GLOSSARY

Ad Valorem Tax

The amount is based on the gross selling price or gross value in money of the goods or properties
sold, bartered or exchanged or on the gross receipts derived from the sale or exchange of
services, including the use or lease of properties.

Amusement Tax
Tax collected from the proprietors, lessees, or operators of theaters, cinemas, concert halls,
circuses, boxing stadia, and other places of amusement.

Annual Fixed Tax For Every Delivery Truck or Van of Manufacturers or Producers,
Wholesalers of, Dealers, or Retailers in, Certain Products 
An annual fixed tax for every truck, van or any vehicle used by manufacturers, producers,
wholesalers, dealers or retailers in the delivery or distribution of distilled spirits, fermented
liquors, soft drinks, cigars and cigarettes, and other products as may be determined by the
sangguniang panlalawigan, to sales outlets, or consumers, whether directly or indirectly, within
the province.

Barangay Clearance 
A reasonable fee collected by barangays upon issuance of barangay clearance – a document
required for many government transactions, such as when applying for business permit with the
city or municipality.

Capital Gains Tax

A tax imposed on the gains presumed to have been realized by the seller from the sale, exchange,
or other disposition of capital assets located in the Philippines, including pacto de retro sales and
other forms of conditional sale.

Community Tax
A tax levied by cities or municipalities to every inhabitant of the Philippines eighteen (18) years
of age or over who has been regularly employed on a wage or salary basis for at least thirty (30)
consecutive working days during any calendar year, or who is engaged in business or occupation,
or who owns real property with an aggregate assessed value of One thousand pesos (P1,000.00)
or more, or who is required by law to file an income tax return. Community tax is also imposed
on every corporation no matter how created or organized, whether domestic or resident foreign,
engaged in or doing business in the Philippines.

Documentary Stamp Tax 

A tax on documents, instruments, loan agreements and papers evidencing the acceptance,
assignment, sale or transfer of an obligation, rights, or property incident thereto. Examples of
documentary stamp tax are those that are charged on bank promissory notes, deed of sale, and
deed of assignment on transfer of shares of corporate stock ownership.

Donor’s Tax 

A tax on a donation or gift, and is imposed on the gratuitous transfer of property between two or
more persons who are living at the time of the transfer. Donor’s tax is based on a graduated
schedule of tax rate.

Estate Tax 

A tax on the right of the deceased person to transmit his/her estate to his/her lawful heirs and
beneficiaries at the time of death and on certain transfers which are made by law as equivalent to
testamentary disposition. Estate tax is also based on a graduated schedule of tax rate.

Excise Tax 

A tax imposed on goods manufactured or produced in the Philippines for domestic sale or
consumption or any other disposition. It is also imposed on things that are imported.

Expanded Withholding Tax 

A kind of withholding tax which is prescribed only for certain payors and is creditable against
the income tax due of the payee for the taxable quarter year. Examples of the expanded
withholding taxes are those that are withheld on rental income and professional income.

Fees for Sealing and Licensing of Weights and Measures 

Fees for the sealing and licensing of weights and measures at such reasonable rates as shall be
prescribed by the sangguniang bayan of the municipality or city.

Final Withholding Tax 

A kind of withholding tax which is prescribed only for certain payors and is not creditable
against the income tax due of the payee for the taxable year. Income Tax withheld constitutes the
full and final payment of the Income Tax due from the payee on the said income. An example of
final withholding tax is the tax withheld by banks on the interest income earned on bank
deposits.

Franchise Tax 
A tax on businesses enjoying a franchise, at the rate not exceeding fifty percent (50%) of one
percent (1%) of the gross annual receipts for the preceding calendar year based on the incoming
receipt, or realized, within its territorial jurisdiction.

Fishery Rentals, Fees and Charges

Rentals, fees or charges imposed by the municipality/city to grantees of fishery privileges in the
municipal/city waters, e.g., fishery privileges to erect fish corrals, oysters, mussels or other
aquatic beds or bangus fry areas and others as mentioned in the local government code, as
amended.

Income Tax 
A tax on all yearly profits arising from property, profession, trades or offices or as a tax on a
person’s income, emoluments, profits and the like. Self-employed individuals and corporate
taxpayers pay quarterly income taxes from 1st quarter to 3rd quarter and instead of filing
quarterly income tax on the fourth quarter, they file and pay their annual income tax return for
the taxable year. Individual income tax is based on graduated schedule of tax rate, while
corporate income tax in based on a fixed rate prescribe by the tax law or special law.

Percentage Tax
A business tax imposed on persons or entities who sell or lease goods, properties or services in
the course of trade or business whose gross annual sales or receipts do not exceed the amount
required to register as VAT-registered taxpayers. Percentage taxes are usually based on a fixed
rate. They are usually paid monthly by businesses or professionals. However, some special
industries and transactions pay percentage tax on a quarterly basis.

Professional Tax 
An annual professional tax on each person engaged in the exercise or practice of his profession
requiring government examination.

Service Fees or Charges 

Fees or charges that may be collected by the barangays for services rendered in connection with
the regulations or the use of barangay-owned properties or service facilities, such as palay, copra,
or tobacco dryers.

Tax on Business 
Taxes imposed by cities, municipalities on businesses before they will be issued a business
license or permit to start operations based on the schedule of rates prescribed by the local
government code, as amended. Take note that the rates may vary among cities and
municipalities. This is usually what businesses pay to get their Business Mayor’s Permit.

Tax on Business of Printing and Publication 

Tax on the business of persons engaged in the printing and/or publication of books, cards,
posters, leaflets, handbills, certificates, receipts, pamphlets, and others of similar nature.

Tax on Sand, Gravel and Other Quarry Resources 

Tax imposed on ordinary stones, sand, gravel, earth, and other quarry resources, as defined under
the National Internal Revenue Code, as amended, extracted from public lands or from the beds of
seas, lakes, rivers, streams, creeks, and other public waters within its territorial jurisdiction.

Tax on Transfer of Real Property Ownership 

Tax imposed on the sale, donation, barter, or on any other mode of transferring ownership or title
of real property.

Taxation
The inherent power of the sovereign, exercised through the legislature, to impose burdens
upon subjects and objects within its jurisdiction for the purpose of raising revenues to
carry out the legitimate objects of government.

Taxes

The enforced proportional contributions from persons and property levied by the law-
making body of the State by virtue of its sovereignty for the support of the government
and all public needs.
Taxes that may be levied by the barangays on stores or retailers with fixed business
establishments 
With gross sales of receipts of the preceding calendar year of Fifty thousand pesos (P50,000.00)
or less, in the case of cities and Thirty thousand pesos (P30,000.00) or less, in the case of
municipalities, at a rate not exceeding one percent (1%) on such gross sales or receipts.
Value Added Tax 
A business tax imposed and collected from the seller in the course of trade or business on every
sale of properties (real or personal) lease of goods or properties (real or personal) or vendors of
services. It is an indirect tax, thus, it can be passed on to the buyer, causing this to increase the
prices of most goods and services bought and paid by consumers. VAT returns are usually filed
and paid monthly and quarterly.

Withholding Tax on Compensation 

The tax withheld from individuals receiving purely compensation income. This tax is what
employers withheld in their employees’ compensation income and remit to the government
through the BIR or authorized accrediting agent.

Withholding Tax on Government Money Payments 

The withholding tax withheld by government offices and instrumentalities, including
government-owned or -controlled corporations and local government units, before making any
payments to private individuals, corporations, partnerships and/or associations.