BIR Clarifies the Proper Taxable Base of Excise Tax in the Manufacturer’s/Assembler’s or Importer’s Sworn Statement and Integration of the Monitoring, Supervision, and Reporting of Excisable Products under RAO No. 2-2014

The Bureau of Internal Revenue (“BIR”) issued Revenue Memorandum Circular (“RMC”) No. 63-2022 to clarify the application of the correct taxable base in the computation of excise tax for automobiles in the manufacturer’s/assembler’s or importer’s sworn declaration pursuant to Sections 4 and 5 of Revenue Regulations (“RR”) No. 25-2003, as amended. 

RMC No. 63-2022 adopted the provisions of Section 4 which was revised under Section 3 of RR. No. 5-2018, and amended Section 5 of RR No.25-2003

Rates and Bases of the Ad Valorem Tax on Automobiles

Ad valorem tax on automobiles shall be levied, assessed, and collected based on the manufacturer’s/assembler’s or importer’s selling price, net of excise and value-added tax, in accordance with the following schedule:

Manufacturer’s or Importer’s Selling Price

Under Section 5, the net manufacturer’s or importer’s price shall refer to the price, net of excise tax and value-added tax (“VAT”), at which locally manufactured/assembled or imported automobiles are offered for sale to the dealers or to the public directly or through the sales agents, as reflected in the manufacturer’s/assembler’s or importer’s sworn statement duly filed with the BIR, or in the sales invoices/official receipts, whichever is higher. 

The computation for the said selling price shall always include the value of car air conditioner, radio, mag wheels including the cost of installation thereof whether or not the same were actually installed in the automobile. The selling price should likewise include other accessories deemed necessary due to advancement on technology which were installed or for installation per sales agreement. However, the selling price shall in no case be less than the amount computed as follows: 

80% x (Actual Dealer’s Suggested Selling Price – Excise Tax – VAT)

The manufacturer’s/assembler’s or importer’s selling price shall in no case be less than the cost of manufacture/assembly or importation plus the industry profit margin of 10% and other expenses incurred before the automobiles are sold to the market, and the suggested retail price shall not be less than the actual selling price of the automobiles when sold to the market. 

The value of other factory-installed accessory or optional equipment such as wheel covers, or any other attachment installed on the unit removed or sold, or previously removed and returned for purposes of installation thereof, as well as the costs of installation of the accessory shall likewise form part of the said selling price. If the accessories are installed outside the production/assembly plant or after the release from the customs custody but before the actual sale of imported automobile, as the case my be, the costs of such accessories and the cost of the installations shall form part of the expenses, and all subsequent billings therefor by the manufacturer/assembler or importer to the dealer or customer shall form part of the selling price.

Thus, there are three (3) primary taxable bases in applying the excise tax rates for automobiles:

1. Declared manufacturer’s or importer’s selling price, net of excise tax and VAT;
2. Based on the 80% actual dealer’s price, net of excise tax and VAT; and
3. Based on the total cost of importation and expenses divided by 90%

The taxable bases are reflected in the Manufacturer’s/Assembler’s and Importer’s Sworn Statement prescribed in Annex “A” of RMC No. 58-2003 where the excise tax shall be computed using the highest identified taxable bases integrating the value of car air conditioner, radio and mag wheels including the cost of installation, as well as the value of other factory-installed accessory or optional equipment such as wheels covers, or any other attachment installed on the unit removed or sold, as the case may be. 

No Authority to Release Imported Goods (“ATRIG”) shall be issued for importation of automobiles without computing the three (3) tax bases to clearly show that the excise tax was based on whichever is higher of the three (3) values mandated under existing issuances. All issued ATRIGs shall be reconciled by the Excise Large Taxpayer Field Operations Division (‘ELTFOD”) with the removal per Excise Taxpayer’s Removal Declaration and stock inventory per Official Register Book. Said office shall also conduct product validation of the manufactured/imported/assembled automobiles registered with the Land Transportation Office which mandatorily issues conduction sticker for automobiles. This is in accordance with the Monitoring, Supervision and Reporting of Excisable Products under Revenue Administrative Order No. 2-2014. 

A copy of RMC No. 63-2022 can be accessed here.