BUSINESS TAX

Question 1

To whom is business tax applicable?

Answer 1

Business tax is applicable to the RESIDENT SELLERS actually engaged in business.

Question 2

What businesses are exempt from business taxes?

Answer 2

1. Businesses principally for subsistence or livelihood which refers to businesses with GROSS SALES OR RECEIPTS NOT EXCEEDING 100,000 A YEAR.
2. Marginal income earners
   a. agricultural growers/producers (farmers/fishermen)
   b. small sari-sari stores
   c. small carinderias
   d. others similarly situated

Question 3

Abdul, a CPA renders his service to the public for a fee. Is he subject to business tax?

Answer 3

Yes. The exercise of a profession by regularly rendering services for a fee is considered a business subject to business tax.

Question 4

Though engaged in sale of goods or services, what are not considered businesses and therefor not subject to business tax?

Answer 4

1. Government agencies and instrumentalities - motive is provision of essential public services
2. Non-profit organizations or associations - motive is provision of eleemosynary services not aimed at income generation
3. Employment - periodic compensation through employment is not a business
4. Directorship in a corporation - it does not involve offering of services to the public.

Question 5

Abdul is an insurance agent and is paid insurance commissions by insurance companies for every policy she is able to sell. Is Abdul subject to business tax?

Answer 5

An agency is not a contract of employment, but rather A CONTRACT FOR THE PROVISION OF SERVICES IN EXCHANGE FOR COMMISSION. Just like other practicing professionals, agents render their services to clients. Abdul therefor is subject to business taxes.

For reference, the following are considered engaged in business:

a. Consultants
b. Sales agents/brokers
c. TV talents/artists
d. Instructors

Question 6

What is the nature of business taxes?

Answer 6

a. Consumption tax
b. Indirect tax
c. Privilege tax

Question 7

What are the types of business taxes?

Answer 7

a. Value Added Tax
b. Percentage Tax
c. Excise Tax

Question 8

What is the general rate for businesses as to registration?

Answer 8

a. VAT registered taxpayers - 12% VAT
b. Non-VAT registered taxpayers - subject to 3% percentage tax

Question 9

What is the tax base for business taxes?

Answer 9

a. Sellers of GOODS/PROPERTIES - Taxable on GROSS SELLING PRICE, WHETHER COLLECTED OR UNCOLLECTED.
b. Sellers of SERVICE or LESSORS OF PROPERTIES - Taxable on GROSS RECEIPTS ONLY, WHETHER EARNED OR UNEARNED.