Professional Documents
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NATURE: Percentage tax is also a type business tax imposed on the gross sales/receipts of a taxpayer. Unlike VAT (particularly output VAT on sales),
percentage tax is a deductible tax under Sec. 34(C) of the Tax Code, except for stock transactions tax and percentage tax on initial public offerings.
THRESHOLD PROVISION: Under Section 109(BB), sale of goods or services not exceeding P3,000,000 shall be exempt from VAT. These, however, are
subject to the 3% percentage tax, except the following:
1. Cooperatives; and
2. Self-employed individuals and professionals availing of the 8% flat rate of income tax.
OTHER VAT-EXEMPT TRANSACTIONS: Those which are VAT-exempt under Sections 109(A) to (AA) are likewise exempt from the 3% percentage
tax. OPT is only applicable to transactions which would have otherwise been subject to VAT had the gross sales/receipts exceeded P3,000,000.
As such, if a vendor sells agricultural or marine food products in their original state which is exempt under Setion 109(A) of the Tax Code, it would likewise be
exempt from the 3% OPT.
NO VAT REGISTRATION: To be subject to the 3% percentage tax, the taxpayer likewise did NOT avail of the optional VAT registration, otherwise, even if
the gross receipts/sales did not exceed the P3,000,000, he would be liable for VAT and not the 3% OPT.
International air and shipping Carriers – CARGO Gross Receipts 3% Sec. 118
Franchisees
Radio and/or Television Broadcasting Gross Receipts (not 3% Sec. 119
exceeding P10M for
Gas and Water Utilities Radio/TV Broadcasting) 2%
Life Insurance directly taken from foreign insurance Premiums 5% Sec. 124
companies
COMMON CARRIER’S TAX: In computing the percentage tax provided in this Section, the following shall be considered the minimum quarterly gross receipts
in each particular case:
Taxis -
Applicability: this tax is applicable only to (1) domestic carriers (2) by land for (3) transport of passengers. If any one of the three is different, the
3% common carriers tax is not applicable, as follows:
a. International Carriers:
a. Carriage of passengers - exempt from VAT and percentage taxes under Sec. 109(S).
b. Carriage of cargo – subject to the 3% Percentage Tax on International Carriers under Section 118.
b. By sea or air:
a. Domestic transport (PH to PH) – 12% VAT if gross sales/receipts exceed P3,000,000 or is VAT registered; otherwise 3% Other Percentage Tax
b. International transport (PH to Foreign Country) – 0% VAT if VAT-registered; VAT-exempt if not VAT-registered.
c. Transport of cargo – 12% VAT or 3% Other Percentage Tax (if gross sales/receipt do not exceed P3,000,000 and did not avail of optional registration
for VAT)
FRANCHISEES:
Radio and/or Television Broadcasting: is subject to the 3% Franchise Tax. However, if their gross receipts exceed P10M, they will be subject to VAT. If
their sales are below P10M, they have an option to be registered as a value-added taxpayer. Provided, that once the option is exercised, it shall not be revoked.
Gas and Water Utilities: are subject to the 2% Franchise Tax regardless of the amount of gross receipts arising from their businesses covered by the law
granting such franchise. If there are income items arising not from their franchise (e.g., rent income), the same will not be subject to the 2% Franchise Tax
but to the 12% VAT or 3% Other Percentage Tax, whichever is applicable.
PAGCOR: income of PAGCOR arising from its casino operations shall be subject to the 5% franchise tax in accordance with its charter, and this tax is in lieu
of all other taxes, including VAT/OPT and Income Tax.
However, income from sources other than casino operations shall be subject to the 30% regular corporate income tax but still exempt from VAT.
Other Franchisees: shall be subject to the 12% VAT or 3% Other Percentage Tax, depending on the gross sales/receipts and VAT-registration.
OVERSEES COMMUNICATION TAX: The tax imposed shall be payable by the person paying for the services rendered and shall be paid to the person
rendering the services who is required to collect and pay the tax within twenty (20) days after the end of each quarter.
Exemptions: the following are not subject to the percentage tax on life insurance premiums:
1. Premiums refunded within six (6) months after payment on account of rejection of risk or returned for other reason to a person insured;
2. Reinsurance premiums
3. Those 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 nor upon 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 premiums is imposed by the foreign country where the original insurance has been
issued or perfected;
4. Premiums collected or received by the insurance companies on variable contracts (as defined in section 232(2) of Presidential Decree No. 612), in excess
of the amounts necessary to insure the lives of the variable contract workers.
Withholding mechanism: The tax herein prescribed shall be deducted from the 'dividends' corresponding to each winning ticket or the "prize" of each
winning race horse owner and withheld by the operator, manager or person in charge of the horse races before paying the dividends or prizes to the persons
entitled thereto.
2 Cesar Nickolai F. Soriano Jr.
University of Santo Tomas – AMV College of Accountancy 2010-6213
Arellano University School of Law 2011-0303
PERCENTAGE TAXES
Example: the amount of winnings is P10,200 and the cost of the ticket is P200, the corresponding percentage tax is P1,000 ([10,200 less 200] * 10%) –
this amount will be deducted from the “prize” given to the bettor, such that he will only receive P9,200 (P10,200 winnings less P1,000 tax).
The P1,000 shall be remitted by the operator, manager or person in charge of the horse race to the BIR.
The gross receipts tax has been re-imposed under RA No. 9238 beginning January 1, 2004, as implemented by RR No. 9-2004.
Imposition of GRT on Banks and Non-Bank Financial Intermediaries performing Quasi-Banking Functions:
On royalties, rentals of property, profits from exchange and all other items treated
as gross income for income tax 7%
On net trading gains on foreign currency, debt instruments, derivatives and other
similar financial instruments.* 7%
*Net trading losses may be deducted only from net trading gains and not from any other item subject to the gross receipts tax. All other revenues subject to
GRT are gross in amount and no deductions are allowed.
Imposition of GRT on Other Non-Bank Financial Intermediaries (not performing quasi banking functions)
From interest, commissions, discounts and all other items treated as gross 5%
income
On interest, commissions and discounts from lending activities, as well as
income from financial leasing*, on the basis of remaining maturities of the
instruments from which such receipt is derived:
Remaining maturity period of 5 years or less 5%
Remaining maturity period is more than 5 years** 1%
*In the case of financial leasing, the taxable gross receipts shall consist only of interest income (recovery of principal not included). However, in the case of
transactions under operating lease agreements, the gross receipts shall be the gross rental amount. Whether the lease transaction is “finance lease” or
“operating lease” shall be determined by the contents of the document evidencing the lease agreement.
**In case the maturity period is shortened through pre-termination, then the maturity period shall be reckoned to the end as of the date of pre-termination
In the above cases, the generally accepted accounting principles as may be prescribed by the Securities and Exchange Commission for other non-bank financial
intermediaries shall be the basis for the calculation of the taxable gross receipts.
GROSS RECEIPTS TAX BASE INCLUDES THE 20% FINAL WITHHOLDING TAX ON INTEREST INCOME:
if X bank earned P1,000 from a bank deposit and the depository bank withheld P200 FWT, such that X Bank received only P800, for GRT purposes the tax
base is still P1,000, the amount withheld and remitted to the BIR as FWT is considered constructively received and forms part of X Bank’s “gross receipts”
subject to GRT.
AMUSEMENT TAXES
There shall be collected from the proprietor, lessee or operator of cockpits, cabarets, night or day clubs, boxing exhibitions, professional basketball games,
Jai-Alai and racetracks, a tax equivalent to:
Gross Receipts: For the purpose of the amusement tax, the term "gross receipts" embraces all the receipts of the proprietor, lessee or operator of the
amusement place. Said gross receipts also include income from television, radio and motion picture rights, if any. A person or entity or association conducting
any activity subject to the tax herein imposed shall be similarly liable for said tax with respect to such portion of the receipts derived by him or it.
Professional Basketball Games: are subject to the 15% amusement tax as provided under PD No. 871. This tax, however, is in lieu of all other percentage
taxes of whatever nature and description.
STOCK TRANSACTIONS TAX: TAX ON SALE, BARTER OR EXCHANGE OF SHARES OF STOCK LISTED AND TRADED THROUGH LOCAL STOCK
EXCHANGE: There shall be levied, assessed and collected on every sale, barter, exchange, or other disposition of shares of stock listed and traded through
the local stock exchange other than the sale by a dealer in securities, a tax at the rate of 6/10 of 1% (1/2 of 1% prior to the TRAIN) of the gross selling price
or gross value in money of the shares of stock sold, bartered, exchanged or otherwise disposed which shall be paid by the seller or transferor.
Note that if the stock is NOT listed or traded through a local stock exchange, the applicable tax shall be the Capital Gains Tax.
Duty of Stockbroker: the stockbroker who effected the sale shall remit the tax to the BIR within 5 days from the date of collection thereof and to submit
on Mondays of each week to the secretary of the stock exchange, a true and complete return which shall contain a declaration of all the transactions effected
through him during the preceding week and of taxes collected by him and turned over to the BIR.
TAX ON SALE, BARTER OR EXCHANGE OF SHARES OF STOCK THROUGH INITIAL PUBLIC OFFERING: There shall be levied, assessed and collected
on every sale, barter, exchange or other disposition through initial public offering of shares of stock in closely held corporations, as defined herein, a tax at
the rates provided hereunder based on the gross selling price or gross value in money of the shares of stock sold, bartered, exchanged or otherwise disposed
in accordance with the proportion of shares of stock sold, bartered, exchanged or otherwise disposed to the total outstanding shares of stock after the listing
in the local stock exchange:
The tax herein imposed shall be paid by the issuing corporation in primary offering or by the seller in secondary offering
CLOSELY HELD CORPORATION means any corporation at least fifty percent (50%) in value of outstanding capital stock or at least fifty percent (50%) of
the total combined voting power of all classes of stock entitled to vote is owned directly or indirectly by or for not more than twenty (20) individuals.
For purposes of determining whether the corporation is a closely held corporation, insofar as such determination is based on stock ownership, the following
rules shall be applied:
(1) Stock Not Owned by Individuals. - Stock owned directly or indirectly by or for a corporation, partnership, estate or trust shall be considered as being owned
proportionately by its shareholders, partners or beneficiaries.
(2) Family and Partnership Ownerships. - An individual shall be considered as owning the stock owned, directly or indirectly, by or for his family, or by or for
his partner. For purposes of the paragraph, the 'family of an individual' includes only his brothers and sisters (whether by whole or half-blood), spouse,
ancestors and lineal descendants.
(3) Option. - If any person has an option acquire stock, such stock shall be considered as owned by such person. For purposes of this paragraph, an option
Duty of Corporate Issuer: 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. In the case of secondary offering, the provision of Subsection (C)(1) of this Section shall apply as to the time and manner
of the payment of the tax.
Determination of the proper rate applicable: the rate applicable (i.e., 4, 2 or 1 percent) depends on the ratio of the shares SOLD over the TOTAL
OUTSTANDING SHARES after the IPO (meaning, including the shares sold during the IPO).
Example: if there are 100,000 outstanding shares prior to the IPO and 50,000 shares were sold in the IPO, the ratio would be 33% (50,000 sold shares
over 150,000 outstanding shares after the IPO), the rate of percentage tax would then be 2% in accordance with the above.
Percentage Tax on an IPO is likewise applicable to a stockholder: if an existing stockholder sells his shares at the time of the IPO, he shall likewise
be subject to the 4%,2% or 1% percentage tax depending on the ratio of the shares sold over the total outstanding shares after the IPO. Note, however, that
the individual stockholder will have his own ratio, such that the sold shares he will use as numerator in the formula is only the shares he sold and not including
those sold by the issuing corporation in the IPO.
In the above illustration, assume that Mr. X also sold 10,000 shares during the IPO, his own ratio would be (10,000 over 150,000) or 6.67% and the rate
then applicable to him would be 4%.
If the stockholder sold the shares AFTER the IPO, the same would be subject to the ½ of 1% STT since at the time of sale, the shares of stock are already
listed in the stock exchange, provided that the sale was made through the stock exchange.
Exemption from Income Tax: gains derived from sale, barter or exchange of shares of stock listed and traded through local stock exchange or through
initial public offering exempt from income tax under Sec. 127(D) of the NIRC and the tax paid is not deductible expense for income tax purposes.
TRAIN AMENDMENT: Percentage Tax Returns (except stock transactions tax and tax on IPO) are now to be filed within 25 days from the close of the
quarter. As such, there is no longer monthly filing of the percentage taxes beginning Jan. 1, 2018.
2. Quarterly Percentage Tax Return – or BIR Form No. 2551Q will be filed and the corresponding tax liability to be paid within 20 days from the end
of each quarter. This return is applicable to:
a. Those subject to amusement taxes
b. Overseas communications tax
3. Percentage Tax Return for Transactions Involving Shares of Stocks Listed and Traded Through the Local Stock Exchange or Through
Initial and/or Secondary Offering – or BIR Form No. 2552 is to be filed and the corresponding tax to be paid:
a. Stock transactions tax - within 5 banking days from date of collection.
b. Tax on IPO – within 30 days from the date of listing in the local stock exchange
c. Tax on Secondary Public Offering – within 5 banking days from date of collection.