer 2

Importation refers to the purchase of goods and services by Philippine residents from non-resident sellers. It is a form of domestic consumption, hence subject to importation tax.

Question 3

What are the types of consumption tax on importation?

Answer 3

1. VAT on importation - consumption tax on the IMPORT OF GOODS
2. Final Withholding VAT - the consumption tax on the PURCHASE OF SERVICES from non-residents.

Question 4

To whom is VAT on importation paid?

Answer 4

It is paid to the BUREAU OF CUSTOMS prior to the withdrawal of the goods from the customs warehouse using a form prescribed by the BoC.

Question 5

To whom is the Final Withholding VAT on importation paid?

Answer 5

It is paid to BIR under form 1600. In the case of sales of services by non-residents, the regulation requires the RESIDENT BUYERS TO “WITHHOLD” THE VAT which is presumed to have been passed-on by the non-resident seller.

Question 6

Aside from the exemptions mentioned in other deck, what are some other VAT exempt importations?

Answer 6

1. Importation of personal and household effects
   a. It must belong to persons intending to resettle in
   the Philippines
   b. The goods must be exempt from customs duties
   c. Its use must be strictly personal or professional
2. Importation of professional instruments and implements, wearing apparel, domestic animal and household effects
   a. Goods must belong to persons who come to settle
   in the PH
   b. Goods must accompany the person upon arrival or
   within 90 days before/after his arrival
   c. There must be evidence showing the change of
   residence is bona fide
   d. Importation is NOT a vehicle, machinery or other
   equipment used in the manufacture or merchandise
   of any kind in commercial quantity

Question 7

How is VAT on importation calculated?

Answer 7

VAT on importation is computed as 12% OF TOTAL LANDED COST of the importation, other than those listed as exempt importations.

Landed cost is composed of the following:

1. Dutiable Value
   a. Cost of Goods
   b. Freight
   c. Insurance
   d. Other costs
2. Custom Duty
   a. If not given, computed as:
   Dutiable Value x Customs or tariff rate
   OR
   Dutiable Value x Exchange rate x Rate of Duty
3. Excise tax, if applicable
   a. If not given, computed as:
   (Dutiable Value + Customs Duty + Other in-land costs)
   multiplied by 1.1 multiplied by 15%
4. Other in-land costs such as:
   a. Bank charge
   b. Brokerage fee
   c. Arrastre charge
   d. Wharfage due
   e. Customs doc stamp tax
   f. Import processing fee

Question 8

Can a resident purchaser claim VAT on importation or withholding VAT as Input VAT creditable against Output VAT?

Answer 8

Yes, provided that he is VAT-registered.

Question 9

T or F
Importation is subject to either VAT or percentage tax depending on the subject.

Answer 9

False. VAT only

Question 10

T or F
The VAT on importation is paid to the BIR.

Answer 10

False, to the Bureau of Customs

Question 11

T or F
The Final withholding VAT on services is paid to BIR.

Answer 11

True

Question 12

T or F
The sale of services abroad is subject to the 12% Final Withholding VAT.

Answer 12

False. It is the PURCHASE OF SERVICES ABROAD that is subject to 12% withholding vat.

Question 13

T or F
Sales by non-residents are considered made in the course of business.

Answer 13

True.

Question 14

T or F
Facilitation expense is included in computation of VAT on importation since it is necessary in bringing the imported item.

Answer 14

False, facilitation expense is an illegal payment (bribe).