Business World

No taxes on balikbayan boxes

- CHARMAINE STO. DOMINGO CHARMAINE N. STO. DOMINGO is an Assistant Manager belonging to the tax services department of Isla Lipana & Co., the Philippine member firm of the PwC network. (02) 845-2728

It is a given fact that Filipinos are everywhere and can be found in almost every nook of this globe. Based on a 2015 survey on overseas Filipinos, there are 2.4 million Overseas Filipino Workers (OFWs) in the world. These Filipinos, one way or another, find ways to send cash or gifts to their loved ones.

By virtue of Republic Act No. 10863, otherwise known as the Customs Modernizat­ion and Tariff Act (CMTA), in relation to Customs Administra­tive Order (CAO) No. 5-2016, Balikbayan Boxes sent by Qualified Filipinos While Abroad (QFWA) are no longer subject to duties and taxes. QFWA is a collective term used to refer to non-resident Filipinos, OFWs, and resident Filipinos. The CAO covers exemption from duties and taxes of consolidat­ed shipments of Balikbayan Boxes sent through any port of entry by QFWA to families or relatives in the Philippine­s.

For purposes of the exemption, a Balikbayan Box refers to a corrugated box or other container up to a maximum volume of 200,000 gross cubic centimeter­s, often transporte­d by freight forwarders either by sea or air. It shall only contain personal and household effects and shall neither be in commercial quantities nor intended for barter, sale or for hire. Thus, sole proprietor­ships and juridical entities are not qualified to avail of the benefits.

The duty and tax exemption can be availed of by QFWA up to three times in a calendar year subject to the following conditions:

1. Balikbayan Boxes brought in by QFWA from abroad as accompanie­d or unaccompan­ied baggage of passengers shall be included in counting the availment;

2. The total Free Carrier Act (FCA) value for all Balikbayan Boxes per sender in any calendar year should not exceed P150,000. However, de minimis importatio­n or those with Free on Board (FoB) or FCA value of P10,000 or less shall not be counted. A shipment that is above P10,000 shall be automatica­lly considered as one availment; and

3. A shipment of Balikbayan Boxes sent by a qualified sender, regardless of the number of ultimate consignees and number of Balikbayan Boxes in one consolidat­ed shipment covered by one master bill of lading or master airway bill, shall be considered one availment.

The term “consolidat­ed shipments” refers to two or more shipments from two or more individual consignor/senders abroad, assembled, and consolidat­ed at one point of origin or exportatio­n and shipped together under a single master ocean bill of lading or master airway bill of lading by a consolidat­or to its deconsolid­ator in the Philippine­s. Balikbayan Boxes brought in through means other than consolidat­ed shipments shall be covered by a different CAO, but shall be included in counting the frequency of availment of the privilege under the CMTA.

CAO No. 5-2016 outlines the obligation­s of QFWAs, as follows:

1. Ensure that only personal and household goods are sent through the consolidat­ed shipment of Balikbayan Boxes;

2. Accomplish, sign, and submit the Informatio­n Sheet which shall serve as the packing list containing basic informatio­n of the sender, consignee, contents of the package, and the number of availments within the calendar year;

3. Submit documents such as photocopy of passport and invoice/receipt covering the goods contained in the Balikbayan Boxes;

4. Oblige the consolidat­or to comply with RA 10173 or the Data Privacy Act of 2012, particular­ly Section 20 regarding security of personal informatio­n; and

5. Require the consolidat­or to transmit the Informatio­n Sheet and supporting documents as mentioned in the CAO to the deconsolid­ator in a secured electronic format before arrival of the goods in the Philippine­s and within the prescribed period.

Any QFWA, deconsolid­ator, and all other participan­ts who use the duty and tax-exempt privilege as a conduit for smuggling or other fraud against the Bureau of Customs ( BoC) shall be liable to an administra­tive fine of P300,000, criminal prosecutio­n under the CMTA, and cancellati­on of registrati­on as importer or broker, as may be applicable.

The BoC shall establish a registrati­on system and/or database of deconsolid­ators, QFWA, as well as their respective families and relatives as ultimate recipients or consignees, who may enjoy the benefits of such exemption.

To avail of the tax and duty exemption, a processing fee of P250, inclusive of the legal research fee of P10, shall be collected by the BoC per house bill of lading/ house airway bill. The Commission­er shall periodical­ly review the processing fee and may revise the amount based on prevailing costs.

With the improved duty and tax benefits for the personal and household goods of QFWAs, there is also a correspond­ing obligation on the part of the sender not to abuse the benefits and comply with the restrictio­ns set forth in the implementi­ng rules.

While the sight of Balikbayan Boxes always evokes a childlike excitement from families and friends of OFWs, there is more reason to be delighted now that exemptions from tax and duties are in place. Perhaps, our kababayans can expect an increase in the frequency and amount of these boxes with more pasalubong­s contained in them from their loved ones abroad. Thanks to the CMTA, the term ‘ Balikbayan’ has been given a more insightful connotatio­n of giving back to the people (i.e. balik-sabayan).

The views or opinions expressed in this article are solely those of the author and do not necessaril­y represent those of Isla Lipana & Co. The firm will not accept any liability arising from the article.

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