CLASSIFICATION OF DUTIES (1)Ordinary/Regular duties

Flowchart VII: Procedure for Levy for Purposes of Satisfying Real Property Taxes-Local Gov’t Code

CLASSIFICATION OF DUTIES (1)Ordinary/Regular duties

Ordinary or regular duties refer to those that, as a matter of course, are imposed on dutiable articles (Sec. 104, TCC)

(a) Ad valorem; Methods of valuation

The tax rates are based on the cost (FMV) or price of the imported articles, in wholesale

quantities in the principal market of the exporting country or the country of origin, including expenses connected with the importation, such as insurance, freight, packaging, loading and unloading charges, but excluding internal excise taxes to be remitted or rebated; or

(a) In case such value is not ascertainable, the reports of the Revenue or commercial attaches; or

(b) If still not ascertainable, the domestic wholesale market price in the ordinary course of trade less import duty and not more than 25% for expenses and profits. (Sec. 201, TCC)

Note:

General Rule: The following methods are sequentially applied

Exception: (CAO 4-2004) Methods 4 and 5 may be reversed at the request of the importer, subject to the approval of the Commissioner. Ground to refuse the request: if the Commissioner deems that he will experience real difficulties in determining the dutiable value using Method 5

(Basis for all Methods of Valuation: Sec. 201, TCC and CAO 4-2004)

(1) Transaction value

Price actually paid or payable for goods when sold for export to Philippines

(a) commissions & brokerage fees (b) cost of containers

(d) assists (value of goods and services supplied by the buyer free of charge or at a reduced price for use in connection with the production and sale for export of the good)

(e) royalties & license fees

(f) value of any part of the proceeds of subsequent resale, disposal or use of imported goods that accrue directly or indirectly to seller

(g) cost of transport

(h) loading, unloading, handling (i) insurance

Dutiable Value (DV) must NOT include:

(a) charges for construction, erection, assembly maintenance or technical assistance undertaken after importation

(b) cost of transport after importation (c) duties and taxes of Phil

(d) other permissible deduction under WTO Valuation Agreement

ALL the following CONDITIONS must be satisfied so the Transaction Value shall be the DV (CREPD):

(1)sale for Export to Phil

(2) no restrictions as to the Disposition or use of goods by buyer except:

(a) those imposed by law or Phil authorities

(b) limit the geographical area where goods may be resold

(3) not be subject to some Condition or consideration for which value cannot be determined

(4) no part of the Proceeds of any subsequent disposal shall accrue to the seller

(5) buyer and seller are not Related or if they are, relationship did not affect the price DEEMED RELATED IF:

(1) They are officers or directors of one another’s business;

(2) They are legally recognized partners in business;

(3) There exists in an er-ee relationship between them;

(4) Any person directly or indirectly owns, controls or holds 5% or more of the outstanding voting stock or shares of bother seller and buyer;

(5) One of them directly or indirectly controls the other;

(6) Both of them are directly or indirectly controlled by a 3rd_person;

(7) Together they directly or indirectly control a 3rd person; or

(8) Related by affinity or consanguinity up to 4th civil degree.

IF RELATED, USE OF TRANSACTION VALUE (TV) ACCEPTABLE IF:

(1) circumstances surrounding transaction show that relationship did not influence the price

(2) TV closely approximates:

(a) TV of unrelated buyers of identical or similar goods

(b) Deductive value of identical or similar goods determined according to method #4

(2) Transaction Value of Identical Goods

The DV shall be the transaction value of identical goods sold for export to the Phil and exported at or about the same time as the goods being valued. Identical goods must be same commercial level and substantially same quantity as the goods being valued.

Identical goods

(a) Same in all respects (physical characteristics, quality and reputation)

(b) Produced in the same country as the goods being valued

(c) Produced by producer of the goods being valued Excludes: imported goods for which engineering, development, artwork, design work, plans and sketches is undertaken in the Phil and provided by the buyer to the producer free of charge or at a reduced rate

When no identical goods produced by the same person:

Identical goods produced by different producer in the same country

If NO identical goods at same commercial level and same quantity,

(a) TV of identical goods at a different commercial level and different quantity may be utilized (b) TV shall be adjusted upward or downward to

account for the difference (3) Transaction value of similar goods

The DV shall be the transaction value of similar goods sold for export to the Phil and exported at or about the same time as the goods being valued.

Similar goods must be same commercial level and substantially same quantity as the goods being valued.

Similar goods

(a) like characteristics and like component materials (b) capable of performing same functions

Excludes: imported goods for which engineering, development, artwork, design work, plans and sketches is undertaken in the Phil and provided by the buyer to the producer free of charge or at a reduced rate

When no similar goods produced by the same person:

similar goods produced by different producer in the same country

If NO similar goods at same commercial level and same quantity,

(a) TV of similar goods at a different commercial level and different quantity may be utilized (b) TV shall be adjusted upward or downward to

account for the difference (4) Deductive value

DV is determined on the basis of sales in the Phil of goods being valued of identical or similar imported goods less certain expenses resulting from importation and sale of goods.

Deductive Value is determined by making a deduction from the established price per unit for the aggregate of the ff elements:

(a) Commissions OR

(b) additions made in connection with profit and general expenses AND

PRICE

Less: COMMISSIONS/ADDITIONS Less: COSTS

Less: DUTIES and TAXES DEDUCTIVE VALUE

The Sales must meet the following CONDITIONS:

(1) sold in the Phil in the same condition as imported

(2) sales taken place at or about the same time of importation of good being valued

(3) if no sale took place at or about the time of importation

use sales at the earliest date after importation (of the similar or identical good) but before expiration of 90 days

(4) if no sale meet the above conditions, importer may choose the use of sales of goods being valued after further processing “At or about the same time”

45 days prior to and 45 days following the importation

(5) Computed value

DV is determined on the basis of cost of production + profit + general expenses reflected

in sales from exporting country to the Phil of goods of same class or kind

DV is calculated by:

determining aggregate of relevant costs, charges and expenses or value of (1) materials and (2) production or processing costs

(a) Costs* (containers, packing, assists, engineering, artwork, plans and sketches undertaken in Phil and charged to producer (b) profits and general expenses

*Note: these additional costs are added only if not included in the determination of the aggregate of relevant costs, charges and expenses or value of materials and production. (6) Fallback value

DV cannot be determined using any of the above methods

Use other reasonable means consistent with principles and general provisions of General Agreements on Tariffs and Trade (GATT) (b) Specific (Sec. 202, TCC)

Rates are based on unit of weight number or measurement

Kinds of weight:

(a) Gross Weight - weight of same, together with the weight of all containers, packages, holders and packings, of any kind, in which said articles are contained, held or packed at the time of importation (b) Legal Weight – weight at the time of their

sale to the public in usual retail quantities (c) Net Weight – only the actual weight at the time of importation excluding the weight of the immediate and all other containers

(2)Special duties – additional import duties imposed on specific kinds of imported articles (See Table of Special Duties)

REMEDIES

In document UP Bar Reviewer 2013 - Taxation (Page 195-197)