Jaypaul Ocampo Acidera, CPA 2016

October 2016

OTHER PERCENTAGE TAXES ("OPT") -

By Atty. C. Llamado

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 VAT-taxable sales or leases of properties, or
services in the course of trade or business:
a) Whose gross sales or receipts < P1,919,500; AND .
b) Are not VAT-registered.

EXC: Marginal income earners.

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

Persons exempt from the 3% GRT:

a) 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 alcsAsoods and/or
services to non-members.
b) Fees, per diems, allowance, and other income received by corporate directors of which
they are not employees.

c) Marginal y_issalts_aIlers
h or individuals who are self-employed and deriving gross
sales/receipts < P100,000 during any 12-month period.

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

e) Persons whose line of business is non-exempt (from VAT) and are NOT VAT registered-

but whose gross annual sales or receipts > P1,919,500.

2) Section 117: Common Carrier's Tax

% tax on domestic carriers and keepers of garages
Persons subject:
a) Cars for rent or hire driven by the lessee;
b) Transportation contractors including persons who transport passengers for hire; and
c) Other domestis.smiathr ) land for the transport of passengers; and
d) Keepers of garages.

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

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October 2016

Tax: 3% of 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
Taxis:
_. r7,2oo
1) Provincial P2,400

L
2) Manila and other cities P3,600

Car for hire (Lvigiout chauffeur P1,800

car for hire (with chauffeur) j

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

Persons subject:

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

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

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Tax: 3% of gross receipts from the transport of mom from the Philippines to another
country . •
,
r -

Domestic
Carriage
, ______
PassengsLl
Passengel_
Car • o
Land

VAT
1_17
OPT 117
-' 017,
Air
ir
yAlf
'VAT
VAT
Sea
VAT
VAT
....______..........,

International Passenger Domestic Corp. Domestic Corp.

Carriage 0% VAT, No OPT
........_... 0% VAT, No OPT
Foreign Corp. Foreign Corp.
Exempt from VAT No Exempt from VAT, No
_ OPT OPT
Cargo Domestic Corp. Domestic Corp.
0%VAT, No OPT 0% ,
VAT, No OPT
Foreign Corp. Foreign Corp.
______ OPT I18
18 OPT 118 _

J. O. A.
4) Section 119: Franchise Tax
 October 2016

Persons Subject: '

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

Tax:
__..7
_
Franchise ,, OPT
1) Radio or television broadcasting with gross 3% of gross receipts derived from the business
annual receipts <P10 M coverecily
) the lawfrrantinkthe franchise
2) Gas and water utilities i 2% of gross receipts derived from the business
covered b the law . rantin the franchise
) PAGCOR 5% of gross revenues
. .
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,
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5) Section 120: Over eas Communi cations fax
- Tax on °verse , s dispatch, message, or coriversation,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 he end of each quarter.
. .
,
.. it paid for the sdvice,
Tax: 10% of the amoir
,
Exemptions: The tax shall not apply to amounts paid by
,
1) The i Government; ,
2) Embassies or consular" offices of a Foreign Government;
, 3) International organizations pursuant' to international agreements;
4) News services: amounts paid for messages from any newspaper, press
. association, radio or television newspaper, broadcasting, or newsticker
. services to any other newspaper, press association, radio or television .
newspaper broadcasting agency, newsticker service, or to a bona. fide
correspondent. Melpfivits_AmtaLeaj 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")
J. O. A.
Persons Subject:
a) Banks; and
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 October 2016

b) Non-bank financial intermediaries performing quasi-banking functions.

The term "bank" shall refer to entities engaged in the lending of funds obtained in the form
of deposits.

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.

Tax:

a) On interest, commissions, discounts from lending aetivities 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) ye0.rs or less 5%

2)- Maturity Period is more thail five (5) years 1%

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

c) • On royalties, ilentals 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 7%

currency, debt securities, derivatives, 1 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:
(1) Finance companies; and J. O. A.
 October 2016

(2) 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 ,
,
i for the purpose of extendiltlacitities .......,,......_mim........_
to c nners and to industrial, commercial,
' _.....,.g
or a ri uitui .ter.p„..
rises by direct lending or by discounting or factoring commercial
1
papers oirI 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
properti s. '

The ternli "other non-bank financial intermediaries" above shall include lipiwnsl
_mm

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, 5%

discounts, and all other items treated as gross income under the
' Tax Code
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8) Sectio0 123: Tax on Lifeinsmaugg Premiums (Premium Tax)

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Person ubject: Any person/entity offering life insurance in the Philippines, except purely
cooperative companies or associations.
if
.
Tax: %
/ of gross premiums collected,
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"Gross Oremiums" shall include re-issuance fees, reinstatement fees, renewal fees, penalties
paid to the insurance company in connection with the insurance policy, and premiums on
IlgitjLand accident insurance.

Exemptions: The following premiums are exempt from the premium tax:

(1) Premiums received by purely cooperative companies or associations;

(2) Premiums refunded within six (6) months after payment on account of
rejection of risk, or returned for any other reason to a person insured;

(3) Premiums paid upon reinsurance by a company that has already paid the
tax;

(4) Premiums collected or received by any branch of a domestic corporation,

firm, or association doing bitsiness outside the Philippines on account ofJ. O. A.
any life insurance of the insured who is a non-resident, if any tax on such
 October 2016

premium is imposed by the foreign country where the branch is

established;
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(5) Premiums collected or received on account of any reinsurance, if the
insured, in case of personal insurance, resides outside the Philippines, if
any tax on such premium is itrposed by the foreign country where the
original insurance has been issued or perfected; and

(6) Portion of the premiums collected or received by the insurance companies

on variable contracts in excess of the amounts necessary to insure the lives
of the variable contract owners.

(7) Management fees, rental income, or any other income earned by the life
insurance company from services which can be pursued independently of
the insurance business activity;

(8) Investment income earned by the life insurance company from investing
the premiums;

Note: If investment income arises from funds solicited for purposes other
than for the payment of premiums, the same shall be subject to the
GRT under Section 121 of the Tax Code.

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

Persons Subject:
(1) Every fire, marine, or miscellaneous insurance agent authorized under the Insurance
Code to procure policies of insurance as he may have 'previously been legally
authorized to transact, on risks located in the Philippines for companies not
authorized to transact business in the Philippines; and

(2) Owners of property who obtain insurance directly with foreign companies.

Tax:

a) For fire, marine, or miscellaneous insurance 4% of total premiums collected

agent
b) For owners of property who obtain 5% of premiums paid -
insurance directly with foreign companies

Exemption: Does not apply to reinsurance premiums.

10) Section 125: Amusement Taxes

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

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 October 2016

Tax:

Amusement Place Tax

1) Cockpits 18% of gross receipts

2) Cabarets 18% of gross receipts
-f 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

Notes:

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

(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 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 ti the
1,- 3V0 OPT under Section 116.

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

Exemption: Boxing exhibition 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 a by a corporation/association which
is > 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"
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 October 2016

2) Winnings from double, Four percent (4%) of winnings or

forecastiquinella, and trifecta bets in "dividends"
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 .
every winning ticket afteli 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), AIM)

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: ( 1/2 of I.%) of the gross selling price.

. Duty of the Stockbroker:

To withhold the tax and remit the same to the AAI3 or RDO where the broker
is registered within 5 days from the date of collection.

2) Sale or Exchange Through Initial Public Offering ("IPO") of Shares of Stock in

aosely-fleid Corporations (See 127(B), NIRC)

"Closel -thelc means any corporation at least fifty percent (50%) J.in O. A.
value of the outstanding capital stock, or at least fifty percent (50%) of the total
 October 2016
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combined voting power of all classes of stock entitled 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 acqu''.Te 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
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issuer corporation of its unissued shares of stock.

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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.

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Follow on/follow through offering of shares refers to an offering of shares to
- - —

the investing public subsequeht to an IPO.

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Persons Subject ;
The tax is imposed on:
a) the issuing corporation in a primary offering, or
b) the selling shareholder of the shares in a secondary offering.

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. i

Rate and Basis o dthe Tax '

,
The tax sh 1, 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 . toal
outstanding shares of stock after the listing in the local stock exchange: ,

Tax Rate
Up to twenty-five percent (25%) 4%
,
Over tweil Iv-five percent (25%) but not over thirty- 2%
three and ne-third percent (33 1/3%) _
.
Over thirt -three
i and one-third percent (33 1/3%) 1%

J. O. A.
 October 2016

(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 stockbroker 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.

J. O. A.

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 October 2016

RETURN AND PAYMENT OF PERCENTAGE TAXES

Generally filing and payment of percentage taxes shall be:

1) Not later than twenty (20) days after the end of each month; •

2) For taxpayers who avail of the Electronic Filing and Payment System ("EFPS"):

a) the Monthly Percentage Tax Returns (BM Form No. 2551M) shall be e-filed in a
consolidated return and on a staggered 'basis (25, 24, 23, 22, 21 days following the
end of the month) according to the taxpayer's industry classification. Payment of the
tax due via the EFPS shall be five (5) days later than the deadlines for filing.

b) the Quarterly Percentage Tax Returns (BIR Form No. 2551Q) shall be e-filed in a
.

consolidated return on a staggered basis according to the taxpayer's industry

classification. The aggregate percentage taxes due shall be e-paid within twenty-five
(25) days after the end of each taxable quarter.

japjfam:

a) Overseas communication tax under Section 120 of the Tax Code — the tax shall be paid to
the person rendering the service, and such person is required to collect and pay the tax
within twenty (20) days after the end of each quarter;

b) Amusement tax under Section 125 of the Tax Code — the tax shall be payable within
twenty (20) days after the end of each quarter;

c) Tax on winnings under Section 126 of the Tax Code — the tax shall be withheld by the
operator, manager or person in charge of the horse races, and must be remitted to the BIR
within twenty (20) days from the date of withholding;

d) Stock transaction tax under Section 127 (A) of the Tax Code;

e) Stock transaction tax (IPO tfix) under Section 127 (B) of the Tax Code;

f) Advance other percentage tax -- •

1) Sale of Sugar

A seller of sugar (other than "raw cane sugar") whose gross annual sales do not
exceed P1,919,500 and who is not VAT-registered shall pay a percentage tax
equivalent to 3% of gross monthly sales or receipts. In general, such percentage tax
shall be paid in advance by the owner or seller before any warehouse receipt or
quedans are issued, or before the sugar is withdrawn from any sugar refinery or mill.

2) Transport of naturally grown and planted timber products

The advance percentage tax shall be determined by applying the rate of 3% on the
corresponding value per cubic meter of the different species of naturally grown and
planted timber products in accordance with the schedules issued by the BIR,

3) Sale of jewelry, gold, and other metalOc minerals to non-resident individuals not
_Iljgaines *ter non-reside
aenr lii:t business in theiN J. O. A.
 October 2016

Where to File Return

Every person liable to the percentage tax may, at his option,, 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, at the case may be

Withholding of Percentage Tax

A) Withholding By the Government

Bureaus, offices, and instrumentalities of the government, including GOCCs as well as

their subsidiaries, provinces, cities, and municipalities making money payments to
private individuals, corporations, partnerships, and/or associations are required to deduct
and withhold the percentage taxes due from the payees on account of such money
payments.

No money payments shall be made by any government office or agency, unless the taxes
due thereon shall have been deducted and withheld.

The required return shall be filed and payments made within ten (10) days following the
end of the month the withholding was made or the withholding tax has accrued.

B) Optional Withholding of Percentage Tax

Under Sec. 5.128 of Rev. Regs. No 2-98 (as inserted by Rev. R.egs. No 14-2003), a
person supplying goods or services and are subject to the 3% percentage tax under
Section 116 of the Tax Code has the option to remit his percentage tax through the
withholding and remittance of the same by the payor.

Such option must be manifested by filing the ("Notice of Avaiiment of the Option to Pay
the Tax Through the Withholding Process", which must be furnished to the payor and the
RDOs of both payer and payee. The option, once chosen, remains as the manner of
remitting the tax unless said option is cancelled by the payee.

The percentage tax withheld shall be remitted by the payor, using BIR Form No 1600, to
the appropriate collection agents (authorized agent bank ("A.AB") or revenue collection
office ("RCO")) of the BIR.

J. O. A.