VAT on Importation in the Philippines: How It's Computed and Paid Before Goods Are Released

VAT on importation is a 12% tax charged on goods brought into the Philippines, computed on the value the Bureau of Customs (BOC) uses to assess tariff and customs duties plus the duties, excise tax, and other charges added before release — and the importer pays it directly to the BOC before the shipment leaves customs custody. This is a separate mechanism from VAT on domestic sales: it applies under NIRC Section 107 even to importers who aren’t VAT-registered for their regular business.

What is VAT on importation, and who has to pay it? #

VAT on importation is a distinct VAT trigger from VAT on sales — it taxes the act of bringing goods into Philippine customs territory, not a domestic transaction, and it’s paid to the Bureau of Customs rather than reported through a periodic BIR return. Under NIRC Section 107, “there shall be levied, assessed and collected on every importation of goods a value-added tax,” and RR No. 16-2005, Section 4.107-1 makes clear this applies whether or not the importation is made in the course of trade or business.

That last point is what trips up many first-time importers: a sole proprietor who is not VAT-registered, a professional bringing in equipment, or even an individual importing goods for personal use in commercial quantity can still owe import VAT. RR No. 16-2005 defines “importer” broadly to include any person who brings goods into the Philippines, regardless of VAT registration status, and specifically includes non-exempt persons who acquire tax-free imported goods from an exempt entity. The tax is paid before the goods are released from customs custody — it isn’t optional or deferrable to a later filing period.

How is the VAT on importation computed? #

The tax base for import VAT is not the invoice price alone — it’s the total value the BOC uses to compute tariff and customs duties, plus the customs duties themselves, excise tax if the goods are excisable, and other charges incurred prior to release, all multiplied by 12%. This base is effectively the landed cost: invoice value, freight, insurance, and other dutiable charges, converted to peso value at the applicable exchange rate the BOC uses for assessment.

Under Section 107 and RR No. 16-2005, the formula is:

Import VAT = 12% × (Dutiable/customs value + Customs duties + Excise tax, if any + Other charges before release)

Where customs duties are assessed on a per-unit or volume basis rather than on value, the regulation directs that the VAT base instead be the landed cost plus excise tax, if any — the duty component itself isn’t separately added in that scenario since it isn’t ad valorem. The Bureau of Customs computes and assesses this on the Import Entry and Internal Revenue Declaration (IEIRD, BOC Form 236), the customs document that consolidates the dutiable value, assessed duties, and VAT due for a given shipment, and duties/VAT are typically settled electronically through authorized agent banks before the BOC releases the cargo.

Worked example #

A Philippine-registered trading company imports machine parts with a BOC-assessed customs value of ₱500,000 and pays ₱50,000 in customs duties on the shipment, with no excise tax and ₱10,000 in other pre-release charges (arrastre, wharfage, and similar fees the BOC includes in the base):

The importer pays the full ₱67,200 to the BOC before the parts are released — separately from, and in addition to, the ₱50,000 customs duty. If the company is VAT-registered and the machine parts are used in its trade or business, that ₱67,200 becomes creditable input VAT, reported in the input tax section of its next BIR Form 2550Q, supported by the IEIRD and proof of VAT payment to the BOC. See Input VAT vs. Output VAT for how that credit then offsets output VAT on the company’s own sales, and Input VAT Substantiation Requirements for the documentation the BIR expects on audit.

How does import VAT become creditable input VAT? #

Import VAT paid to the BOC doesn’t automatically show up as a credit — a VAT-registered importer has to substantiate it and report it correctly on the next quarterly VAT return before it offsets output VAT. Under NIRC Section 110, VAT paid on the importation of goods used in the course of trade or business is creditable input VAT, on the same basis as VAT paid on local purchases.

To claim the credit, the importer needs:

1. The Import Entry and Internal Revenue Declaration (IEIRD) for the shipment, showing the assessed dutiable value, duties, and VAT.
2. Proof the VAT was actually paid to the BOC (the payment reference or official receipt tied to the entry).
3. The transaction properly reported in the Summary List of Importations attached to BIR Form 2550Q, including the import entry number, assessment/release date, and VAT paid.
4. The imported goods actually used in the VAT-registered person’s trade or business — import VAT on goods for purely personal use is not creditable even if the importer happens to be VAT-registered for other activities.

A non-VAT-registered importer pays the same 12% import VAT but cannot credit it against anything — it simply becomes part of the landed cost of the goods, the same treatment as any other non-recoverable input cost.

Which importations are VAT-exempt? #

Not every importation is taxable — NIRC Section 109 carves out specific categories, most commonly basic agricultural and marine food products and the personal effects of returning residents, so the first step before computing import VAT is confirming the shipment doesn’t fall under an exemption. Two frequently used examples:

• Basic agricultural and marine food products in their original state — unprocessed rice, corn, fish, meat, and vegetables, along with fertilizers, seeds, and livestock or poultry feeds, remain exempt whether sold domestically or imported.
• Personal and household effects of returning Philippine residents, resettling non-resident citizens, and qualified overseas Filipino workers — exempt within the limits the law allows, and only to the extent the goods are also exempt from customs duties under the Customs Modernization and Tariff Act (not in commercial quantity).

Section 109 lists more categories beyond these two — see VAT-Exempt Transactions Under NIRC Section 109 for the full catalogue, since most of it applies equally to domestic sales and importation.

Frequently Asked Questions #

What is VAT on importation? #

VAT on importation is the 12% value-added tax levied on goods brought into the Philippines under NIRC Section 107, computed on the total value the Bureau of Customs uses to determine tariff and customs duties, plus customs duties, excise tax if any, and other charges incurred before the goods are released from customs custody. It is paid by the importer directly to the Bureau of Customs, not through a BIR return.

Do I have to pay VAT on importation even if I’m not VAT-registered? #

Yes. Under Revenue Regulations No. 16-2005, Section 4.107-1, VAT on importation applies to goods brought into the Philippines whether or not the importation is made in the course of trade or business, and the term “importer” includes any person who brings in goods regardless of VAT registration status. A non-VAT-registered individual or business still pays the 12% import VAT to the Bureau of Customs before the shipment is released — it just cannot later credit that VAT against any output tax, since it has none.

What is the tax base for VAT on importation? #

The tax base is the total value used by the Bureau of Customs to compute tariff and customs duties (essentially the landed cost — invoice value, freight, insurance, and other dutiable charges), plus customs duties actually assessed, excise tax if the goods are excisable, and other charges incurred prior to release. Where customs duties are assessed on a per-unit or volume basis rather than value, the VAT base is the landed cost plus excise tax, if any.

How does import VAT become creditable input VAT? #

For a VAT-registered importer, the VAT paid at the Bureau of Customs on goods used in the course of trade or business is creditable input VAT under NIRC Section 110, reported on the next BIR Form 2550Q. It must be supported by the Import Entry and Internal Revenue Declaration (IEIRD) and proof that the VAT was actually paid, and the transaction is separately listed in the return’s Summary List of Importations.

Are any importations exempt from VAT? #

Yes. NIRC Section 109 exempts specific importations, such as agricultural and marine food products in their original state (and inputs like fertilizers, seeds, and feeds), and the personal and household effects of returning Philippine residents or resettling non-resident citizens, within limits and provided they are exempt from customs duties under the Customs Modernization and Tariff Act. Section 109’s exemption list is covered in full in a separate guide.

Summary #

VAT on importation taxes the act of bringing goods into the Philippines, not a domestic sale — it’s assessed and paid to the Bureau of Customs under NIRC Section 107 before goods are released, at 12% of the customs-assessed value plus duties, excise tax, and other pre-release charges. It applies to VAT-registered and non-VAT-registered importers alike, per RR No. 16-2005, Section 4.107-1, but only a VAT-registered importer using the goods in trade or business can later credit that VAT as input tax on BIR Form 2550Q, backed by the Import Entry and Internal Revenue Declaration. A handful of importations — basic agricultural food products and qualifying personal effects among them — are exempt under NIRC Section 109.