Customs Duty is a tax levied on imports (and sometimes on exports) by the customs authorities of a country to raise state revenue, and/or to protect domestic industries from more efficient or predatory competitors from abroad. Also called tariff, duty is based generally on the value of goods (called ad valorem duty) or upon the weight, dimensions or some other criteria of the item.
Types of Duty
All imported goods for consumption are subject to the payment of import duty prior to release of unless otherwise exempted in accordance with law by the Department of Finance.
Value Added Tax (VAT)
All imported goods are also subject to the payment of VAT at the uniform rate of 10% of the total landed cost. Even if the shipment is duty free, it may still be subject to VAT.
Ad Valorem Tax
A few commodities, like passenger automobiles, jewelry, alcohol, tobacco, etc. may also be subject to the payment of Ad Valorem Tax aside from the import duty and VAT. The rate of Ad Valorem Tax depends on the make-up of the commodity such as the engine displacement cost in case of automobiles, or alcohol content in case of beverages.
Like VAT, Ad Valorem Tax is an internal revenue tax, the collection of which is delegated to the Bureau of Customs in so far as imported goods are concerned. Imported goods subject to Ad Valorem shall be covered by an Authority to Release Imported Goods (ATRIG) issued by the Bureau of Internal Revenue before they can be released from the port.
Rates of Duty
The rate of import duty varies depending on the commodity imported, ranging from 3 to 50%. The schedule of rates is listed under Section 104, Tariff and Customs Code of the Philippines (TCCP), as amended.
Payment of Duties
Duty is paid along with all the other taxes and charges due on the shipment prior to release of the goods for consumption. Payments are made through banks which are electronically connected to Customs. Under the automated On-line Release System(OLRS), when the fact of payment made through the banks are relayed to Customs, Customs in turn keys in such payment and lifts the hold status of the shipment allowing the port operator to release the goods to the importer or his representative.
Certain commodities are exempt from the payment of import duties upon compliance with formalities prescribed and approved by the Secretary of Finance. Section 105, TCCP governs what is termed as Conditionally-Free Importations. Other special laws also provide tax and duty-free treatment on certain importations.
Last Updated on: 15-02-2010