Percentage Taxes

Question 1

Who are subject to the 3% (1% from Jul. 1, 2020 - Jun. 30, 2023) tax under Sec. 116?

Answer 1

Persons who engage in VATable sales or leases of properties, or services in the course of trade or business:
- whose gross sales or receipts does not exceed P3,000,000; AND
- are not VAT-registered

Question 2

Who are exempt from the 3% (1% from Jul. 1, 2020 - Jun. 30, 2023) tax under Sec. 116?

Answer 2

(1) Self-employed individual and professionals availing of the 8% tax on gross sales and other non-operating income

(2) Cooperatives (except duly registered cooperatives which transact business with members and non-members, and accumulated reserves and undivided net saving of more than P10M pesos - subject to percentage tax on all sales to non-members)

(3) Fees, per diems, allowance, and other income received by corporate directors of which they are not employees

(4) Marginal income earners or individuals who are self-employed and deriving gross sales/receipts not exceeding P100,000 during any 12-month period

(5) Persons who are VAT-registered, regardless of level of sales

(6) Persons whose line of business in non-exempt (from VAT) and are non-VAT registered, but whose gross annual sales/receipts exceeds P3,000,000

Question 3

Who are subject to common carrier’s tax under Sec. 117?

Answer 3

(1) Lessors of cars for rent or hire driven by the lessee
(2) Transportation contractors including persons who transport passengers for hire
(3) Other domestic carriers by land for the transport of passengers
(4) Keepers of garages

Exempt: banca owners and owners of animal-drawn two-wheeled vehicles

Question 4

What is the rate and base of the CCT?

Answer 4

3% of quarterly gross sales or receipts from the transport of passengers, provided the gross receipts is equal or greater than the minimum levels provided by law

Question 5

What are the minimum quarterly receipts?

Answer 5

(1) Jeep for hire
(a) provincial - 1,200
(b) Manila and other cities - 2,400

(2) Public Utility Bus
(a) not exceeding 30 passengers - 3,600
(b) exceeding 30 but not exceeding 50 - 6,000
(c) exceeding 50 - 7,200

(3) Taxis
(a) Provincial - 2,400
(b) Manila and other cities - 3,600

(4) Car for hire
(a) without chauffeur - 1,800
(b) with chauffeur - 3,000

Question 6

Who are subject to the percentage tax on international carriers under Sec. 118?

Answer 6

International air and shipping carriers doing business in the Philippines

Off-line carriers, which sell tickets (a) covering off-line flights/voyages3 or (b) flights or voyages of other carriers, are not considered engaged in business as an international carrier in the Philippines, and therefore are exempt from the OPT under Section 118

Question 7

What is the rate and base of the tax on international carriers?

Answer 7

3% of quarterly gross receipts from the transport of cargo from the Phil. to another country

Question 8

Who are subject to franchise tax under Sec. 119?

Answer 8

(1) Radio and/or television broadcasting companies whose annual gross receipts of the preceding year do not exceed P10M, and which did not choose to be registered under the VAT system

(2) Gas and water utilities

Question 9

What is the rate and base of the franchise tax?

Answer 9

• Radio and/or TV broadcasting - 3% of gross receipts derived from the business covered by the law granting the franchise
• Gas and water utilities - 2% of gross receipts derived from the business covered by the law granting the franchise

Question 10

Who are subject to the overseas communications tax under Sec. 120?

Answer 10

Payor of overseas dispatch, message, or conversation originating from the Philippines by telephone, telegraph, telewriter exchange, wireless, and other communication equipment or service

Payee collects and remits the tax within 20 days after the end of each quarter

Domestic calls are subject to VAT.

Question 11

What is the rate and base of the OCT?

Answer 11

10% of the amount paid for the service

Question 12

Who are exempt from the OCT?

Answer 12

(1) The Government;

(2) Embassies or consular offices of a Foreign Government;

(3) International organizations pursuant to international agreements;

(4) News services: amounts paid for messages from any newspaper, press
association, radio or television newspaper, broadcasting, or newsticker
services to any other newspaper, press association, radio or television
newspaper broadcasting agency, newsticker service, or to a bona fide
correspondent. The messages must deal exclusively with the collection
or dissemination of news items.

Question 13

What is the rate and base of the tax on banks and and non-bank financial intermediaries performing quasi-banking functions under Sec. 121?

Answer 13

(1) Interest, commissions, discounts from lending activities, as well as income form financial leasing
- 5 years or less maturity period - 5%
- more than 5 years maturity period - 1%

(2) Dividends and equity shares and net income of subsidiaries - 0%

(3) Royalties, rentals of property, profits from exchange, and all other items of gross income under Sec. 32 - 7%

(4) Net trading gains within the taxable year on foreign currrency, debt securities, derivatives, and other similar financial instruments - 7%

BSP is not a bank nor a non-bank financial intermediary. In the performance of its
proprietary functions, it shall not be subject to the percentage tax. However, it can subject to VAT if it engages in any of the transactions under Section 105 of the Tax Code.

The term “bank” shall refer to entities engaged in the lending of funds obtained in the form of deposits.

The term “non-bank financial intermediaries” shall refer to persons or entities whose principal
functions include the lending, investing, or placement of funds or evidences of indebtedness or equity deposited with them, acquired by them, or otherwise coursed through them, either for their own account or for the account of others.

The term “quasi-banking activities” shall refer to the borrowing of funds from twenty (20) 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 for the borrower’s own account, or through the issuance of certificates of assignment or similar instruments, with recourse, or of repurchase agreements for purposes of relending or purchasing receivables and other similar obligations.

Question 14

What is the rate and base of the tax on finance companies (and other non-bank financial intermediaries not performing quasi-banking functions,
doing business in the Philippines) under Sec. 122?

Answer 14

(1) On interest, commissions, discounts from lending activities as well as income from financial leasing
- 5 years or less maturity period - 5%
- more than 5 years maturity period - 1%

(2) On gross receipts derived from interest, commissions, discounts, and all other items treated as gross income under the Tax Code - 5%

The term “finance companies” shall refer to corporations except banks, investment houses,
savings and loans associations, insurance companies, cooperatives, and other financial
institutions organized or operating under other special laws, which are primarily organized for
the purpose of extending credit facilities to consumers and to industrial, commercial, or
agricultural enterprises, by direct lending or by discounting or factoring commercial papers
or accounts receivables, or by buying and selling contracts, leases, chattel mortgages, or other
evidences of indebtedness, or by financial leasing of movable as well as immovable properties.

The term “other non-bank financial intermediaries” above shall include pawnshops and non- stock savings and loan associations.

Question 15

Who are subject to the premium tax under Sec. 123?

Answer 15

Any person/entity offering life insurance in the Philippines, except purely
cooperative companies or associations

Question 16

What is the rate and base of the premium tax?

Answer 16

2% of gross premiums collected

Gross premiums shall include re-issuance fees, reinstatement fees, renewal fees, penalties
paid to the insurance company in connection with the insurance policy, and premiums on
health and accident insurance.

Question 17

Who are exempt from the premium tax?

Answer 17

(1) Premiums received by purely cooperative companies or associations;

(2) Premiums refunded within six (6) months after payment on account of
rejection of risk, or returned for any other reason to a person insured;

(3) Premiums paid upon reinsurance by a company that has already paid the
tax;

(4) 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

(5) Premiums collected or received on account of any reinsurance, if the
insured, in case of personal insurance, resides outside the Philippines, if any
tax on such premium is imposed by the foreign country where the original
insurance has been issued or perfected; and

(6) Portion of the premiums collected or received by the insurance companies
on variable contracts in excess of the amounts necessary to insure the lives
of the variable contract owners.

(7) Management fees, rental income, or any other income earned by the life
insurance company from services which can be pursued independently of
the insurance business activity;

(8) Investment income earned by the life insurance company from investing the
premiums;

If investment income arises from funds solicited for purposes other than for the payment of premiums, the same shall be subject to the
GRT under Section 121 of the Tax Code.

Question 18

Who are subject to the tax on Agents of Foreign Insurance Companies under Sec. 124?

Answer 18

(1) Every fire, marine, or miscellaneous insurance agent authorized under the Insurance Code to procure policies of insurance as he may have previously been legally authorized to transact, on risks located in the Philippines for companies not authorized to transact business in the Philippines

(2) Owners of property who obtain insurance directly with foreign companies

Does not apply to reinsurance premiums

Question 19

What is therate and base of the tax on agents of Foreign Insurance Companies?

Answer 19

• For fire, marine, or miscellaneous insurance agent - 4% of total premiums collected
• For owners of property who obtain
  insurance directly with foreign companies - 5% of premiums paid

Question 20

Who are subject to the amusement tax under Sec. 125?

Answer 20

Proprietor, lessee, or operator of cockpits, cabarets, night or day clubs,
boxing exhibitions, professional basketball games, jai-alai, and race
tracks

Question 21

What are the rate and base of the the amusement tax?

Answer 21

Basis: Gross Receipts

• cockpits, cabarets, and night or day clubs - 18%
• boxing exhibitions - 10%
• professional basketball games - 15%
• jai-alai and race tracks - 30%

(a) Gross receipts include admission charges, rents, and income from television, radio, and
motion picture rights.

(b) If the proprietor, lessee, or operator of the amusement place also operates, at the same
time within the premises, a bar or restaurant, the receipts of the bar or restaurant shall
form part of gross receipts subject to the amusement tax above.

(c) If such bar or restaurant in (b) is operated by a third person, the gross receipts thereof
shall be subject either to VAT or to the 3% OPT under Section 116.

(d) Amusement places include videoke bars, karaoke bars, karaoke televisions, karaoke
boxes, and music lounges.

Question 22

What are exempt from amusement tax?

Answer 22

Boxing exhibition where:
(1) The world or oriental title is at stake;
(2) One of the contenders is a Filipino citizen; and
(3) Is promoted by a Filipino citizen, or a by a corporation/association which
is ≥ 60% owned by Filipinos.

Question 23

What is the rate and base of the Gaming Tax of Offshore Gaming Licensees under Sec. 125A?

Answer 23

5% of the entire gross gaming revenue or receipts, or the agreed pre-determined minimum monthly gaming revenue or receipts, whichever is higher. Such 5% gaming tax shall be in lieu of all other direct and indirect internal revenue taxes and local taxes

This shall be directly remitted to the BIR not later than the 20th day following the end
of each month.

(1) Gross gaming revenue or receipts shall mean gross wagers less payouts.

(2) Non-gaming revenue. The non-gaming revenues of a duly-licensed offshore gaming
licensee shall be subject to an income tax equivalent to twenty-five percent (25%) of
taxable income. Such non-gaming revenues of OGLs shall also be subject to the VAT
or OPT, whichever is applicable.

Question 24

Who are subject to the winnings tax under Sec. 126?

Answer 24

(1) Persons who win horse races; and
(2) Owners of winning race horses.

Question 25

What is the rate and base of the winnings tax?

Answer 25

(1) winnings in horse races - 10% of winnings or dividends

(2) winnings form double forecast/quinella, and trifecta bets in horse races - 4% of winnings or dividends

(3) owners of winning race horses - 10% of the prizes

(a) The tax in (1) and (2) above shall be based on the actual amount paid for every
winning ticket after deducting the cost of the ticket.

(b) The tax shall be withheld by the operator, manager, or person in charge of the
horse races before paying the dividends or prizes.

Question 26

Who are subject to the stock transaction tax on sale, barter, or exchange of shares listed and traded through the LSE under Sec. 127A?

Answer 26

Seller or transferor of the shares of stock, whether individual (citizen or alien), corporation (domestic or foreign), or other taxpayer such as estates, trust funds, and pension funds

Question 27

Who are exempt from stock transaction tax under Sec. 127A?

Answer 27

(a) Dealers in securities

(b) Investors in shares of stock in a mutual fund company upon redemption of said
shares of stock in a mutual fund

(c) All other persons, whether natural or juridical, who are specifically exempt
from national internal revenue taxes under existing investment incentives and other special laws

Question 28

What is the rate and base of the stock transaction tax under Sec. 127A?

Answer 28

6/10 of 1% (.006) of the gross selling price

The stockbroker shall withhold the tax and remit the same to an authorized agent bank (AAB) or
Revenue District Office (RDO) where the broker is registered within 5 days
from the date of collection

Question 29

Whoa are subject to the stock transaction tax on sale or exhchange through IPO of shares of stock in closely-held corporations under Sec. 127B?

Answer 29

(1) the issuing corporation in a primary offering, or

(2) the selling shareholder of the shares in a secondary offering during an IPO

Any initial public offering and secondary offering of shares of stock issued by a real estate investment trust (“REIT”) or derivatives thereof shall be exempt from the stock transaction tax imposed under Section 127 (B) of the Tax Code

Question 30

What is the rate and base of the stock transaction tax under Sec. 127B?

Answer 30

Base: Gross selling price or gross value in money of the shares of stock sold

In accordance with the proportion of shares of stock sold to the total outstanding shares of stock after the listing in the local stock exchange:
- up to 25% - 4%
- over 25% but not over 33.33% - 2%
- over 33.33% - 1%

Question 31

Who pays the stock transaction tax under Sec. 127B?

Answer 31

(a) In the case of a primary offering, the corporate issuer shall file the return, and pay the corresponding tax within thirty (30) days from the date of listing of the shares of stock in the local stock exchange.

(b) In the case of a secondary offering, it shall be the duty of the stockbroker who effected the sale to collect the tax, and remit the same to the BIR within five (5) banking days from the date of collection.

Question 32

Are stock transaction taxes deductible for income tax purposes?

Answer 32

No