OTHER PERCENTAGE TAXES (“OPT”)

In lieu of the VAT, OPTs are imposed on the following persons/transactions:

1) Section 116: Tax on Persons Exempt from VAT

Persons subject: Persons who engage in VATable sales or leases of properties, or services in the course of
trade or business:
a) Whose gross sales or receipts ≤ P3,000,000; AND
b) Are not VAT-registered.

Tax: 3% of quarterly gross sales or receipts (also called gross receipts tax (GRT))

Persons exempt from the 3% GRT:

a) Self-employed individuals and professionals availing of the 8% tax on gross sales and/or receipts and
other non-operating income;

b) Cooperatives, except:

Duly registered cooperatives which transact business with members and non-members and with
accumulated reserves and undivided net savings of more than Ten Million Pesos (P10,000,000.00)
shall be subject to the percentage tax on all sales of goods and/or services to non-
members.

c) Fees, per diems, allowance, and other income received by corporate directors of which they are not
employees.

d) Marginal income earners or individuals who are self-employed and deriving gross sales/receipts
≤ P100,000 during any 12-month period.

e) Persons who are VAT-registered, regardless of level of sales.

f) Persons whose line of business is non-exempt (from VAT) and are NOT VAT-registered but whose
gross annual sales or receipts > P3,000,000.

2) Section 117: Common Carrier’s Tax

- % tax on domestic carriers and keepers of garages

Persons subject:
a) Lessors of cars for rent or hire driven by the lessee;
b) Transportation contractors including persons who transport passengers for hire; and
c) Other domestic carriers by land for the transport of passengers; and
d) Keepers of garages.

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 Exempted persons:
a) Banca owners
b) Owners of animal-drawn two-wheeled vehicles

Tax: 4% of quarterly gross sales or receipts from the transport of passengers, provided the gross receipts
are ≥ minimum levels provided by law. The table below provides the minimum quarterly receipts:

Domestic Carrier
Jeep for hire:
1) Provincial P1,200
2) Manila and other cities P2,400
Public Utility Bus:
1) Not exceeding 30 passengers P3,600
2) Exceeding 30 but not exceeding 50
passengers P6,000
3) Exceeding 50 passengers P7,200
Taxis:
1) Provincial P2,400
2) Manila and other cities P3,600
Car for hire (without chauffeur) P1,800
Car for hire (with chauffeur) P3,000

3) Section 118: % Tax on International Carriers (Foreign Carriers)

Persons subject:

(a) International air carriers doing business in the Philippines; and

(b) International shipping carriers doing business in the Philippines.

Tax: 3% of quarterly gross receipts from the transport of cargo from the Philippines to another country

Land Air Sea

Domestic Passenger OPT 117 VAT VAT
Carriage Cargo VAT VAT VAT
International Passenger Domestic Corp. Domestic Corp.
Carriage 0% VAT, No OPT 0% VAT, No OPT
Foreign Corp. Foreign Corp.
Exempt from VAT Exempt from VAT
No. OPT No OPT
Cargo Domestic Corp. Domestic Corp.
0% VAT, No OPT 0% VAT, No OPT
Foreign Corp. Foreign Corp.
OPT 118 OPT 118

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 Note: Off-line carriers, which sell tickets (a) covering off-line flights/voyages1 or (b) flights or voyages of
other carriers, are not considered engaged in business as an international carrier in the Philippines, and
therefore are exempt from the OPT under Section 118.

4) Section 119: Franchise Tax

Persons subject:

(a) Radio and /or television broadcasting companies whose annual gross receipts of the preceding year
do not exceed Ten Million Pesos (P10,000,000), and which did not choose to be registered under
the VAT system; and
(b) Gas and water utilities

Tax:
Franchise OPT
1) Radio or television broadcasting with gross annual 3% of gross receipts derived from the business
receipts ≤ P10M covered by the law granting the franchise
2) Gas and water utilities 2% of gross receipts derived from business
covered by the law granting the franchise
3) PAGCOR 5% of gross revenues from gaming operations

5) Section 120: Overseas Communications Tax

- Tax on overseas dispatch, message, or conversation originating from the Philippines by telephone,
telegraph, telewriter exchange, wireless, and other communication equipment or service.

Note: Domestic calls are subject to VAT.

Persons subject: Payor of the service

The payee (person/entity rendering the service) collects and remits the tax to the BIR within
20 days after the end of each quarter.

Tax: 10% of the amount paid for the service.

Exemptions: The tax shall not apply to amounts paid by:

(a) The Government;

(b) Embassies or consular offices of a Foreign Government;
(c) International organization pursuant to international agreements;
(d) News services: amounts paid for messages from any newspaper, press association, radio or
television newspaper, broadcasting, or newsticker services to any other newspaper, press

1Off-line flights/voyages refer to flights/voyages outside the Philippines, and which do not touch any port or point in the
Philippines.

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 association, radio or television newspaper broadcasting agency, newsticker service, or to a bona fide
correspondent. The messages must deal exclusively with the collection or
dissemination of news items.

6) Section 121: Tax on Banks and Non-Bank Financial Intermediaries Performing Quasi-
Banking Functions (“GRT”)

Persons Subject:
a) Banks2; and
b) Non-bank financial intermediaries performing quasi-banking functions.3

Tax:
a) On interest, commissions, discounts from lending activities as well
as income from financial leasing, on the basis of the remaining
maturities of instruments from which such receipts are derived:

(1) Maturity period is five (5) years or less 5%

(2) Maturity period is more than five (5) years 1%

b) On dividends and equity shares and net income of subsidiaries 0%

c) On royalties, rentals of property (real or personal), profits from 7%

exchange, and all other items treated as gross income under
Section 32 of the Tax Code

d) On net trading gains within the taxable year on foreign currency, 7%

debt securities, derivatives, and other similar financial instruments

Note: BSP is not a bank nor a non-bank financial intermediary. In the performance of its proprietary
functions, it shall not be subject to the percentage tax. However, it can subject to VAT if it engages in any of
the transactions under Section 105 of the Tax Code.

7) Section 122: Tax on Finance Companies

Persons Subject:
a) Finance companies; and

2 The term “bank” shall refer to entities engaged in the lending of funds obtained in the form of deposits.
3 The term “non-bank financial intermediaries” shall refer to persons or entities whose principal functions include the
lending, investing, or placement of funds or evidences of indebtedness or equity deposited with them, acquired by them, or
otherwise coursed through them, either for their own account or for the account of others.

The term “quasi-banking activities” shall refer to the borrowing of funds from twenty (20) or more personal or corporate
lenders at any one time, through the issuance, endorsement, or acceptance of debt instruments of any kind other than deposits
for the borrower’s own account, or through the issuance of certificates of assignment or similar instruments, with recourse,
or of repurchase agreements for purposes of relending or purchasing receivables and other similar obligations.

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 b) Other non-bank financial intermediaries not performing quasi-banking functions, doing business in
the Philippines.

The term “finance companies” shall refer to corporations except banks, investment houses, savings and
loans associations, insurance companies, cooperatives, and other financial institutions organized or
operating under other special laws, which are primarily organized for the purpose of extending credit
facilities to consumers and to industrial, commercial, or agricultural enterprises, by direct or
by discounting or factoring commercial papers or accounts receivables, or by buying and selling contracts,
leases, chattel mortgages, or other evidences of indebtedness, or by financial leasing of movable as well as
immovable properties.

The term “other non-bank financial intermediaries” above shall include pawnshops and non-stock
savings and loan associations.

Tax:
a) On interest, commissions, discounts from lending activities as well
as income from financial leasing, on the basis of the remaining
maturities of instruments from which such receipts are derived:

(1) Maturity period is five (5) years or less 5%

(2) Maturity period is more than five (5) years 1%

b) On gross receipts derived from interest, commissions, discounts, 5%

and all other items treated as gross income under the Tax Code

8) Section 123: Tax on Life Insurance Premiums (Premium Tax)

9) Section 124: Tax on Agents of Foreign Insurance Companies

10) Section 125: Amusement Taxes

Persons Subject: Proprietor, lessee, or operator of cockpits, cabarets, night or day clubs, boxing
competitions, professional basketball games, jai-alai, and race tracks.

Tax:
Amusement Place Tax
1) Cockpits 18% of gross receipts
2) Cabarets 18% of gross receipts
3) Night or day clubs 18% of gross receipts
4) Boxing exhibitions 10% of gross receipts
5) Professional basketball games 15% of gross receipts
6) Jai-alai 30% of gross receipts
7) Race tracks 30% of gross receipts

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 Notes:

(a) Gross receipts includes admission charges, rents, and income from television, radio and motion
picture rights.

(b) If the proprietor, lessee, or operator of the amusement place also operates, at the same time within
the premises, a bar or restaurant, the receipts of the bar or restaurant shall form part of the gross
receipts subject to the amusement tax above.

(c) If such bar or restaurant in (b) is operated by a third person, the gross receipts thereof shall be
subject either to VAT or to the 3% OPT under Section 116.

(d) Amusement places include videoke bars, karaoke bars, karaoke televisions, karaoke boxes, and
music lounges.

Exemptions: Boxing exhibitions where:

(1) the world or oriental title is at stake;
(2) one of the contenders is a Filipino citizen; AND
(3) is promoted by a Filipino citizen, or by a corporation/association which is at least 60%
owned by Filipinos.

11) Section 126: Winnings (from Horse Races)

Persons subject:
a) Persons who win horse races; and
b) Owners of winning race horses.

Tax:
(1) Winnings in horse races Ten percent (10%) of winnings or “dividends”
(2) Winnings from double, forecast/quinella, Four percent (4%) of winnings or “dividends”
trifecta bets in horse races
(3) Owners of winning race horses Ten percent (10%) of the prizes

Notes:

(a) The tax in (1) and (2) above shall be based on the actual amount paid for evening winning ticket after
deducting the cost of the ticket
(b) The tax shall be withheld by the operator, manager, or person in charge of the horse races before
paying the dividends or prizes.

12) Section 127: Stock Transaction Tax

(a) Sale, Barter, or Exchange of Shares Listed and Traded Through the Local Stock
Exchange (Sec. 127(A), NIRC)

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 Persons Subject:

The tax is imposed on the seller or transferor of the shares of stock, whether individual (citizen or alien),
corporation (domestic or foreign), or other taxpayer such as estates, trust funds, and pension funds.

However, the following are not liable for the tax on such sales, namely:

a) Dealers in securities;
b) Investors in shares of stock in a mutual fund company upon redemption of said shares of stock in
a mutual fund;
c) All other persons whether natural or juridical, who are specifically exempt from national internal
revenue taxes under existing investment incentives and other special laws.

Rate and Basis of the Tax: (6/10 of 1%) of the gross selling price

Duty of the Stockholder: To withhold the tax and remit the same to the AAB or RDO where the
broker is registered within 5 days from the date of collection.

(b) Sale or Exchange Through Initial Public Offering (“IPO”) of Shares of Stock in Closely-
Held Corporations (Sec. 127(B), NIRC)

“Closely-held corporation” means any corporation at least fifty percent (50%) in value of the
outstanding capital stock, or at least fifty percent (50%) of the total combined voting power of all classes
of stock entitle to vote, is owned directly or indirectly by or for not more than twenty (20) individuals.

Note: For purposes of determining stock ownership, stock shall be considered owned (a) indirectly thru
a corporation, partnership, estate, or trust (b) directly or indirectly thru family members including the
spouse, and (c) thru options to acquire stock.

Initial Public Offering (“IPO”) – refers to a public offering of shares of stock made for the first time
in the local stock exchange.

Primary offering – refers to the original sale made to the investing public by the issuer corporation of
its unissued shares of stock.

Secondary offering – refers to an offer for sale to the investing public by the existing shareholders of
their securities which is conducted during an IPO, or after an IPO.

Follow-on/follow-through offering of shares – refers to an offering of shares to the investing

public subsequent to an IPO.

Persons Subject:
The tax is imposed on:

a) The issuing corporation in a primary offering, or

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 b) The selling shareholder of the shares in a secondary offering during an IPO.

Note: Any initial public offering and secondary offering of shares of stock issued by a real
estate investment trust (“REIT”) or derivatives thereof shall be exempt from the
stock transaction tax imposed under Section 127(B) of the Tax Code.

Rate and Basis of the Tax:

The tax shall be based:

a. on the gross selling price or gross value in money of the shares of stock
sold
b. in accordance with the proportion of shares of stock sold to the total
outstanding shares of stock after the listing in the local stock exchange:
Tax Rate
Up to twenty-five percent (25%) 4%
Over twenty-five percent (25%) but not over 2%
thirty-three and one-third percent (33 1/3%)
Over thirty-three and one-third percent (33 1/3%) 1%

Who pays the tax?

a) In the case of a primary offering, 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.
b) In the case of a secondary offering, it shall be the duty of the stockholder who effected the
sale to collect the tax, and remit the same to the BIR within five (5) banking days from the date of
collection.

Note: The stock transaction tax under Section 127(A) and (B) shall not be deductible for income tax
purposes.