How to Calculate Duties and Taxes on Imports to Philippines involves a multi-step process managed by the Bureau of Customs (BOC). Import duties and taxes are determined by the product's classification (HS Code), its customs value, and the country of origin. A key factor is the de minimis threshold, which currently exempts shipments with a Free on Board (FOB) or Free Carrier (FCA) value of ₱10,000 or less from both customs duties and Value-Added Tax (VAT). Understanding these rules is essential for accurately estimating your total landed cost in Philippine Peso (₱, PHP).
Customs duties are the primary tariff levied on imported goods, with rates varying significantly based on the product's classification under the Harmonized System (HS) code. The Philippines uses the ASEAN Harmonized Tariff Nomenclature (AHTN), which is an 8-digit import classification code that builds upon the international 6-digit HS structure to determine the specific duty rate. The official authority responsible for the assessment and collection of these revenues is the Bureau of Customs (BOC), which operates under the Department of Finance (DOF). The duty rate can range from 0% to 65%, with preferential rates available under Free Trade Agreements (FTAs) such as the ASEAN Trade in Goods Agreement (ATIGA) and the Regional Comprehensive Economic Partnership (RCEP). To accurately calculate import tax in Philippines, importers must first correctly classify their goods and then determine the customs valuation.
The calculation of import duties and taxes in Philippines is based on two main components: the Customs Duty and the Value-Added Tax (VAT). The primary method for determining the dutiable value is the Transaction Value, which is the price actually paid or payable for the goods when sold for export to the Philippines, in line with WTO rules.
For the purpose of calculating the total tax base, the Philippines uses the Cost, Insurance, and Freight (CIF) method. This means the dutiable value includes the cost of the goods, the cost of freight (shipping), and the cost of insurance to the port of entry.
How Import Duty is Calculated in Philippines:
This comprehensive approach is necessary to estimate the total landed cost. Importers must lodge their import entries electronically through the BOC's Electronic to Mobile (E2M) system or the National Single Window (NSW) trade portal. The most critical factor for low-value shipments is the ₱10,000 de minimis threshold, which acts as an automatic import tax calculator Philippines exemption for both duties and taxes when the FOB/FCA value is below this amount.
Determine the Dutiable Value: Use the Transaction Value (or CIF Value for the tax base), which is the Cost of Goods + Insurance + Freight (CIF).
Classify the Goods: Identify the correct 8-digit AHTN import classification code to find the applicable Customs Duty rate and check for any preferential FTA rates.
Calculate Customs Duty: Multiply the Dutiable Value (CIF) by the Customs Duty Rate (Duty = CIF Value x Duty Rate).
Calculate Value-Added Tax (VAT): Apply the 12% VAT rate to the total tax base (VAT Base = CIF Value + Customs Duty + Excise Tax, if any). (VAT = VAT Base x 12%)
Shipment Value (FOB/FCA) is ₱9,500: Since the value is below the ₱10,000 de minimis threshold, the shipment is exempt from both Customs Duty and VAT.
Shipment Value (FOB/FCA) is ₱15,000: The shipment exceeds the de minimis threshold and is subject to full duties and taxes. If the CIF value is ₱16,000 and the duty rate is 5%, the Duty is ₱800. The VAT is 12% of (₱16,000 + ₱800) = ₱2,016. Total duties and taxes due are ₱2,816.
Misclassifying the Goods: Using an incorrect 8-digit AHTN code can lead to incorrect duty rates, penalties, and customs delays.
Ignoring the De Minimis Consolidation Rule: The BOC aggregates the value of multiple low-value shipments sent to the same recipient on the same day. Exceeding ₱10,000 in total value will trigger full duties and taxes on all parcels.
Failing to Claim FTA Benefits: Not providing the required Certificate of Origin (e.g., Form D for ATIGA or Form RCEP) means missing out on preferential or zero-duty rates.
The most significant special rule for imports to the Philippines is the high de minimis value of ₱10,000 (FOB/FCA), which exempts low-value shipments, particularly those from cross-border eCommerce, from both Customs Duty and the 12% VAT. This rule is a major trade facilitator but is subject to the BOC's consolidation policy. Furthermore, the Philippines offers duty and tax exemptions for goods imported into designated Special Economic Zones and provides preferential tariff treatment under various Free Trade Agreements for goods meeting the specific Rules of Origin.
The de minimis threshold is ₱10,000 (Philippine Peso) based on the Free on Board (FOB) or Free Carrier (FCA) value. Shipments at or below this value are exempt from both Customs Duty and Value-Added Tax (VAT).
The standard Value-Added Tax (VAT) rate on imported goods in the Philippines is 12%. This tax is applied to the total landed cost, which includes the CIF value, the Customs Duty, and any applicable Excise Tax.
The primary basis for customs valuation is the Transaction Value (the price actually paid or payable). However, the tax base for calculating VAT is the Cost, Insurance, and Freight (CIF) value plus the Customs Duty and any Excise Tax.
The Philippines uses the 8-digit ASEAN Harmonized Tariff Nomenclature (AHTN) as its import classification code structure, which is based on the international 6-digit Harmonized System (HS) code.