Tax
De Castro, Wei
What is percentage tax?
Percentage tax is a business tax imposed on persons, entities, or transactions
specified under Sections 116 to 127 of the National Internal Revenue Code of
1997 (also known as Tax Code), as amended, and as required under special laws.
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.
Who are required to file and pay?
Coverage Type of % Tax Tax Rate
1. Services specifically subject to percentage tax Specific % tax Various Rates
2. Sales of goods or other services not exempt General % tax 3%
Types of Percentage Tax VAT taxpayers Non-VAT taxpayers
Specific percentage tax Specific % tax Various Rates
General percentage tax General % tax 3%
Services Specifically Subject to Percentage Tax
1. Banks and non-bank financial intermediaries (including pawn shops).
2. International carriers on their transport of cargoes, excess baggage and mails
only.
3. Common carriers on their transport of passengers by land and keepers of garage.
4. Certain amusement places. (Cockpit, night/day clubs/ Boxing exhibitions)
5. Brokers in effecting sales of stocks through the PSE and corporations or
shareholders on IPOs.
6. Certain franchise grantees.
7. Life insurance companies and agents of foreign insurance.
8. Telephone companies on overseas communication.
Banks and Quasi-banks
Source of income or receipt Tax Rate
1. Interest income, commissions and discounts from lending activities, and income from
financial leasing, on the basis of remaining maturities of instruments from which the
receipts were derived
● Maturity period of ≤5 years 5%
● Maturity period of >5 years 1%
2. Dividend and equity shares in the net income of subsidiaries 0%
3. All items treated as gross income under Section 32 of the NIRC 7%
4. Net trading gains within the taxable year of foreign currency, debt securities, 7%
derivatives and other similar financial instruments
Other Non-bank Financial Intermediaries
Source of income or receipt Tax Rate
1. Interest, commissions, discounts and all other items treated as gross income under the 5%
Tax Code, as amended
2. Interest, commissions, discounts from lending activities, as well as income from
financial leasing on the basis of remaining maturities of instruments from which such
receipts are derived:
● Maturity period of ≤5 years 5%
● Maturity period of >5 years 1%
International/Common Carriers and Overseas dispatch
Source of income or receipt Tax Rate
Gross receipts from International Carriers on the shipment of cargo from the Philippines a 3%
foreign country
Gross receipts from Domestic carriers and keepers of garages 3%
Amount paid for a message or call originating from the Philippines 10%
Amusement Places
Source of income or receipt Tax Rate
1. Gross receipts from Cockpits 18%
2. Gross receipts from Cabarets, Night or Day Clubs, videoke bars, karaoke bars, 18%
karaoke televisions, karaoke boxes and music lounges
3. Gross receipts from Boxing exhibitions 10%
4. Gross receipts from Professional basketball games 15%
5. Gross receipts from Jai-alai and race track 30%
6. Gross receipts from Winnings on horse races
● Winnings or ‘dividends’ 10%
● Winnings from double forecast/quinella and trifecta bets 4%
● Prizes of owners of winning race horses 10%
Sales of stocks through the PSE and corporations or shareholders on IPOs
Source of income or receipt Basis Tax Rate
1. Sale, barter, exchange or other disposition of shares of Gross Value in Money 6/10 of 1%
stock listed and traded through the Local Stock Exchange
other than the sale by a dealer of securities
2. Sale, barter or exchange or other disposition through:
Initial Public Offering (IPO) – the issuing corporation shall pay the imposed tax
Secondary Public Offering – the seller shall pay the imposed tax
3. Proportion of disposed shares to total outstanding shares 25% 4%
after the listing in the local stock exchange:
Over 25% but not over 33 2%
1/3%
Over 33 1/3% 1%
Government Franchises
Source of income or receipt Tax
Rate
1. Gross receipts from radio and television broadcasting companies whose 3%
annual gross receipts of the preceding year do not exceed Php10,000,000
and did not opt to register as VAT taxpayer
2. Gross receipts from gas and water utilities 2%
Life Insurance and Agents of Foreign Insurance
Source of income or receipt Tax Rate
Life Insurance
1. Total direct premiums collected by life Insurance Company/Agent/Corporation 2%
Agents of Foreign Insurance
1. Total premiums collected by insurance agents authorized under the Insurance 4%
Code to procure policies of insurance for companies not authorized to
transact business in the Philippines
2. Total premiums paid by owners of property obtaining insurance directly with 5%
foreign insurance companies
Summary of Specific Percentage Taxes
Business or Activity Percentage Tax Tax Rates
1. Banks and non-bank Gross receipt tax 5%, 1%; 7%
financial intermediaries
2. International carriers International carrier’s tax 3%
3. Common carriers / oversea Common carrier’s / Overseas 3% / 10%
calls communications tax
4. Amusement places / betting Amusement / Winnings tax 10%, 15%, 18%; 30% / 10%; 4%
5. Sales of stocks by investor / Stock transaction / IPO tax 60% x 1%
during IPO
6. Franchise Franchise tax 3%
7. Life insurance Premiums tax 2%, 4%; 5%
