PERCENTAGE TAX

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.

THE SCOPE OF THE PERCENTAGE TAX

Coverage Type of % tax Tax rates

Service specifically subject to percentage tax Specific % tax Various tax rates

Sales of goods or other services not exempted General % tax 3% percentage tax

WHO PAYS PERCENTAGE TAX?

VAT registered
Type of % tax Non-VAT taxpayers
taxpayers
Specific % tax ✓ ✓
General % tax x ✓

SERVICES SPECIFICALLY SUBJECT TO PERCENTAGE TAX

(mnemonics: BICAP FLOW)

1. Banks and other non-bank financial intermediaries

2. International carriers on their transport of cargoes, excess baggage and mails only
3. Common carriers on their transport of passenger by land and keepers of garage
4. certain Amusement places
5. Brokers in effecting sales of stocks through PSE and corporations or stockholders on initial public
offerings
6. certain Franchise grantees
7. Life insurance companies and agents of foreign insurance
8. Overseas communication
9. Jai-alai and cockpit operators on Winnings

TAX RATES ON 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 remaining maturities
of instruments from which the receipts were derived:
a. Maturity period of 5 years or less 5%
b. Maturity period of more than 5 years 1%
2 Dividend and equity shares in the net income of subsidiaries 0%
 3 On royalties, rentals of real and personal property, profits from
7%
exchange and all other items treated as gross income
4 On net trading gains within the taxable year on foreign currency,
7%
debt securities, derivatives, and other similar financial instruments

Percentage tax on banks, quasi-banks and other non-bank financial institution is commonly known as the
gross receipt tax.

TAX ON OTHER FINANCIAL INTERMEDIARIES WITHOUT QUASI-BANKINGFUNCTIONS

Source of income or receipt % tax rate

1 Interest income, commissions, and discounts from lending activities,
and income from financial leasing, on the basis remaining maturities
of instruments from which the receipts were derived:
a. Maturity period of 5 years or less 5%
b. Maturity period of more than 5 years 1%
2 From all other items treated as gross income under the NIRC 5%

Non-bank financial intermediaries without quasi-banking functions:

▪ Pawnshops
▪ Money changers

PERCENTAGE TAX ON INTERNATIONAL CARRIERS

International carriers (air or shipping carriers) doing business in the Phil. is subject to 3% tax of quarterly
gross receipts from transport of cargoes, baggage, or mails from Philippines to other country.

Taxation of gross receipts on flights or voyages

Domestic International carriers

Types of Carriers
carrier Passengers Cargoes, mails, or goods
Only outbound fares
Domestic Operation 12% VAT N/A N/A for cargoes, excess
baggage or mails are
International Outgoing 0% VAT Exempt 3% OPT included in the tax
Operation base.
Incoming Exempt Exempt Exempt

DOMESTIC CARRIERS
Sea or air carriers owned by
Domestic corporation Foreign corporation

Passengers Vatable Exempt

Cargoes/baggage Vatable 3% percentage tax

RULES ON COMMON CARRIERS

Mode of transport Passengers Baggage/Mails/Cargoes

“Vatable” means subject to VAT
3% percentage tax
By land vatable if taxpayer is VAT-registered or
(common carrier’s tax)
a registrable person, otherwise,
By water or sea vatable vatable the 3% gen percentage tax
applies
By air vatable vatable

Minimum presumptive gross receipts for common carriers and keepers of garage
Quarterly Monthly
Manila and other cities P 2,400 P 800
Jeepney for Hire
Provincial 1,200 400
Not exceeding 30
3,600 1,200
passengers
Public Utility Bus
Exceeding 30 but not 50 6,000 2,000
Exceeding 50 passengers 7,200 2,400
Manila and other cities 3,600 1,200
Taxis
Provincial 2,400 800
With chauffer 3,000 1,000
Car for Hire
Without chauffer 1800 600

AMUSEMENT TAXES

Exempt receipts on professional boxing

- World or oriental championship
- At least one of the contenders is a Filipino citizen
- The promoter is a Filipino citizen or a corporation 60% of which is owned by a Filipino

Illegal cockpits
Persons engaged in same operations such as operators of illegal “tupada” cockpit are also taxed at 18%
of their gross receipts

INITIAL PUBLIC OFFERING (IPO) TAX

Closely held corporation – any corp at least
- Applies only to the initial public offering of a 50% in the value of the outstanding capital
closely held corporation stock or at least 50% of all classes of stock
entitled to vote is owned directly or indirectly
by not more than 20 people

EXEMPTION FROM PERCENTAGE TAX

The percentage tax does not cover:
- VAT taxpayers
- Self- employed and or professionals who opted to the 8% income tax
- Cooperatives
SUMMARY OF PERCENTAGE TAXES

Bank – short term loans 5% gross receipts tax

Bank – long term loans 1% gross receipts tax
Bank – royalties, rentals, profit from exchange and all other items treated as
7% gross receipts tax
gross income
Bank – net trading gains 7% gross receipts tax
International carrier – passengers Exempt
International carrier – cargoes/baggage/mails 3 % international carrier’s tax
Common carrier by land – transport of passengers 3% common carrier’s tax
Common carrier by land – transport of cargoes/mails/baggage VAT or 3% common carrier’s tax
Common carrier by sea VAT
Common carrier by air VAT
Operators of cinemas VAT
Operators of cockpits 18% amusement tax

Operators of jai-alai and race tracks 30% amusement tax

Places of exhibitions of professional basketball 15% amusement tax
Places of exhibitions of professional boxing 10% amusement tax
Bowling alleys VAT or percentage tax

Night or day clubs and cabarets 18% amusement tax

Franchise grantees of radio or TV broadcasting companies (annual gross
3% franchise tax
receipts do not exceed P10,000,000)
Franchise grantees of electricity VAT
Franchise grantees of water 2% franchise tax
Franchise grantees of gas 2% franchise tax
Non-life insurance VAT
Life insurance 2% premiums tax
Tax on agents of foreign insurance 4% premiums tax
Insurance directly from abroad without the services of an insurance agent 5% premiums tax
Telephone – inbound calls Exempt

Telephone – outbound calls 10% overseas communication tax

Winnings in horse race or jai-alai in general 10% winnings tax

Winnings from double, forecast/quinella and trifecta bets 4% winnings tax

Owners of winning race horses 10% winnings tax

Sale of stocks by an investor 60% of 1% stock transaction tax

Sale of stocks during an initial public offering (IPO) – up to 25% shares 4% IPO tax
Sale of stocks during an initial public offering (IPO) – over 25% but not over 2% IPO tax
33 ½%
Sale of stocks during an initial public offering (IPO) – over 33 ½% 1% IPO tax
https://www.youtube.com/watch?v=ukbnOEURMSg

TEST BANK with answers:

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