Customs Duties and Taxes Explained

All imported items are subject to payment of Duties and Taxes as a general rule except for items specifically provided in the Tariff and Customs Code of the Philippines. A lot of citizens do not understand this provision of the law and oftentimes it creates unnecessary buzz in socmed and puts the Bureau of Customs in a bad light.


What are Duties and Taxes?

To put it in simple words, Duties and Taxes just like any tax or VAT we pay when we buy goods and services, is the means of the government to collect revenues, the only difference is, these are imposed on imported goods. If you look at this definition, you will realize that it is only fair for the government to collect such revenues since imported items are goods that we bought and thus, just like any locally sourced item, taxes are imposed.


Now that issue is settled, you may be wondering what affects your duties and taxes and how do the government come up with this?


How Duties and Taxes are Computed?


Duties and Taxes are based on the transaction value of the goods or the price actually paid or payable. So whatever value your goods have is the basis of the computation. When we compute for the Dutiable value of the item, the base value to which the rate of duty is imposed, we need to account for the CIF value of the item, meaning we need to add the Cost, Cost of Insurance ( in the Philippines it’s mandatory to add insurance value which is 2% for general cargo and 4% for special cargoes, these are goods that are dangerous in nature or high value cargoes) and the Freight costs. Once added, You will get the Dutiable value in US dollars (all computation of value regardless if it is in yen, euro etc. should be converted into US dollars) then this value will be further converted into Philippine peso and thus will be multiplied to the rate of duty.



The rate of Duty is based on the Tariff and Customs Code of the Philippines Volume 1. This is also readily available in the website of the Tariff Commission https://finder.tariffcommission.gov.ph/ This ranges from 0-60% and may be affected by certain Free Trade Agreements with different countries.


Once the Duty of item is computed, you will need to add all the charges that are incurred in the importation of your goods, such as Customs Broker’s fees, Port Charges (Arrastre and Wharfage) and others. The charges to be added depends on the mode of transportation and the mode on which the item was shipped. Was it shipped using a full container? Loose cargo? Via air or via sea? These are the questions that are needed to be answered for you to be able to use the correct formula and which charges to be added to the Customs Duty. The sum of all these is called Landed Cost and that is the basis for the imposition of 12% VAT.


Add the Customs Duties, VAT, Bank Charges and Import Processing fees and you will come up with your Total Duties and Taxes Payable. Also, take note that the Bureau of Customs collects both but Customs Duty is due to the Bureau of Customs and VAT is for the Bureau of Internal Revenue.


This is a complicated process, thus when planning to import goods, one must consider using a trusted Customs Broker to help you with the process. These experts are professionals that have passed the Board Exams and are duly licensed by the Professional Regulation Commission to know the rules and regulations, laws and all the nitty-gritty stuff on how to process and release your cargoes from the Bureau of Customs.


Knowing and understanding the process and the regulations on importations will greatly help everyone to comply and accept that these charges do exist and are legal means of the government to collect lawful revenues, these are receipted and are duly paid to the Philippine Government. Furthermore, this is a practice adopted by several countries as the source of funds and the life-blood of a nation. Hope this article helps and more Filipinos will understand the importance of complying and paying these taxes.


*If you need the services of trusted logistics experts WRV logistics Consultancy Inc. offers FREE consultation for your concerns. Email us at sales@wrvlogicon.com.

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