SUMMARY NOTES

GROSS RECEIPTS TAX

Section 121

 Gross Receipts Tax, Tax-on Banks and Non-Bank Financial Intermediaries

Performing Quasi-Banking Operations, there shall be collected a tax on a gross
receipt derived from sources within the Philippines by all Banks and Non-Bank
Financial Intermediaries.
 There is an in accordance with the following schedule. These are:
 The tax rate of, on interest, commissions and discounts from lending activities
and financial leasing on the basis of maturities of instruments from, maturity
period is 5 years or less is 5%, while the maturity period is more that 5 years
is only 1%.
 For the dividends and equity shares in net income of subsidiaries is 0%.
 The tax rate for royalties, rentals of property, real or personal, profits from
exchanged and all other items treated in gross income is 7%.
 The tax rate for the Net trading gains within the taxable year on foreign
currency, debts, securities, derivative and other similar financial instruments
is also 7%.
 Banks or banking Institutions, shall refer to those entities as defined under
Sec. 3 RA No. 8791, also known as the General Banking Law of 2000, or to
the entities engaged in the lending of funds obtained in the form of deposits.
 Non-bank financial intermediaries, refers to the persons or entities whose
principal function include lending, investing or placement of funds or evidence
of indebtedness or equity deposited with them, acquired by them, or
otherwise coursed through them, wither for their own account or for the
account of others.
 Non-bank financial intermediaries, also pertains to the financial institutions
supervised by BSP. These do not have a full banking license but they
facilitate bank-related financial services such as investment, contractual
savings, and etc.
 NBFIs are composed of the non-banks with quasi-banking functions and non-
banks without quasi-banking functions.
 Quasi-banking functions defined, refers to the NBFIs engaged in borrowing of
funds from twenty or more personal or corporate lenders at any one time.
 In determining and computing the correct amount of Net Trading Gain, within the
taxable year, the figure to be reported in the percentage tax return shall be the
cumulative total of the net trading gain or loss since the first months of the same
taxable year.
 It is provided that the net trading loss may only be deducted from the net trading
gain. However, it is not from any other items of gross receipt to arrive at the total
monthly gross receipts due.
 To Sec. 121-Gross Receipts Tax, provided that in case the maturity period referred to
in paragraph a is shortened through pre-termination, then the maturity period shall be
 reckoned to end as of the date of pre-termination for purposes of classifying the
transaction and the correct rate of tax shall be applied accordingly.
 Also, the generally accepted accounting principles as may be prescribed by the BSP
for the bank or non-bank financial intermediary performing quasi-banking functions
shall likewise be the basis for the calculation of gross receipts.
 Some of the examples of non-bank financial institutions in the Philippines with quasi-
banking functions are Cebu International Finance Corp-with quasi-banking op.,
RCBC Leasing and Finance Corp.-with quasi-banking op. and etc.
 Income realized by BSP and all Rural Banks, Sec. 121, it is noted that income or
revenue realized by the BSP from its transactions undertaken in pursuit of its legally-
mandated functions and all rural banks created and organized under the provision
RA 7353, and rural banks already in operation as of the date for a period of 5 years
from the date of commencement of operations or from approval of the Act as the
case may be are exempt from the GRT imposed under Sec 121 of the Tax Code.
 Money Changers and Pawnshops, other non-bank financial intermediaries, such as
money changers and pawnshops, subject to percentage tax under the Sec. 121 and
122.
 In Sec. 122- Gross Receipts Tax, Tax on other Non-Bank Financial Intermediaries,
there shall be collected a tax of 5% on a gross receipt derived from the sources
within the Philippines by other non-bank financial intermediaries doing business in
the Philippines from interests, commissions, discounts and all other items treated as
gross income under the tax code.
 The interest, commissions and discounts from lending activities, as well as income
from financial leasing shall be taxed on the basis of the remaining maturities of the
instruments from which such receipts are derived.
 In the statement above, it is in accordance to the following schedule: Maturity period
is 5 years or less is 5% and Maturity period is more than 5 years is only 1%.
 However, provided that in case the maturity is shortened through pre-termination,
then the maturity period shall be reckoned to end as of the date of pre-termination for
purposes of classifying the transaction and the correct rate of tax shall be applied
accordingly.
 Also, the generally accepted accounting principles as may be prescribed by the
Securities and Exchange Commission for other than non-bank financial
intermediaries shall likewise be the basis for the calculation of gross receipts.
 Moreover, Nothing in this code shall preclude the Commissioner from imposing the
same tax herein provided on persons performing similar financing activities.