SUMMARY NOTES

FRANCHISE TAX

Section 119
 On the annual gross receipts derived by the franchise grantees of:
1. Gas and water utilities from the business covered by the law granting the
franchise – 2% (not subject to VAT, subject to tax under section 119). Electric
utilities are subject to VAT under RA 9337
2. Radio and/or television broadcasting companies whose annual gross receipts
of the preceding year do not exceed PhP10 million – 3%
 Companies whose annual gross receipts of the preceding year exceed
PhP10 million are subject to VAT
 Said company may opt to be registered as a VAT taxpayer. The option,
once exercised, cannot be revoked.

Franchise (Grantor) Business tax of franchise (Grantees)

Private VAT or OPT (Sec. 116)
Unless exempt
Government VAT; or
OPT
 Sec. 119
 Gas and water- 2%
 Radio Television
broadcasting companies- 3%
or vat
 Unless exempt or as provided under
other special laws

 A radio or television broadcasting franchisee with gross annual receipts from the
franchise that did not exceed PHP10 million, derived from the business covered by
the law granting the franchise may opt for VAT registration. This option, once
exercised, shall be irrevocable. (Sec. 119, Tax Code).
 Any person who is VAT-registered but enters into a transaction which is exempt from
VAT (mixed transactions) may opt that the VAT apply to his transaction which would
have been exempt under Section 109(l) of the NIRC.