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What is business?

"Business" or "in the course of trade or business" means the regular conduct or pursuit of a commercial
or economic activity, including transactions incidental thereto, by any person or government entity.
(Source: Philippine Code of Commerce)

There are three (3) major business taxes in the National Internal Revenue Code, namely:

(a) Excise taxes;

(b) Value-added tax; and

(c) Percentage taxes.

The excise taxes are imposed on:

(a) Manufacturers; or

(b) Importers,

of any of the following categories of goods or articles:

(a) Distilled spirits (e.g., liquors);

(b) Wines (e.g., grape wine);

(c) Fermented liquors (e.g., beer);

(d) Tobacco products (e.g., chewing tobacco);

(e) Cigars;

(f) Cigarettes;

(g) Automobiles;

(h) Manufactured fuel oils (e.g., gasoline);

(i) Minerals (e.g., gold, silver); and

(j) Non-essential goods (e.g., jewelry, perfumes).

The percentage taxes under the National Internal Revenue Code are:

(a) 3% percentage taxes on sale of goods, properties or services;

(b) Common Carrier's tax on domestic carriers;

(c) Common Carrier's tx on international carriers;


(d) Franchise tax;

(e) Overseas communications tax;

(f) Tax on banks and non-bank financial intermediaries performing quasi-banking functions;

(g) Tax on other non-bank financial intermediaries;

(h) Tax on insurance companies;

(i) Tax on agents of foreign insurance companies;

(j) Amusement tax;

(k) Tax on winnings; and

(l) Stock Transaction tax.

The value-added tax is imposed on:

(a) Sale of goods or properties;

(b) Sale of services;

(c) Importation of goods or properties.

Which business tax is due?

Subject to the basic rules (Section 109 of the National Internal Revenue Code):

(a) That regardless of annual gross sales or receipts, those who are in paragraphs (a) to (u) of Section
109 of the National Internal Revenue Code)

(1) Shall be exempt from the value-added tax; and

(2) Shall be exempt from the 3% percentage tax;

(b) That those who are not under paragraphs (a) to (u) of Section 109 of the National Internal Revenue
Code but whose gross sales in the preceding year did not exceed one million five hundred thousand
pesos (P1,500,000)

(1) Shall be exempt from the value-added tax; but

(2) Shall be subject to the 3% percentage tax (unless a different percentage tax applies, or unless the
taxpayer opted to be a value-added tax taxpayer..

(c) That manufacturers or importers who are subject to the excise taxes also pays either:
(1) The value-added tax; or

(2) The 3% percentage tax (if the sales in the preceding year did not exceed one million five hundred
thousand pesos (P1,500,000).