A.
Course Code & Title : C-AE25 BUSINESS TAXATION
B. Module No. & Title : Module 8 – Excise Tax
C. Time Frame (Weeks/Hours) : 1 week (3 hours)
D. Overview
This module explains Excise Tax in the Philippines, when it is applicable and how it is
imposed.
E. Desired Learning Outcomes
Students should be able to:
a. Determine what transactions are subject to Excise Tax
b. Determine the rates of Excise tax on different excisable goods and services
F. Values Integration
In studying this module, it is hoped that you will be able to develop and manifest the following UA
Core Value/s:
Servant Leadership
Integrity
Excellence
Service Orientation
Teamwork
Obedience
Open Communication
G. Interaction/Collaboration
You will be engaging in activities that would make use of:
Google Forms
Group Chat
Other tools _______________
H. Content/Discussion
Review:
In the start of the course, we have determined that there are 3 types of business taxes: The percentage
tax, value-added tax, and the excise tax.
We have already discussed percentage tax and value added tax. The last one in our menu is the excise
tax. We have also already determined that a business or transaction generally can only be subjected
to two of the business taxes. Percentage tax and VAT cannot be imposed at the same time but VAT and
excise tax and other percentage tax and excise tax may be imposed at the same depending on the type
of goods or service.
Faculty: LIGAYA T. DAVID Page 1
sin tax
What is Excise tax?
It is a kind of a hybrid consumption tax with a regulatory overture. It is imposed only on certain goods
or services.
Excise tax is generally divided at the point of production or importation which means that the tax is
of production/ importation
collected even point
before it is sold or consumed (except for cosmetic surgery and mineral products are
subject to an excise tax at the point of sale).
Goods subject to excise tax
1. Alcohol products - this includes distilled spirits wines and fermented liquors
2. Tobacco products - this includes cigars and cigarettes
3. Petroleum products - this includes gas gasoline diesel wax lubricant oil grease kerosene, not a
denatured alcohol asphalt and bunker fuel oil.
4. Mineral products - includes metallic or non-metallic minerals and quarry resources
5. Miscellaneous articles such as automobiles non-essential goods such as jewelry perfume yet
sweet and beverages like soft drinks and sweetened drinks
Services subject to excise tax
1. Non-essential services such as cosmetic surgery
A business normally pays either a percentage tax or a value-added tax. If the business also produces or
imports Excisable goods or services, then excise tax is also imposed as an addition to the two business taxes.
Example:
a. If the company is a VAT taxpayer, then vat plus excise tax.
b. If the company is a non-VAT taxpayer, then percentage tax + excise tax.
Rates of Excise tax on Excisable Goods and Services
1. Alcohol products
Alcohol products Excise tax rates for 2019*
Distilled spirits per proof liter 23.4
net retail price NRP 20%
Sparkling wines/ net retail price per 750ml bottle: 500 316.33
champagne pesos or less
more than 500 pesos 885.73
Still wines and carbonated 14% alcohol by volume or less 37.9 6/L
wines
more than 14% but not more than 25% 70 5.92/L
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Fermented liquors if brewed and soda pub and restaurants 35.43/L
others 25.42/L
Note: the specific tax rates are subject to 4% annual adjustment every January 1 of every year
Proof liter means a liter of proof spirits a proof means 50% of alcohol content does 70% proof means
35% alcohol content.
Liter Proof 50 % alcohol content
75 % Prof 35 % alconol content
Example:
60 % proof =
30 % alcohol content
A brewery produces its famous whiskey of 60 proof, 750 ml bottle sold at a net retail price of 100
pesos per bottle. During the period, it produced a total of 15,000 bottles for 2019. required how much
is excise tax:
Since the whiskey is 60% proof, therefore alcohol content is 30%
per proof liter at P23.4
Total Proof Liter (60% x 750ml x 15,000 6,750
bottles)/1000
excise tax fair proof liter (6,750 x 23.4) 157,950
excise tax on NRP (15,000 x 100 x 20% 300,000
total excise tax 457,950
2. Tobacco products
The following shows the excise tax for tobacco products
Tobacco products tax rates
a. Tobacco not twisted by hand or P2.20/kg as of January 1, 2019*
reduced into a condition to be
consumed in any manner other
than the ordinary mode of drying
and cutting
b. tobacco prepared or partially P2.20/kg as of January 1, 2019*
prepared with or without the use of
any machine or instruments or
without being pressed or
sweetened
c. fine cut shorts and refuse, scripts, P2.20/kg as of January 1, 2019*
clippings , cutting, stems and sweet
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things of tobacco
d. on tobacco specially prepared for P1. 89/kg as of January 1, 2019*
chewing so as to be unsuitable for
use in any other manner
Note: Subject to 4% increase per annum.
Cigars and Cigarettes
Cigars per cigar Excise tax
- ad valorem tax 20% on net retail price
- specific tax 6.32 per pack as of January 1 2019
cigarettes per pack Pack by hand packed by machine
- July 1 2018 to 35 per pack 35 per pack
December 31 2019
- January 1, 2020 to 37.50 pack 37.50
December 31 2021
- January 1 2022 to 40 per pack* 40 per pack*
December 31,2023
Note: Subject to 4% increase per annum starting January 1, 2024
Petroleum products Tax rate unit of measure
2019 2020
Lubricating oils and greases including but P9.00 P10.00 liter of volume
not limited to base tax of lube oils and
greases and additives
processed gas P9.00 P10.00 liter of volume
wax and petroleum P9.00 P10.00 Kg
denatured alcohol for motive power P9.00 P10.00 liter of volume
naptha regular gasoline , pyrolysis P9.00 P10.00
gasoline and other similar products of
distillation
if used as raw materials and the
production of petrochemicals or as a
replacement fuels for power plants
unleaded gasoline P9.00 liter of volume
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aviation turbojet and aviation gas P4.00 liter of volume
Kerosene P4.00 liter of volume
diesel fuel oil and similar fuel oils P4.50 liter of volume
liquefied petroleum gas P2.00 kg
if used for motive power tax as diesel oil
if used for production of petrochemical 0 0
products
Asphalts P9.00 P10.00 kg
bunker fuel oil and similar fuel oils P4.50 P6.00 liter of volume
petroleum coke P4.50 P6.00 metric ton
If used as feedstock to power generation 0 zero
facilities
Note: Petroleum products used as raw materials in the manufacture of other petroleum products or as fuel for
power plants are not taxable.
Excise tax on sweetened beverages
Sweetened beverages refer to the non-alcoholic beverages of any constitution that are pre-packed and sealed
in accordance with the FDA standards, that contain caloric and/or non-caloric sweeteners added by the
manufacturers.
This includes sweetened juice drinks, sweetie, or carbonated beverages, flavored water, energy drinks.
The following table shows the excise tax on such products:
Product description tax rate per
liter
using purely calorie sweeteners and purity or a mix of them P6.00
using purely high fructose corn syrup or in combination with any calorie or P12.00
non-calorie sweetener
using purely coconut sap sugar and purely steviol glycosides exempt
The following shall not be subjected to excise tax on sweetened beverages
1. all milk products
2. soy milk and flavored soy milk
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3. 100% natural fruit juice
4. 100% natural vegetable fruit chews
5. meal replacement and medically indicated beverages
6. ground coffee, instant soluble coffee, and pre-packed powdered coffee products
Excise tax on miscellaneous articles.
The following shows the table for excise tax on miscellaneous articles such as automobiles and non- essential
services:
Excise tax on automobiles:
Automobiles refer to any four or more wheeled motor vehicle regardless of seating capacity which is
propelled by gasoline diesel electricity or other motive power. Take note of the definition four or more
wheeled. (which means this does not include motorcycles)
Consequently, utility vehicles such as buses trucks cargo vans jeepneys, or jeepney substitute and special
purpose vehicles such as cement mixers firetruck boom truck ambulance and or medical unit, and off-road
vehicles for heavy industries shall not be considered automobiles.
Pickups, like pickup trucks, are also exempted from excise tax. (these vehicles are also considered as utility
vehicles).
The following table shows the ad valorem tax on manufactured or imported vehicles. Please note that the
amounts are net of excise tax and vat, which means the rates will be added to the selling price.
Manufacturers or importer selling price Tax Rate
up to 600,000 4%
600,000 to 1 million 10%
1 million to 4 million 20%
over 4 million 50%
25 % excise tax
Also, hybrid vehicles shall only be subjected to 50% of the applicable excise taxes while purely electric
vehicles shall be exempt on excise tax on automobiles. This is done to promote the manufacture and use of
electric vehicles.
Hybrid vehicles means a motor vehicle powered by electricity and the traditional fuels like gasoline, diesel, or
any other motive power
Excise tax on non-essential goods
A 20% ad valorem tax is imposed upon the following non-essential goods.
a. Jewelry
b. Perfume and toilet water
c. Yachts and other vessels intended for pleasure or sports
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Excise tax on non-essential services
A tax of 5% on gross receipts derived from the performance of services, net of excise tax and vat, o invasive
cosmetic procedures, and surgeries directed solely towards improving , altering , or enhancing the patient's
appearance that do not meaningfully promote the proper functions of the body or prevent or treat illness or
disease. (as the definition suggests, these are non-essential and therefore not needed to promote the general
well-being of an individual.
Examples include
1. breast lift
2. facelift
3. neck lift
4. hair restoration
5. buttocks augmentation
Consequently, this is the only not essential service as of this date.
Progress check:
1. Discuss the nature of Excise tax?
2. What goods and services are subject to excise tax in the Philippines.
3. What are the specific excise tax rates on the following:
a. Alcohol products 20 % URP 23 4 PL .
b. Tobacco Products 2. 2011
c. Petroleum products
89/kg
.
d. Automobiles 406 10 %,209 50 %
,
e. Sweetened Beverages 4 R
.
AssignmentEvaluation:
:
1. ABC Co. is a VAT registered Manufacturer. it had the following data on the
manufacturer of car model during the period of covid.
Production cost 1 million
transport and other expenses 200,000
of sales
final selling price to a customer 1,100,000 basis of excise tax
required: What is the basis of ad valorem tax?
2. DEF company produced the following vehicle model during the month:
Car model wholesale price
electric car 5 million
utility bus 4 million
Faculty: LIGAYA T. DAVID Page 7
3
, 000 000 X 50 % X 20 %
100
.
=
.
000
hybrid ↓
cm-
hybrid suv 3 million
passenger jeepney 2 million
Motorbikes 1 million
Total 15 million
Required: how much is excise tax due?
3. Miss A, a VAT registered physician and beautician conducted an internal abs
enhancement procedure. the amount of the contract is 2 million pesos before taxes.
Required: How much is the excise tax?
2
, 000 000
. X 5% =
1
I. References
TRAIN LAW
CREATE ACT
Aduana, N. L. (2016). Simplified and Procedural Handbook on Transfer and Business Taxation.
Ampongan, O. E. (2015). CPA Review in Taxation. Iriga City, Philippines: Ampongan, Omar Erasmo G.
Ampongan, O. E. (2016). Transfer, Business & local Taxation. Iriga City, Philippines: Ampongan, Omar Erasmo
G.
Ballada, W., & Ballada, S. (2015). Transfer and Business Taxation. Manila City, Philippines: Domdane.
Banggawan, R. B. (2019). Business and Transfer Taxation Laws Principles and Applications. Baguio City,
Philippines: Real Excellence Publishing.
De Leon, H. S., & De Leon, H. M. (2016). The Law on Transfer and Business Taxation (with Illustrations,
Problems, and Solutions). Manila City, Philippines: REX Book Store.
Duncano, D. A. (2017). Easy Guide to taxation for Entrepreneurs. Mandaluyong City: Anvil Publishing, Inc.
Duncano, D. A. (2016). National Internal Revenue Code of 1997 As Amended Updated with Annotations.
Mandaluyong City, Philippines: Anvil Publishing, Inc.
Reyes, V. D. (2013). Philippine Business and Transfer Taxes. Philippines: Philippine Business and Transfer
Taxes.
Reyes, V. D. (2015). Taxation: Law and Accounting for the CPA Reviewees and the Bar Reviewer.
Faculty: LIGAYA T. DAVID Page 8
Tabag, E. D., & Garcia, E. J. (2017). Transfer and Business Taxation. Quezon City, Philippines: MaxCor
Publishing House, Inc.
Valencia, E. G., & Roxas, G. F. (2013-2014). Transfer and Business Taxation Principles and Laws with Accounting
Principles. Baguio City, Philippines: Valencia Educational Supply.
Module prepared by : MR. ROCKY D. BAYAS
Reviewed/updated by : LIGAYA T. DAVID
Faculty: LIGAYA T. DAVID Page 9
