PERCENTAGE TAXES

La Consolacion University Philippines

College of Business, Entrepreneurship and Accountancy

Transfer and Business Taxation

Handout on Other Percentage Taxes
Instructor: Mr. Leomar B. Seminiano, MICB, CPA
Summary rules on Other Percentage Taxes (OPT) under R.A. 8424, as last amended by R.A. 9337 and
RA 10963

Section Tax Base Tax Rate

Tax on persons exempt from VAT (except

Cooperatives) and not liable to pay the other
116 Monthly gross sales or receipts 3%
percentage taxes below. Not exceeding
P3,000,000.

Tax on franchises:
1. On gas and water utilities Monthly gross receipts 2%

119 2. On radio and/or television broadcasting Monthly gross receipts or pay 3%

companies with annual GR of not more than VAT at their option. Once
P10,000,000 exercised, it becomes
irrevocable.

125 Amusement taxes from operators of:

1. Boxing exhibitions Quarterly gross receipts 10%
(Exempt, if a World or Oriental championship in any division is at stake, promoted
by a Filipino citizen or Corporation, at least 60% Filipino owned, and one of the
contenders is a Filipino citizen)
2. Professional basketball games Quarterly gross receipts 15%
3. Cockpits Quarterly gross receipts 18%
4. Cabarets, night or day clubs Quarterly gross receipts 18%
5. Jai-alai and race tracks Quarterly gross receipts 30%

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.

126 Tax on winnings  Winner of the prizes in double 4% of the net prize
forecast/quinella & trifecta bets
 Person winning not in double 10% of the net prize
forecast/quinella & trifecta bets
 Owners of winning race horses 10% of the prize

123 Tax on life insurance premium, except purely Insurance premiums collected 4%
cooperative companies or associations

124  Owners of property who obtain insurance On premiums paid 5%

directly with foreign companies
 Agents of foreign insurance companies Insurance premiums collected 4%
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(fire, marine or miscellaneous insurance

agents)

127-A Tax on sale, barter or exchange of shares of stock listed and traded through the local stock
exchange (LSE), other than sale by a dealer in securities – ½ of 1% of gross selling price or gross
value in money of the shares of stock sold, bartered, exchanged or otherwise disposed of. 0.006
under the TRAIN law

127-B Tax on shares of stock sold or exchanged through the LSE in an initial public offering of shares of
stock of a closely held corporation in accordance with the proportion of shares of stock sold,
bartered or exchanged or disposed of to the total outstanding shares of stock after the listing in the
LSE:
Up to 25% 4% of GSP
Over 25% to 33 1/3% 2% of GSP
Over 33 1/3% 1% of GSP
117 Percentage tax on domestic common carriers Monthly gross receipts 3%
by land for the transport of passengers and
keepers of garages, except owners of bancas
and animal-drawn two-wheeled vehicles.

The following shall be considered per unit minimum quarterly gross receipts (for Sec. 117 only):

Manila and other Provincial

Cities
 Jeepney for hire P2,400 P1,200
 Public utility bus:

Not exceeding 30 passengers 3,600 3,600

Exceeding 30 but not exceeding 50 6,000 6,000
Exceeding 50 7,200 7,200
 Taxis 3,600 2,400
 Car for hire (with chauffeur) 3,000 3,000
 Car for hire (w/o chauffeur) 1,800 1,800

118 OPT on international carriers (air & shipping) Monthly gross receipts 3%
for the transport of both passengers & cargoes

120 Tax on overseas dispatch, message or Quarterly gross receipts from

conversation originating from the Philippines such services 10%

Exempted from Sec. 120 are: (DING)

 Diplomatic services
 International organizations
 News services
 Government

121 Tax on banks and non-bank financial Monthly gross receipts

intermediaries performing quasi-banking
functions:
a. On interests, commissions and discounts from lending activities as well as
income from financial leasing, based on remaining maturities of the instruments,
as follows:
Maturity period of more than 5 years 1%
Maturity period of 5 years or less 5%
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Note: In case of pretermination, the maturity period shall be reckoned to end as

of the date of pretermination for purposes of classifying the transaction and
applying the correct rate of tax.
b. On royalties, rental of property (real or personal), profit from exchange and all
other items treated as gross income under Section 32 of the tax code. 7%
c. On trading gains within a taxable month on foreign currency, debt securities,
derivations and other similar financial instruments. 7%
d. On dividends and equity shares in the net income of subsidiaries. 0%

122 Tax on other non-bank financial intermediaries, Monthly gross receipts

including finance companies, money changers
and pawnshops:
a. On interests, commissions and discounts from lending activities as well as
income from financial leasing, based on remaining maturities of the instruments,
as follows:
Maturity period of more than 5 years 1%
Maturity period of 5 years or less 5%
Note: In case of pretermination, the maturity period shall be reckoned to end as
of the date of pretermination for purposes of classifying the transaction and
applying the correct rate of tax.
b. On royalties, rental of property (real or personal), profit from exchange and all
other items treated as gross income under Section 32 of the tax code. 7%
c. On dividends and equity shares in the net income of subsidiaries. 0%

Return and payment of other percentage taxes

a. General rule: Every person liable to pay percentage taxes shall file a monthly return of the amount of his
gross sales, receipts or earnings and pay the tax thereon within twenty (20) days after the end of each taxable
month. The taxpayer may file a separate return for each branch or place of business, or a consolidated return
for all branches or places of business with the authorized agent bank, Revenue District Officer, Collection
Agent or duly authorized Treasurer of the City or Municipality where said business or principal place of
business is located, as the case maybe.

b. Exceptions:

 The tax on overseas dispatch, message or conversation originating from the Philippines shall be paid by
the person rendering the service within twenty (20) days after the end of each quarter.
 Amusement taxes shall be paid by the proprietor, lessee, operator or any party liable within twenty (20)
days after the end of each quarter.
 The tax on winnings shall be deducted and withheld by the operator, manager or person in charge of the
horse races and remitted to the Bureau of Internal Revenue within twenty (20) days from the date the tax
was deducted and withheld.
 The stock transaction tax of 1/2 of 1%, shall be collected by the stock broker and remitted to the Bureau
of Internal Revenue within five (5) banking days from the date of collection.
 The stock transaction tax of 4%, 2% and 1%, in case of primary offering, shall be paid by the corporation
within thirty (30) days from the date of listing of the shares of stock in the local stock exchange. In case
of secondary offering, the tax shall be collected by the stockbroker and remitted to the Bureau of Internal
Revenue within five (5) banking days from the date of collection.
 Any person retiring from a business subject to percentage tax shall notify the nearest internal revenue
officer, file his return and pay the tax due thereon within twenty (20) days after closing his business.

PROBLEMS ON BUSINESS TAXES

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1. The net sales of Leopard Marketing in any year never exceeded P550,000. The following information
are also available:

Inventory, January 1, 2003 P -0-

Gross sales, January, 2003 160,000

Sales returns and allowances 7,000

Sales discounts 3,000

Purchase price, from VAT suppliers, of goods sold, VAT included 66,000

Required: Compute the following:

a. Percentage tax on the sale of the month?

b. If the taxpayer opted to be a VAT taxpayer effective January 1, 2003, the value-added tax payable for
the month?

2. The Metropolitan Electric Co., Inc. is a holder of a franchise to sell electricity. In a particular month, it
had gross receipts of P1,000,000 for the sale of electricity. Its building had an auditorium and theater which it
rents out. For the same month, the auditorium and theater had gross receipts of P200,000:

Required: Compute the franchise tax.

3. Mrs. Simple Lang operates domestic carriers in the City of Dagupan. The following receipts during the
first quarter of 2004 were reported:

From ten (10) taxi units P24,000

From Five (5) bus units with 60 seating capacity 40,000

Twenty (20) units of jeepneys 50,000

Assuming receipts were evenly distributed to individual units of common carrier, compute the percentage tax to
be paid by Mrs. Lang during the first (1st) quarter.

4. Barbosa Lines operates 15 buses with a capacity of 45 passengers, plying the route from Cavite City
to Las Piñas City. The total gross receipts during the quarter amounted to P150,000.

Questions:

a. How much common carriers tax is payable by Barbosa Lines?

b. Assuming instead that the quarterly gross receipts amount to P88,000 only, how much percentage tax
should the company pay?

5. FPJ is a television broadcasting company. Its gross receipts during the preceding year amounted to
P9,500,000.

Required:

a. Assuming the actual quarterly gross receipts amounted to P2,000,000, how much percentage tax
should FPJ pay?

b. How about if the gross receipts during the preceding year totaled to 22,000,000?

c. What if the franchisee is other than radio and/or television broadcasting company or electric, gas and
water utilities and the gross receipts amounted to P7,500,000?
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6. Rochelle Telephone Co. is engaged in selling telephone services to the public. Raul Punzalan availed
of Rochelle’s services by calling her girlfriend in China. He paid P5,000 for thirty minutes call.

Question: How much is the overseas communication tax? What if the long distance call is made to his sister
in Cebu?

7. The Philippine Bank of Accountants (PBA) realized during the last quarter of 2004 the following
interest from lending activities:

Short term maturing instruments P200,000.

Medium term maturing instruments 100,000.

Long term, not over 7 years, maturing instruments 150,000

Long term, over 7 years, maturing instruments 50,000

Required: Compute PBA’s gross receipts (percentage) tax (GRT).

8. Cigu Rista insured his life with Tiyak Yewn Insurance Co. The total premium paid was P60,000. Out
of this amount, P48,000 was paid in cash and the balance in promissory note.

Question: How much is the tax on life insurance premiums?

9. Carrie Rista operates a racetrack. Other than the restaurant it operates, it also allows the Gloriants to
sell foods inside its premises. The gross receipts during the current quarter follow:

From operation of race track P1,100,000

From restaurant 1,000,000

From television coverage 1,300,000

From rental of Gloriants 1,200,000

Required: Answer the following questions:

a. How much amusement tax is payable by Carrie Rista?

b. Is the Gloriants’ restaurant subject to amusement tax?

10. Charmaine sold 10,000 shares of stock costing P95,000 for P100,000. The par value of the stock is
P9 per share.

Required- Compute the following:

a. Applicable tax if the shares are listed and traded in the Philippine Stock Exchange (PSE).

b. Applicable tax if the shares are not listed (traded) in the PSE

11. The following data were taken from the records of Toralba Company:

Cash sales P572,000

Installment sales 913,000

Sales on account 297,000

Sales returns 18,700

Sales discount 13,200

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Required: Compute the gross selling price and the tax base.

12. Tindera Co, a VAT registered taxpayer, sold to Mommy Mely some pieces of merchandise. The
amount indicated in the invoice is P8,800. Subsequently, Mommy Mely sold the same goods to Papa Billy for
P11,000 who later sold the same to Baby Lee for P13,200.

Required:

a. Record the journal entries necessary to record the above transactions in the book of Tindera Co.

b. Record the necessary journal entries in the applicable books of Mommy Mely.

c. Compute the VAT payable by Mommy Mely.

d. Record the necessary journal entries in the books of Papa Billy.

e. What is the tax consequence on Baby Lee of the above transactions?

13. Heaven Footsteps, a shoe mart, purchased 100 pairs of shoes from its distributor. Each pair is worth
P1,012 and sold by the shoe mart at P1,100. During the month, the management decided to give one (1) pair
of shoes to each of the ten (10) salesladies.

Required:

a. Compute the VAT payable by Heaven Footsteps.

b. Compute the VAT payable assuming that distribution of shoes to salesladies are not deemed sale
transactions.

c. For whose advantage are deemed sales transactions, to the taxpayer or to the government.

14. Aniano is engaged in a merchandising business. His sales and other data during the month of
January 2004 are shown below:

Cash sales P 770,000.

Sales returns on cash sales 55,000.

Installment sales 495,000.

Goods consigned

Jan. 1, 2004 P265,000

October 1, 2003 16,500

Goods taken for personal use 18,150.

Good taken as payment to creditors 25,850.

Purchases of merchandise 946,000.

Purchases of Supplies 88,000.

Telephone bills on domestic call 3,300.

Required: Compute the following:

a. Output tax.

b. Input tax.
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c. VAT Payable.

15. The following data reveals the March, 2004 records of Victory Corporation, a VAT registered taxpayer:

Domestic sales P1,056,000

Export sales, F.O.B. shipping point 820,000.

Sale of goods to Five Star in China, but delivered to Pinay, a resident, (payment was remitted in dollars by Five
Star through BPI) 750,000.

Purchases of goods sold locally 575,300.

Purchases of raw materials on goods exported 423,500.

Required: Compute the VAT Payable by Victory Corporation during the month if it decides to claim as tax
credit the input tax corresponding to the export sale.

16. Coco Nat is engaged in purchasing copra from copra producers and process them into canned
cooking oil. In February 2005 he made total purchases of P800,000, processed them into canned cooking oil
and sold the same to the public. The taxable sales amounted to P2,090,000. Purchases of canning and
labeling materials totaled P269,500.

Questions:

a. How much is the presumptive input tax?

b. How much is the VAT payable if there is any?

17. Rhodora Company is engaged in business which is subject to value added tax. It also operates a
business which is subject to percentage tax. Its sales and purchases during the quarter are shown below:

Invoice, VAT business P1,650,000.

Invoice, Non-VAT business 900,000.

Purchases, VAT business 385,000.

Purchases, non-VAT business 247,500.

Unallocated input taxes 40,000.

Required: Compute the VAT Payable by Rhodora Company.

18. Delta Bus Company is operating provincial buses from Dagupan to Baguio and Baguio to Dagupan.
Mr. Peter Pans took a ride on one of the buses for which he was issued two (2) tickets: Ticket no. 669
covering his one (1) way fare of P280 and Ticket no. 670 covering his cargoes in the amount of P220. Delta
Company has accumulated VAT invoiced purchases, such as lubricating oil in the amount of P55 and was in
the amount of P66.

Questions:

a. Which of the above ticket sales is subject to VAT?

b. How much is the VAT payable of Delta Company assuming no other relevant information?

19. Engr. Del Hensia is a building contractor. His records show the following information about the current
quarter.

Price Collection
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Contract A P2,200,000 P1,760,000

Contract B 4,000,000 3,300,000*

Contract C 2,500,000 385,000**

* Includes P1,100,000 advances for work to be done the following quarter.

** Contract C has been completed since last year. This amount represents receivable as of last year
collected during the current quarter.

Payments made:

For services of subcontractor P1,540,000.

Purchases of construction materials 682,000.

Wages of employees 450,000.

Purchases of supplies 55,000.

Required: Compute the VAT Payable.

20. Determine which of the following cases is subject to VAT.

Case Monthly Rent Annual Rent Answer

A P7,000 P600,000

B P8,000 P400,000

C P7,500 P450,000

D P9,000 P500,000

E P9,000 P600,000