OTHER PERCENTAGE TAXES Flashcards
What is percentage tax?
Percentage tax is a national tax measured by a CERTAIN PERCENTAGE of the gross selling price or gross value in money of goods sold or bartered; or of the gross receipts or earnings derived by any person engaged in the sale of services.
What is the scope of percentage tax?
It covers the following:
- Services specifically subject to percentage taxes
- All other sales of goods, services or lease of properties other than exempt sales, provided that the SELLER:
a. DID NOT EXCEED THE VAT THRESHOLD
b. IS NON VAT-REGISTERED
What are the services specifically subject to percentage tax?
PE DC IC F OM BNB L A W A S
- Persons Exempt from VAT
- Domestic Carriers and keepers of garage
- International Carriers
- Franchises
- Overseas dispatch, message or conversation originating from the Philippines
- Banks and Non-Bank financial intermediaries performing quasi-banking functions
- Tax on other Non-Bank financial intermediaries not performing quasi-banking operations
- Life insurance premiums
- Agents of foreign insurance companies
- Winnings
- Amusement Taxes
- Sale/barter/exchange of shares of stock listed and traded through the local stock exchange or through initial public offering.
Explain the tax on persons exempt from VAT.
(SECTION 116) - 3%
To be subject to percentage tax, the person must:
a. NOT be VAT registered
b. Annual gross sales must NOT EXCEED 3,000,000.
Percentage tax is computed as:
Tax base x 3% = OPT
Tax base is:
a. Seller of Goods - Gross Sales
b. Seller of Services - Gross Receipts
If a person has sales/services not exceeding the 3,000,000 threshold, but registered as a VATable business, his VATable status shall be irrevocable for?
3 consecutive years.
What are common carriers?
Common carriers refers to the persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods, either by land, water or air, for compensation, offering their services to the public and shall include transportation contractors.
Explain the Percentage tax on domestic carriers and keepers of garage.
(SECTION 117) - 3%
Persons liable are the following:
a. Cars for rent or hire driven by the lessee
b. Transportation contractors
c. Other domestic carriers BY LAND for transport of passengers
d. Keepers of garage
Exempt persons:
a. owners of bancas
b. owners of animal-drawn two-wheeled vehicles
Percentage tax is computed as:
Tax base x 3% = COMMON CARRIERS TAX
Tax base is the HIGHER BETWEEN:
a. Actual Gross Receipts
b. Minimum Gross Receipts
Explain the Percentage tax on international carriers.
(SECTION 118) - 3%
Persons liable here are:
a. International air carriers
b. International shipping carriers
Percentage tax is computed as:
Gross receipts x 3% = COMMON CARRIERS TAX
Summarize the applicable tax on domestic and international carriers.
DOMESTIC Passengers |Cargoes/Mail
Land OPT 3%| VATable Sea/Air
a. Local VATable | VATable
b. Outgoing zero-rated | zero-rated
c. Incoming EXEMPT | EXEMPT
INTERNATIONAL
Passengers | Cargoes/Mail Land N/A | N/A
Sea/Air
a. Local N/A | N/A
b. Outgoing EXEMPT | OPT 3%
c. Incoming EXEMPT | EXEMPT
It must be noted that OUTGOING INTERNATIONAL CARRIERS are SUBJECT TO 2.5% INCOME TAX.
“VATable” means that the person/business is subject to VAT if VAT-registered or VAT-registrable, otherwise, said person/business will be subject to the 3% general percentage tax.
Explain the percentage tax on franchises.
(SECTION 119) 2% AND 3%
Franchises liable are:
1. Franchises on GAS AND WATER UTILITIES - 2% of gross receipts derived from business covered by the law granting the franchise
- Franchises on RADIO/TV BROADCASTING - 3% of gross receipts derived from business covered by the law granting the franchise
a. Must NOT BE VAT REGISTERED
b. Annual gross receipts of PRECEDING YEAR MUST
NOT EXCEED 10,000,000 - PAGCOR - 5% OF GROSS REVENUES ON GAMING OPERATIONS
OPT shall be based on GROSS RECEIPTS OF THE FRANCHISE.
Explain the percentage tax on overseas dispatch, message or conversation originating from the Philippines.
(SECTION 120) - 10% Requisites: a. There must be an overseas dispatch/message b. Originated from PH c. Made through wireless communication
Person liable is the USER of the facility
Percentage tax is computed as:
Payment for service x 10% = OVERSEAS COMMUNICATION TAX
The following are exempt:
a. Diplomatic Services
b. International Organizations
c. News Agencies or services
d. Government
What are banks/banking institutions?
These refer to those entities engaged in the lending of funds obtained in the form of deposits.
What are non-bank financial intermediaries?
These refer to persons/entities whose principal function include the lending/investing/placement of funds or evidences of indebtedness or equity deposited with them/acquired by them.
What are quasi-banking functions?
These refer to the borrowing of funds from TWENTY OR MORE personal or corporate lenders AT ANY ONE TIME through the issuance/endorsement or acceptance of debt instruments of any kind other than deposits.
Explain the percentage tax on banks/non-bank financial intermediaries performing quasi-banking functions.
(SECTION 121) - 5%, 1%, 0%, 7%
GROSS RECEIPTS OR INCOME DERIVED FROM:
A. Interest/commissions/discounts from LENDING AND FINANCIAL LEASING:
a. Remaining maturity period in 5 YEARS OR LESS - 5%
b. Remaining maturity period is MORE THAN 5 YEARS
- 1%
B. Dividends and equity shares in net income of subsidiaries - 0%
C. Royalties/rentals of property/profits from exchange and all other items treated as gross income under the Tax Code - 7%
D. Net Trading Gains within the taxable year on foreign currency/debts/securities/derivatives and other similar financial instruments - 7%
Explain the percentage tax on OTHER non-bank financial intermediaries NOT performing quasi-banking functions.
(SECTION 122) - 5%, 5%, 1%
GROSS RECEIPTS OR INCOME DERIVED FROM:
A. Interest/commissions/discounts and all other items treated as gross income under the Tax code - 5%
B. Interest/commissions/discounts from LENDING AND FINANCIAL LEASING:
a. Remaining maturity period in 5 YEARS OR LESS - 5%
b. Remaining maturity period is MORE THAN 5 YEARS
- 1%
Explain the percentage tax on Life insurance premiums.
(SECTION 123) - 2%
Percentage tax is computed as follows:
Premiums collected x 2% = Premiums tax
However, the following premiums are exempt from tax:
a. Premiums refunded within six months after payment on account of rejection of risk or returned for other reason
b. Premiums paid upon re-issuance by a company that has already paid the tax
c. Premiums collected or received by any branch of a domestic corporation/firm or association doing business outside the Philippines on account of any life insurance of the insured who is a non-resident, if any tax on such premium is imposed by the foreign country where the branch is established.
d. Premiums collected are received on account of any reinsurance, if the insured, in case of personal insurance, resides outside the Philippines if any tax on such premiums is imposed by the foreign country where the original insurance has been issued or perfected.
e. Portion of the premiums collected or received by the insurance companies or variable contracts in excess of the amounts necessary to insure the lives of the variable contract workers
f. Premium collected by a purely cooperative company/association.
Explain the percentage tax on agents of a foreign insurance company.
(SECTION 124) - 4%, 5%
Persons liable are:
a. Fire/Marine/Miscellaneous agents of non-resident foreign corporations engaged in insurance business computed as follows:
Premiums collected x 4% = Premiums Tax
b. Owners of property DIRECTLY obtaining insurance from non-resident foreign corporations engaged in insurance business computed as follows:
Premium payments x 5% = Premiums Tax
Explain the percentage tax on amusement.
(SECTION 125) - 10%, 15%, 18%, 30%
The following amusement places and their corresponding rate are as follows:
a. Boxing exhibition - 10% or exempt
b. Professional Basketball games - 15%
c. Cockpits/cabarets/night or day clubs - 18%
d. Jai-alai and racetracks - 30%
Percentage tax shall be computed as follows:
Gross receipts x Rate = Amusement Tax
Gross receipts encompasses ALL RECEIPTS such as radio/TV rights of the proprietor/lessee/operator of the amusement place.
To be exempt from amusement tax, what are the requisites for boxing exhibitions?
- A World or Oriental championship is at stake
- One of the contenders is a CITIZEN of PH
- Promoted by citizens of the PH or by a corporation/association AT LEAST 60% of the capital is owned by such citizen.
Explain the percentage tax on winnings.
(SECTION 126) -10%, 4% or 10%
Persons liable are:
1. Owners of the winning horse computed as:
Winnings x 10% = Tax on Winnings
- Bettor in horse race or jai-alai computed as:
(Gross Winnings - cost of ticket) x Rate=Tax on winnings
Rate:
a. Ordinary - 10%
b. Special(Double/forecast/quinella/trifecta) - 4%
Explain the percentage on stock transactions.
(SECTION 127) 0.6%, 4%, 2%, 1%
Kinds of Stock Transaction Tax:
A. Tax on SALE/BARTER/EXCHANGE of Stock LISTED AND TRADED THROUGH THE LOCAL STOCK EXCHANGE
Requisites:
a. Seller must NOT BE A DEALER in securities
b. Shares sold is listed and traded in LSE
Percentage tax shall be computed as:
Gross Selling Price x 0.6% = Stock transaction tax
B. Tax on SHARES OF STOCK SOLD OR EXCHANGED THROUGH INITIAL PUBLIC OFFERING
Requisites:
a. Sale is made through the LSE
b. It is an INITIAL PUBLIC OFFERING OF A “CLOSELY
HELD CORPORATION”
Percentage tax shall be computed as:
Gross Selling Price x Rate = Stock transaction tax
Rate depends whether the ratio of shares sold over shares outstanding after the sale is:
25% and below - 4%
More than 25% to 33.33% - 2%
More than 33.33% - 1%
Persons liable
1. Primary offering of unissued stock - Issuing corporation
- Secondary offering of stocks by existing shareholders during the IPO - seller of stock.
What does “follow-on/follow through offering of shares” mean?
It refers to an offering of shares to the investing public AFTER an IPO. After an IPO, the corporation becomes publicly listed, and so sale of shares by non-dealers become subject to stock transactions tax under Sec 127.
Section 116 or tax on VAT exempt persons shall be returned and paid every?
25 days after the end of each quarter.
Section 117 or tax on domestic common carriers shall be returned and paid every?
25 days after the end of each quarter.
Section 118 or tax on international common carriers shall be returned and paid every?
25 days after the end of each quarter.
