Excise tax
Excise tax is a Philippine tax on specific goods and services like fuel, tobacco, alcohol and sweetened drinks.
March 2024 | Published by Xero
Published Monday 31 August 2026
Table of contents
Key takeaways
- Excise tax is a tax on specific goods and services under the National Internal Revenue Code (NIRC), administered by the Bureau of Internal Revenue (BIR)
- There are two types: specific tax based on weight, volume or unit, and ad valorem tax based on a percentage of the selling price or value
- Manufacturers and producers pay before goods leave the place of production, importers pay before release from customs, and the cost is usually passed on to consumers
- Excise tax is charged on top of the 12% value-added tax (VAT), so both can apply to the same product
What is excise tax?
Excise tax is a tax on specific goods and services produced, manufactured or imported in the Philippines. It's charged in addition to any other taxes that apply to those items, such as VAT.
The tax exists to discourage the use of certain products and to raise money for public services. It's imposed under Title VI of the National Internal Revenue Code, as amended by the TRAIN Law. The BIR collects excise tax on goods made or produced at home, while the Bureau of Customs collects it on imported goods.
What is the main purpose of excise tax?
Excise tax has two main purposes, and both shape which products it targets and how high the rates are set.
- Discourage harmful or non-essential consumption: higher prices on products such as tobacco, alcohol and sweetened beverages are meant to reduce demand
- Raise government revenue: the tax funds public programs, including health and infrastructure spending
Types of excise tax: specific and ad valorem
Philippine law splits excise tax into two classifications, and the difference comes down to how the tax is measured. One is based on the quantity of the product, the other on its price.
Specific tax
A specific tax is charged on a fixed amount per unit of weight, volume or quantity. For example, cigarettes are taxed per pack and fuel is taxed per litre, so the peso amount stays the same no matter what the retail price is.
Ad valorem tax
An ad valorem tax is charged as a percentage of the selling price or value of the product. Automobiles and non-essential goods such as jewellery use this method, so the tax rises as the price rises.
Goods and services subject to excise tax in the Philippines
The statutory list of excisable goods and services is broad and covers everyday products as well as luxury items. Excise tax applies to the following:
- Alcohol products
- Tobacco products, including heated tobacco and vapor products
- Petroleum products
- Automobiles
- Sweetened beverages
- Mineral products
- Non-essential goods, such as jewellery, perfumes and yachts
- Invasive cosmetic procedures
Who pays excise tax?
The business that makes or brings in the product pays the excise tax first, then usually builds the cost into the retail price. So while producers and importers remit the tax, consumers tend to carry it in the end.
For goods made in the Philippines, manufacturers and producers pay the excise tax before the goods leave the place of production. For imported goods, importers pay before the shipment is released from customs custody. This timing matters for cash flow, because the tax falls due early in the supply chain.
Excise tax rates and charges
Rates are set by statute and vary widely by product, and many are scheduled to rise each year. The examples below reflect the rates summarised for the Philippines under the TRAIN Law and sin-tax laws:
- Gasoline: PHP 10 per litre and diesel PHP 6 per litre, though these fuel rates are subject to temporary presidential suspension under RA 12316 in 2026
- Cigarettes: PHP 69.46 for a pack of 20 in 2026, rising each year under the sin-tax laws
- Sweetened beverages: PHP 6 or PHP 12 per litre, depending on the sweetener used
- Automobiles: 4% to 50%, depending on the manufacturer's or importer's price
- Non-essential goods such as jewellery and perfumes: 20% of the wholesale price or value of importation
- Invasive cosmetic procedures: 5% of the gross receipts
Rates change often, especially for tobacco and alcohol, which rise on 1 January most years. Always check the BIR for the current figures before you set prices or file.
Excise tax vs VAT
Excise tax and VAT often get confused because both can appear in the final price of a product. The key difference is scope: one applies broadly, the other only to listed items.
VAT is a broad-based tax of 12% applied to most goods and services in the Philippines. Excise tax applies only to specific goods and services, and it's charged in addition to VAT, so both can apply to the same product. Both are indirect taxes collected through the price, unlike a direct tax such as income tax.
Why excise tax matters to small business
If you make, import or sell excisable goods, excise tax affects your margins and your admin. Getting it right keeps your pricing accurate and your business compliant.
Excise tax feeds straight into your costs, so it belongs in your pricing strategy and cost of goods sold. If a rate rises and you don't adjust, your margin shrinks. Understanding the taxes a small business pays helps you plan for these charges alongside VAT and income tax.
Compliance is the other half. You may need to register with the BIR, file the right returns and pay excise on time to avoid penalties. Keeping your records current and tracking your business costs as you go makes your cash flow forecasts more reliable, so you're never caught short when the tax falls due.
Manage your business finances with Xero
Excise tax is one of several obligations you juggle while running a business, and clear records make each one easier to handle. With Xero accounting software, you can track costs, monitor cash flow and stay ready for tax time in one place. Sign up and get one month free to see how Xero helps you keep your finances organised.
FAQs on excise tax
Here are quick answers to common questions about excise tax in the Philippines.
What is an example of excise tax in the Philippines?
A common example is the tax on a pack of 20 cigarettes, set at PHP 69.46 in 2026. Fuel, alcohol, sweetened beverages and automobiles are also subject to excise tax.
How is excise tax different from VAT?
VAT is a 12% tax on most goods and services, while excise tax applies only to specific listed items. Excise is charged on top of VAT, so both can apply to the same product.
How is excise tax calculated?
A specific tax is calculated on a fixed amount per unit of weight, volume or quantity, such as pesos per litre. An ad valorem tax is calculated as a percentage of the product's selling price or value.
Do small businesses need to register and pay excise tax?
If you manufacture, produce or import excisable goods, you generally need to register with the BIR and pay the tax before the goods are removed or released. Businesses that only resell finished products usually don't remit excise, since the producer or importer has already paid it.
Related terms
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.