If it’s your first time shipping, perhaps your initial question revolves around how to calculate duties and taxes in the Philippines? Duties and taxes are assessed based on the total value of the shipment, encompassing the cost of your imported products, freight, and insurance. Additionally, imports are subject to sales tax.
Comprehending the process of calculating duties and taxes holds immense importance, particularly for businesses involved in global trade or individuals bringing goods into the Philippines. Nonetheless, maneuvering through the intricate network of customs duties, taxes, and fees can be daunting. In this guide, we aim to simplify this process by elucidating the steps required to calculate duties and taxes in the Philippines.
Identify Your Dutiable Value:
The initial step in the duties and taxes calculation process involves determining the dutiable value of the imported goods. This value encompasses the cost of the goods, freight, insurance, and any additional charges incurred until the goods arrive at the Philippine port of entry. Maintaining precise records of all related expenses is imperative.
Grasp Tariff Rates:
Once you’ve established the dutiable value, the next task is to ascertain the applicable tariff rates for your goods. The Philippines Customs Tariff comprises a comprehensive list of tariffs for various products. Tariff rates are subject to variation based on the type of goods and their country of origin. You can locate the relevant tariff classification and rates within the Tariff and Customs Code of the Philippines.
Compute Customs Duties:
Customs duties are calculated by multiplying the dutiable value of the goods by the applicable tariff rate. The resulting amount represents the customs duty payable to the Bureau of Customs. Ensuring accuracy in classification and calculation is vital to prevent underpayment or overpayment of duties.
Subscribe to the Ex-works24/7 newsletter
Take into Account Additional Taxes and Fees:
Apart from customs duties, imported goods are subject to various other taxes and fees. These may encompass value-added tax (VAT), excise tax, and assorted administrative charges. In the Philippines, the current VAT rate stands at 12%, while excise tax rates fluctuate based on the nature of the goods.
Consider Special Trade Agreements:
The Philippines has engaged in multiple trade agreements with other nations, such as the ASEAN Trade in Goods Agreement (ATIGA) and Free Trade Agreements (FTAs). Commodities imported from countries covered by these agreements might be eligible for preferential tariff rates or exemptions. It’s essential to verify the eligibility criteria and documentation requirements to avail yourself of these advantages.
Utilize Online Tools and Resources:
To streamline the process of duty and tax calculation, leverage online tools and resources provided by the Bureau of Customs. These resources often encompass duty calculators and databases of tariff classifications, facilitating the determination of applicable rates for your goods.
Seek Professional Assistance if Necessary:
Should you encounter difficulties or handle intricate import transactions, consider seeking professional assistance from customs brokers or import-export consultants. They can offer expert guidance and ensure compliance with customs regulations.
Import documents To Consider
Vital documentation is necessary for all imported goods. Failure to provide the necessary paperwork may result in delays in customs processing. This article outlines the essential documents needed for importing into the Philippines, restricted or prohibited products, and the method for calculating applicable taxes. The specific documents required vary depending on the type of goods being imported, with additional documentation possibly including the following:
An endorsed Bill of Lading or Airway Bill.
A sales invoice that shows the commercial value of the goods.
A packing list with the detailed information regarding the products
Duly notarized Supplemental Declaration on Valuation (SDV)
Import license for the Philippines or permit
Certificate of origin only for those products for which you want to avail preferential tariffs under free trade agreements.
Other documents and certificates that prove exemption from taxes and customs fees in the Philippines
Authority to Release Imported Goods (ATRIG)
Tax Credit Certificate (TCC)
Tax Debit Memo (TDM)
If a ruling was used in goods declaration, a copy of the verdict is required.
How to Calculate Duties and Taxes?
You can use an import tax calculator to calculate customs duty in the Philippines. Import duty rates in the Philippines include the average duty rate based on the value of the imported goods plus Value Added Tax (VAT) or sales tax which is 12% of the total cost of unloading.
E.G. if the imported products’ Dutiable value is US$2000 and a 3% Customs duty rate is applied, the import duty would be 3% x US$2000 = US$60.
A VAT of 12% is also applicable on the Dutiable Value and the Customs duty, which will become 12% x (Declared value US$2000 + Customs Duty US$60) = US$247.20.
The total import duties for the goods would then be:
Customs Duty US$60.00 + 12% VAT US$247.20 = US$307.20.
In addition to import duties and sales tax, some products may be subject to additional taxes, including:
-
Ad Valorem Tax for alcohol, tobacco, automobiles, and jewelry
-
Storage charge and warehouse handling charges
-
Excise Tax on alcohol, tobacco, petroleum products, mineral products, automobiles, jewelry, perfume, toilet water, yachts, and vessels
-
Bulk and break bulk cargo fees on liquids, chemicals, petroleum products, grains, and all other types of cargo shipped in bulk.
Conclusion: Calculating duties and taxes in the Philippines doesn’t have to be daunting. By following these simplified steps and leveraging available resources, businesses and individuals can ensure compliance with customs regulations and avoid any surprises when importing goods. Understanding the process empowers importers to make informed decisions and effectively manage their international trade operations.
