If you’re planning to expand your eCommerce footprint into a new destination country, it’s best to know about the local customs regulations so that your eCommerce experience is smooth and effective in your new market. For starters, you should be looking out for the country’s import duties and taxes, and the country’s de minimis rate.
With a young and tech-savvy population, the Philippines is one of the fastest growing eCommerce markets to look out for in Southeast Asia. eMarketer’s study in 2018 pegs the Philippines’ growth at 31% for the year of 2019,1 whereas PPRO Group’s study in 2018 has a more optimistic growth percentage of 51%.2
This market currently has 73 million internet users, which is a 67% internet penetration rate. Among this group of internet users, 76% of them have bought a product online.3 Not only that, the Philippines also has a high de minimis rate to encourage trade between countries.
But first, it helps to know what de minimis means, and the import duties and taxes of the Philippines.
What is the De Minimis Rate in the Philippines?
The Philippines has a de minimis rate of PHP 10,000, or roughly USD 197 as of the time of this writing. De minimis rate is the price threshold in which fewer or no taxes are charged on shipments entering the country if the CIF value, meaning the goods, shipping fees, and insurance, is below the threshold.
‘De minimis’ comes from a longer phrase in Latin which means ‘the law does not concern itself with trifles’.4 The de minimis threshold only applies to B2C international shipments that enter the archipelago via air freight. This means that B2B shipments and goods that enter via sea freight are not exempt from import duties and taxes.
With a high de minimis rate, eCommerce merchants would be able to make full use of this regulation to sell their items directly to consumers. Merchants who sell via B2C eCommerce wouldn’t have to pay for extra duties and taxes if the value of the goods and shipping fees are below PHP 10,000.
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How Much are the Taxes if my Goods Surpass the De Minimis Rate in the Philippines?
Import duties range from 0% to 20%, and the goods and services tax (GST) is 12% if your CIF value, which means the value of your goods, shipping fees, and insurance fees, exceeds the Philippines’ de minimis rate.5
Import duty is a type of tax collected on imports into the country, which can help the local government to raise income and provide a market advantage for locally produced goods from global competition.6
The duties calculated for your goods depend on your product category identified by the Harmonised Systems Code (HS Code). This code is a classification system developed by the World Customs Organization to classify over 5,000 product categories. To find out the rate of your specific product category, you may do so at the Philippines Tariff Finder page.7
How can I Ensure Smooth Customs Clearance into the Philippines?
Aside from learning about the Philippines de minimis rate and import duties & taxes for your goods, you’ll need to ensure that your shipments have the necessary documentation and shipping labels to clear customs effectively. If you’re not familiar with the B2C customs clearance process, we’ve covered that topic in a previous article and in our customs clearance resources.
Having a reliable shipping partner who provides you with accurate and complete customs documents can help you take the burden of filing every single document for your shipments. That way, all you need to do is to ensure that your shipping labels are accurate and visible to customs officers. We have a B2C shipping guide which covers topics like labelling your shipments and the importance of data accuracy in these shipping labels for you to check out.
If your goods and shipping fees exceed the de minimis rate, you can choose to settle the payment of import duties and taxes from these two incoterms, DDU and DDP. These incoterms help determine how you will settle the payment for import duties and taxes. Our recommendation is to opt for DDP and seek out a shipping partner who can arrange to pay for your import duties and taxes prior to the shipment arriving in the Philippines.
Knowing about the Philippines’ de minimis rate, import duties and GST is one step closer to ensuring that your international shipments can be shipped to your Philippine customers easily. Not only that, having a trusted shipping partner with customs clearance expertise can help to ensure your deliveries reach your customers in a timely manner. Seamless international eCommerce deliveries are one way to impress your customers in the Philippines, and by having this base covered, you’re on your way to having your slice of the Philippines’ eCommerce pie.
Looking to ship internationally throughout Southeast Asia? Contact us to find out how.
You may also want to check out our other articles on customs clearance in Southeast Asia: