Import Duties and Taxes in the Philippines Explained

Imported goods in the Philippines are subject to duties and taxes assessed by the Bureau of Customs based on tariff classification, customs value, and applicable tax laws. Understanding these charges is essential for accurately estimating importation costs and avoiding unexpected financial exposure.

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Customs Duty

Customs duty is determined using the Harmonized System (HS) Code, which classifies goods according to their nature and use. Each classification corresponds to a specific duty rate, which may vary depending on trade agreements or preferential tariff arrangements.

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Value-Added Tax (VAT)

VAT is currently set at 12% and is applied on top of:

• The customs value (cost of goods/FOB value)
• The duty
• Other applicable charges

Imported goods are generally subject to 12% VAT on the total landed cost inclusive of excise tax, if applicable. The landed cost includes the customs value, duties, freight charges, insurance, and other applicable fees.

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Other Charges

Depending on what you're importing, you may also encounter:

• Excise tax (for alcohol, fuel, tobacco, etc.)
• Customs processing fees
• Port and handling charges

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Where Importers Get Caught Off Guard

Common issues include:

• Using the wrong HS Code, which affects the duty rate
• Declaring only product cost and excluding freight and insurance
• Not accounting for VAT on top of duty

These mistakes can result in higher-than-expected costs, reassessment, penalties, and in serious cases, seizure. Working with a professional customs broker helps minimize these risks and keeps your shipments compliant.

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Import Cost Breakdown - Step by Step

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Step 1: Start with Supplier Cost

This is your FOB (Free on Board) value - the price of the goods before freight and insurance are added.

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Step 2: Add Freight and Insurance

FOB + Freight + Insurance = CIF Value. This becomes your customs value basis. See our full Importation Costs Breakdown Philippines for a worked example.

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Step 3: Compute Customs Duty

Customs Duty = CIF x Applicable Duty Rate. Rates range from 0% to 65% depending on the product classification.

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Step 4: Compute VAT

VAT = (CIF + Duty + Other Charges) x 12%

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Step 5: Add Port and Handling Fees

Include arrastre, wharfage, and storage charges to get your true landed cost.