Business Taxes – Under the Tax Code, Particularly RA.

8424, also known as internal revenue code of the

Philippines.

- Business Taxes are those imposed upon onerous transfers such as sale, barter,
exchange, and importation.

I. Onerous Transfer (Sale)

Normal Course of Business
1. (Made) In the ordinary course of trade or business. >>

2. Not in the ordinary course of trade or business. >>>> Casual Transfer

1. Normal Course of Business 2. Casual Transfer

Capital Gain Tax

VAT or Percentage and Excise
Tax

1. Normal Course of Business

Ex. Merchandise Company, Manufacturing Company, Sales, or Service type Company.

2. Casual Transfer

Ex. I sell my old laptop.

I sell our old model car.

Those may lead to taxes (Income Tax).

VAT or Value Added Tax - VAT-registered individuals or businesses engaged in selling, exchanging,
leasing of goods or properties, and rendering services, if the actual gross sales or receipts accumulate up
to Php 3,000,000.00;

Percentage Tax - may be applicable for:

1. Businesses with gross annual sales and/or receipts not exceeding P3,000,000; and

2. Business that are not VAT-registered businesses or are VAT-Exempt.

3% is the general base rate of Percentage Tax on gross sales and receipts for standard non-VAT
registered businesses.

The rate does vary. (https://www.bir.gov.ph/index.php/tax-information/percentage-tax.html)

Transfer Taxes – Taxes on Gratuitous Transfer (transfer without consideration, donation)

II. Gratuitous Transfer

Heritage Type of Donation: Mortis Causa Type of Donation: Inter Vivos

DEATH Gift/Donation

Estate Donor’s
Tax
Tax

(Section 105 NIRC; Section 4.105-3, RR 16-2005)

IN THE COURSE OF TRADE OR BUSINESS – The regular conduct or pursuit of a commercial or an

economic activity, including transactions incidental thereto, by any person, regardless of whether or not
the person engaged therein is a non-stock, non-profit private organization or government entity.

Meaning to say, it is not Isolated Transaction.

Isolated Transaction – not subject to business tax

Example, I have a clothing wear business, then all of the sudden, I sell my car.

Selling my car is an Isolated Transaction therefor it is not subjected to business tax.

“Isolated Transactions” are generally not considered in the ordinary course of trade or business, hence,
not subject to business tax. However, as provided under RR 16-2005, services rendered in the
Philippines by a non-resident foreign person shall be considered as being rendered in the course of
trade or business even if the performance is not regular.
Non-resident foreign person – simply a foreigner who doesn’t live inside our country.

When we talk about Non-resident foreign persons in RR 16-2005, another entity like a corporation is
included (even a partnership).

 Whether you are a charitable organization, non-stock/nonprofit organization, or government

agency as long as the transaction is a sale, barter, or exchange in the ordinary course of trade
except for importation it is subject to business tax.

NRANET - non-resident alien not engaged in trade

NIR CODE OF 1997

SEC. 30. Exemptions from Tax on Corporations. - The following organizations shall not be taxed
under this Title in respect to income received by them as such:

(A) Labor, agricultural or horticultural organization not organized principally for profit;

(B) Mutual savings bank not having a capital stock represented by shares, and cooperative
bank without capital stock organized and operated for mutual purposes and without profit;

(C) A beneficiary society, order or association, operating for the exclusive benefit of the
members such as a fraternal organization operating under the lodge system, or mutual aid
association or a nonstock corporation organized by employees providing for the payment of life,
sickness, accident, or other benefits exclusively to the members of such society, order, or
association, or nonstock corporation or their dependents;

(D) Cemetery company owned and operated exclusively for the benefit of its members;

(E) Nonstock corporation or association organized and operated exclusively for religious,
charitable, scientific, athletic, or cultural purposes, or for the rehabilitation of veterans, no part of
its net income or asset shall belong to or inure to the benefit of any member, organizer, officer
or any specific person;

(F) Business league chamber of commerce, or board of trade, not organized for profit and no
part of the net income of which insures to the benefit of any private stock-holder, or individual;

(G) Civic league or organization not organized for profit but operated exclusively for the
promotion of social welfare;
(H) A nonstock and nonprofit educational institution;

(I) Government educational institution;

(J) Farmers' or other mutual typhoon or fire insurance company, mutual ditch or irrigation
company, mutual or cooperative telephone company, or like organization of a purely local
character, the income of which consists solely of assessments, dues, and fees collected from
members for the sole purpose of meeting its expenses; and

(K) Farmers', fruit growers', or like association organized and operated as a sales agent for the
purpose of marketing the products of its members and turning back to them the proceeds of
sales, less the necessary selling expenses on the basis of the quantity of produce finished by
them;

Notwithstanding the provisions in the preceding paragraphs, the income of whatever

kind and character of the foregoing organizations from any of their properties, real or
personal, or from any of their activities conducted for profit regardless of the disposition
made of such income, shall be subject to tax imposed under this Code.

Example:

UST is a non-stock & non-profit educational institution. It is an entity exempt under section 30 of
the tax code. But UST engaged in a business that is not related to education that’s why they are
VATABLE. Why? Inside their campus, there’s a lot of business there even they are not the owners of
those businesses, they still earn from the rent income of the business owners inside their properties.

What is meant by ordinary asset?

Ordinary assets shall refer to all real properties specifically excluded from the definition
of capital assets under Sec. 39(A)(1) of the Code, namely:

1. Stock in trade of a taxpayer or other real property of a kind which would properly
be included in the inventory of the taxpayer if on hand at the close of the taxable
year; or
2. Real property held by the taxpayer primarily for sale to customers in the ordinary
course of his trade or business; or
3. Real property used in trade or business (i.e., buildings and/or improvements) of a
character which is subject to the allowance for depreciation provided for under
Sec. 34(F) of the Code; or
4. Real property used in trade or business of the taxpayer.
Real properties acquired by banks through foreclosure sales are considered as ordinary
assets. [Sec. 2(b) of RR No. 7-2003]

MARGINAL INCOME EARNER

RR 7-2012 defined Marginal Income Earners (MIE’s) as those individuals whose business do not
realize a gross sales or receipts exceeding P100,000 in any twelve-month period.

Business Tax Exempt = Annual gross of P100,000 or below

Income Tax Exempt = P250,000 annual income or below

TYPES OF BUSINESS TAXES

1. Value Added Tax

2. Other Percentage Taxes

3. Excise Taxes

MEMORIZE THE FOLLOWING

 VAT EXEMPT
SEC. 109. Exempt Transactions. –

(1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be
exempt from the value-added tax.

(A) Sale or importation of agricultural and marine food products in their original state,
livestock and poultry of or king generally used as, or yielding or producing foods for human
consumption; and breeding stock and genetic materials therefor.

Products classified under this paragraph shall be considered in their original state even if they
have undergone the simple processes of preparation or preservation for the market, such as
freezing, drying, salting, broiling, roasting, smoking or stripping. Polished and/or husked rice,
corn grits, raw cane sugar and molasses, ordinary salt and copra shall be considered in their
original state; 

(B) Sale or importation of fertilizers; seeds, seedlings and fingerlings; fish, prawn, livestock
and poultry feeds, including ingredients, whether locally produced or imported, used in the
manufacture of finished feeds (except specialty feeds for race horses, fighting cocks, aquarium
fish, zoo animals and other animals generally considered as pets);

(C) Importation of personal and household effects belonging to the residents of the
Philippines returning from abroad and nonresident citizens coming to resettle in the
Philippines: Provided, that such goods are exempt from customs duties under the Tariff and
Customs Code of the Philippines;

(D) Importation of professional instruments and implements, tools of trade, occupation or

employment, wearing apparel, domestic animals, and personal and household effects
belonging to persons coming to settle in the Philippines or Filipinos or their families and
descendants who are now residents or citizens of other countries, such parties hereinafter
referred to as overseas Filipinos, in quantities and of the class suitable to the profession, rank
`or position of the persons importing said items,  for their own use and not for barter or sale,
accompanying such persons, or arriving within a reasonable time: Provided, That the Bureau
of Customs may, upon the production of satisfactory evidence that such persons are actually
coming to settle in the Philippines and the goods are brought from their former place of
abode, exempt such goods from payment of duties and taxes: Provided, further, That the
vehicles, vessels, aircrafts, machineries and other similar goods for use in manufacture, shall
not fall within this classification and shall therefore be subject to duties, taxes and other
charges;

(E) Services subject to percentage tax under Title V;

(F) Services by agricultural contract growers and milling for others of palay into rice, corn into
grits and sugar cane into raw sugar;

(G) Medical, dental, hospital and veterinary services except those rendered by professionals;

(H) Educational services rendered by private educational institutions, duly accredited by the
Department of Education(DepED), the Commission on Higher Education (CHED), the Technical
Education and Skills Development Authority (TESDA) and those rendered by government
educational institutions; 

(I) Services rendered by individuals pursuant to an employer-employee relationship;

(J) Services rendered by regional or area headquarters established in the Philippines by

multinational corporations which act as supervisory, communications and coordinating
centers for their affiliates, subsidiaries or branches in the Asia-Pacific Region and do not earn
or derive income from the Philippines;

(K) Transactions which are exempt under international agreements to which the Philippines is
a signatory or under special laws, except those under Presidential Decree No. 529; 

(L) Sales by agricultural cooperatives duly registered with the Cooperative Development
Authority to their members as well as sale of their produce, whether in its original state or
processed form, to non-members; their importation of direct farm inputs, machineries and
equipment, including spare parts thereof, to be used directly and exclusively in the
production and/or processing of their produce;

(M) Gross receipts from lending activities by credit or multi-purpose cooperatives duly
registered with the Cooperative Development Authority;

(N) Sales by non-agricultural, non- electric and non-credit cooperatives duly registered with
the Cooperative Development Authority: Provided, That the share capital contribution of each
member does not exceed Fifteen thousand pesos (P15,000) and regardless of the aggregate
capital and net surplus ratably distributed among the members;

(O) Export sales by persons who are not VAT-registered;

(P) Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business or real property utilized for low-cost and socialized
housing as defined by Republic Act No. 7279, otherwise known as the Urban Development
and Housing Act of 1992, and other related laws, residential lot valued at One million pesos
(P1,500,000) and below, house and lot, and other residential dwellings valued at Two million
five hundred thousand pesos (P2,500,000) and below: Provided, That beginning January 1,
2021, the VAT exemption shall only apply to sale of real properties not primarily held for sale to
customers or held for lease in the ordinary course of trade or business, sale of real property
utilized for socialized housing as defined by Republic Act No. 7279, sale of house and lot, and
other residential dwellings with the selling price of not more than Two million pesos
(P2,000,000): Provided, further, That every three (3) years thereafter, the amount herein stated
shall be adjusted to its present value using the Consumer Price Index, as published by the
Philippine Statistics Authority (PSA); 

(Q) Lease of a residential unit with a monthly rental not exceeding Fifteen thousand pesos
(₱15,000); 

(R) Sale, importation, printing or publication of books, and any newspaper, magazine, journal,
review bulletin, or any such educational reading material covered by the UNESCO Agreement
on the Importation of Educational, Scientific and Cultural Materials, including the digital or
electronic format thereof: Provided, That the materials enumerated herein are not devoted
principally to the publication of paid advertisements;

(S) Transport of passengers by international carriers;

(T) Sale, importation or lease of passenger or cargo vessels and aircraft, including engine,
equipment and spare parts thereof for domestic or international transport operations;

(U) Importation of fuel, goods and supplies by persons engaged in international shipping or
air transport operations: Provided, That the fuel, goods, and supplies shall be used for
international shipping or air transport operations; 

(V) Services of bank, non-bank financial intermediaries performing quasi-banking functions,

and other non-bank financial intermediaries;

(W) Sale or lease of goods and services to senior citizens and persons with disability, as
provided under Republic Act Nos. 9994 (Expanded Senior Citizens Act of 2010) and 10754 (An
Act Expanding the Benefits and Privileges of Persons with Disability), respectively; 

(X) Transfer of property pursuant to Section 40(C)(2) of the NIRC, as amended;  

(Y) Association’s dues, membership fees, and other assessments and charges collected by
homeowners’ associations and condominium corporations; 

(Z) Sale of gold to the Banko Sentral ng Pilipinas (BSP);

(AA) Sale of or importation of prescription drugs and medicines for: 

(i) Diabetes, high cholesterol, and hypertension beginning January 1, 2020; and 

(ii) Cancer, mental illness, tuberculosis, and kidney diseases beginning January 1, 2021. 
Provided, That the DOH shall issue a list of approved drugs and medicines for this
purpose within sixty (60) days from the effectivity of this Act; and 

(BB) Sale or importation of the following beginning January 1, 2021 to December 31,
2023: 

(i) Capital equipment, its spare parts and raw materials, necessary for the production of
personal protective equipment components such as coveralls, gown, surgical cap,
surgical mask, N-95 mask, scrub suits, goggles and face shield, double or surgical
gloves, dedicated shoes, and shoe covers, for COVID-19 prevention; and 

(ii) All drugs, vaccines and medical devices specifically prescribed and directly used for
the treatment of COVID-19; and 

(iii) Drugs for the treatment of COVID-19 approved by the Food and Drug Administration
(FDA) for use in clinical trials, including raw materials directly necessary for the
production of such drugs: Provided, That the Department of Trade and Industry (DTI)
shall certify that such equipment, spare parts or raw materials for importation are not
locally available or insufficient in quantity, or not in accordance with the quality or
specification required: Provided, further, That for item (ii), within sixty (60) days from the
effectivity of this Act, and every three (3) months thereafter, the Department of Health
(DOH) shall issue a list of prescription drugs and medical devices covered by this
provision: Provided, finally, That the exemption claimed under this subsection shall be
subject to post audit by the Bureau of Internal Revenue or the Bureau of Customs as
may be applicable. 

(CC) Sale or lease of goods or properties or the performance of services other than the
transactions mentioned in the preceding paragraphs, the gross annual sales and/or
receipts do not exceed the amount of Three million pesos (P3,000,000.00). 

OTHER PERCENTAGE TAXES

SEC. 116.  Tax on Persons Exempt from Value-Added Tax (VAT). [115]- Any person whose
sales or receipts are exempt under Section 109(CC) [116] of this Code from the payment
of value-added tax and who is not a VAT-registered person shall pay a tax equivalent to
three percent (3%) of his gross quarterly sales or receipts: Provided, That
cooperatives, [117] shall be exempt from the three percent (3%) gross receipts tax herein
imposed: Provided, further, That effective July 1, 2020 until June 30, 2023, the rate shall
be one percent (1%). [118]
(NOTE: The amendment introduced by the TRAIN Law was vetoed by the President. The
veto message reads:

C. Exemptions from percentage tax of gross sales/receipts not exceeding five hundred
thousand pesos (P500,000)

I am constrained to veto the provision which provides for the above under line 12 of Sec.
38 in the enrolled bill, to wit:

“And Beginning January 1, 2019, Self-Employed and Professionals with Total Annual
Gross Sales And/Or Gross Receipts Not exceeding Five Hundred Thousand Pesos
(P500,000)

The Proposed exemption from percentage tax will result in unnecessary erosion of
revenues and would lead to abuse and leakages.  The subject taxpayers under this
provision are already exempted from the VAT, thus, the lower three percent percentage
tax on gross sales or gross receipts is considered as their fair share in contributing to the
revenue base of the country.)

TYPE OF BUSINESS TAXES

SALE OF GOOD OR
SERVICE VAT OPT EXCISE TAX

1. In General  -
2. Exempt from VAT -  -
3. Excise Taxes - - -

SALE OF SIN PRODUCTS

AND NON-ESSENTIAL
 - 
GOODS
OR
-  

 If your business is VAT registered, even your annual sales fall below 3,000,000 then you’re still
liable to pay VAT for that particular year.
  Excise Tax – Are taxes on sin products, non-essential goods and non-essential service (like
medical surgery). Basically, it is imposed to manufacturers or importers.

Example, San Miguel manufactures alcoholic beverages like San Mig light, so they are subjected to
excise tax.

 VAT and Excise Tax is possible to impose on a particular business at the same time.
 The only liable to pay excise tax from a product which is subjected to excise tax is the
manufacturer/producer/importer of such product.

Example: 7-eleven is selling San Mig light, but 7-eleven is not subjected to pay excise tax from such
product but San Miguel Corp.

SALE OF SERVICE
 Sale of services means performance of all kind of services in the Philippines for others for a fee,
renumeration or consideration, whether in kind or in cash. VAT on sale of service is a tax on
payments for services rendered in the excise of profession or calling.
 It is an indirect tax and, thus may be passed on to the client or customer.
 Such payments may be collected in advance or after the service is rendered.

SALE OF REAL PROPERTIES

 It refer to real properties held primarily for sale to customers or held for lease in the ordinary
course of trade or business of the seller.
 In the case of sale of real properties on the installment plan, the real estate dealer shall be
subject to VAT on the installment payments, including interest and penalties, actually and/or
constructively received by the seller.

Kinds of Vat
1. VAT on sales of goods of properties
2. VAT on sale of services and/or lease of properties

3. VAT on importation

Persons Liable to VAT

1. Sellers of goods and/or properties

2. Sellers of services and/or lessors of properties

3. Importers

CHARACTERISTIC OF VAT
1. It is an indirect tax where tax shifting is always presumed

The value added tax is an indirect tax and the amount may be shifted or passed on to the buyer,
transferee or lessee of the goods, properties or services (Section 105 tax code; Section 4, RR 16-2005).
The seller is the one statutory liable to pay for the payment of the tax but the amount of the tax may be
shifted or passed on the buyer or transferee or lessee of the goods, properties or services.

This rule shall likewise apply to existing contracts of sale or lease of goods, properties or services
at the time of the effectivity of RA 9337 (VAT Reform Act).

However, in the case of importation, the importer is the liable for the VAT (RR 16-2005).

The “burden of the tax” is borne by the final consumers although the producers and suppliers of
these goods and services are the ones who have to file their VAT returns to the BIR.

Hence, what is transferred or shifted to the consumers is not the “liability to pay the tax” but
the tax burden.

2. It is consumption-based

1. VAT is a tax on consumption levied on the sale, barter, exchange or lease of goods or
properties and services in the Philippines and on importation of goods into the Philippines (RR 16-2005).
 2. It is the end user of consumer goods or services which ultimately shoulders the tax as
a liability therefrom is passed on to the end users by the providers of these goods or services.
The vat, thus, forms a substantial portion of consumer expenditures.

3. It is imposed on the value-added in each stage of production and distribution process.

The VAT system assures fiscal adequacy through the collection of taxes on every level of
consumption. Each business in the supply chain takes part in the process of controlling and
collecting the tax. To illustrate VAT on each stage of production, refer to the illustration below:

ILLUSTRATION 1: -VAT is imposed on the value-added in each stage of production and/or

distribution process.

Bobadilla Manufacturing, Incorporated is a manufacturer of bombastic cigarettes (sin product subject

to excise tax). It sells its products to Pearl Shell, the company’s exclusive distributor in the Philippines.

Pearl Shell sells the same to the following:

1. Jamylla Company – exclusive distribution for Luzon

2. Ivy, Incorporated- exclusive distributor for Visayas

3. Joseph – exclusive distributor for Mindanao

Then

Jamylla (1) sells the products to its various customers such as “7/24 supermarket”

VAT is imposed as follows

 Bobadilla is subject to excise tax and value added tax (input vat).
Consequently, Bobadilla will charge vat (output vat) to Pearl Shell.
 Pearl Shell will charge VAT (output VAT) to Jamylla, Ivy and Joseph. In addition, Pearl
Shell will deduct the amount of input VAT it paid to Bobadilla against the vat collected
from Jamylla, Ivy and Joseph.
 Jamylla will charge VAT to 7/24. The amount paid by Jamylla to Pearl Shell will be
deducted to the amount collected from 7/24.
 7/24 will charge VAT to their customers/end user. The VAT paid by 7/24 to Jamylla will
be charge against the CAT collected from the customers.
4. It is credit-invoice method value added tax

VAT payable is computed by deducting the input VAT from the output VAT (refer to illustration
#1). The provider of goods or services passed on to the end users the liability to pay the tax who in turn
may credit their VAT liability from the VAT payments they received from the final consumer. This is
because VAT is a consumption tax levied on sales to be borne by consumers with sellers acting simply as
tax collectors.

In the Philippines, the “Credit-Invoice Method” or “Tax Credit Approach” is adopted in

computing the VAT Payable. This means that VAT is imposed on the sale first called “Output Vat” and a
tax credit is allowed or claimed on the VAT passed-on to his purchase or cost of goods or services known
as “Input Tax”. The excess of output VAT over input VAT is called “VAT Payable”.

ILLUSTRATION 2

On January 10, GJ sold product “X” to Mac with a gross selling price of
P1,000,000 plus VAT of P120,000 for a total of P1,120,000. GJ will treat the
P120,000 vat as his output vat. On the other hand, Mac will treat the P120,000
VAT as his input VAT, On January 15, Mac sold the product to Clifford for
P1,100,000 plus VAT of P132,000. The VAT paid by Clifford to Mac is an Output
Vat of Mac.

The VAT payable of Mac is computed as follows:

Output VAT (collected from Clifford) P132,000

Input VAT (paid to GJ) (less) 120,000

VAT Payable 12,000

Output tax means the VAT due on the sale, lease or exchange of taxable goods or properties or
services by any person registered or required to register under Section 236 of the Tax Code. Input tax
means the VAT due on or paid by a VAT-registered on importation of goods or local purchase of goods,
properties or services, including lease or use of property in the course of his trade or business. It shall
also include the transitional input tax determined in accordance with Section 111 of the Tax Code,
presumptive input tax and deferred input tax from previous period (Refer to Chapter 8 for a more
detailed discussion on the sources of input and output VAT). Input VAT should be supported with VAT
receipts.

Sec. 4. 110-7 of RR 16-2005 as amended by RR2-2007 provides that “if the input tax inclusive of
input tax carried over from the previous quarter exceeds the output tax, the excess input tax shall be
carried over to the succeeding quarter or quarters, provided, however, that any input tax attributable to
zero-rated sales by a VAT-registered person may at his option be refunded or applied for a tax credit
certificate which may be used in the payment of internal revenue taxes, subject to the limitations as
may be provided for by law, as well as, other implementing rules (refer to Chapter 8 for 0% sales).

Basis of Value Added Tax

The law that governs the implementation of VAT is RA9337, The VAT Reform Act,
passed by Congress in May 2005 and amended by RA9361. It was implemented on November 1,
2005. Under this law, a single rate equivalent to 12% (except for 0% sales discussed in Chapter
8) is based on the following:

Nature of Transaction(s) Tax Based

A. Sale of Goods or Properties Gross selling price

B. Sale of services Gross receipts

C. Importation Total landed cost

D. Dealers in Securities Gross Income

Sale of Goods

Gross Sales Pxx

Less: Sales discounts xx**
Sales returns xx** xx
Net sales xx
Add: Excise tax, if any xx
Tax Base xx
x Var rate 12%
Output Vat xx
Less: Input VAT (xx)
VAT Payable/(Excess input tax) Pxx
**Sales Discounts, Returns and Allowances (Sec. 4. 106-9 of RR 16 16-2005)

In computing the taxable base during the month or quarter, the following shall be allowed as
deductions from gross selling price:

a) Discounts determined and granted at the time of sale, which are expressly indicated in the
invoice, the amount thereof forming part of the gross sales duly recorded in the books of accounts. Sales
discount indicated in the invoice at the time of sale, the grant of which is not dependent upon the
happening of a future event, may be excluded from the gross sales within the same month/quarter it
was given.

b) Sales returns and allowances for which a proper credit or refund was made or a credit memo
was issued during the month or quarter to the buyer for sales previously recorded as taxable sales.

Cash received (actually and constructively) *** Pxx

Deposits/Advance payments for future projects xx
Materials charged for services xx
Gross receipts xx
x VAT Rate 12%
Output VAT xx
Less: Input VAT (xx)
VAT Payable (Excess input tax) Pxx

*** Receivables (For Sale of Services), although earned, are not included in the computation of
VAT payable.
Dealer in Securities and Lending Investors:

Gross Selling Price Pxx

Less: Acquisition cost of securities sold for the (xx)
Month/quarter
Balance xx
Add: Other income subject to basic tax xx
Gross receipts xx
x VAT Rate 12%
Output VAT xx
Less: Input VAT (xx)
VAT Payable Pxx

Sale of Goods/Services to Senior Citizens and PWDs (as amended)

Sale of certain goods or services specified under the law (magna carta for senior citizens and
magna carta for PWDs as amended) shall no be subject to the 12% value added tax (Refer to Chapter 8
for a detailed discussion on vat exemption and 205 discount granted to Senior Citizens and PWDs.

Activity 1

1. Why there’s no business tax for agricultural food products?

2. What kind of transfer which business taxes are imposed on?

3. What businesses are exempt on VAT?

4. What businesses are exempt on Percentage Tax (OPT)

5. What is excise tax?

6. When could you say that a particular business is Vatable?

7. When could you say that a particular business is subject to Percentage Tax?
8. What are the types of Business Taxes?

ACTIVITY 2
True or False

1. For a person to be subjected to any business tax, it is necessary that he is regularly

engaged in the conduct or pursuit of an economic activity.

2. A non-resident foreign person performing isolated transaction in the Philippines shall

be liable to VAT.

3. non-stock and non-profit private organizations which sell exclusively to their

members in the regular conduct or pursuit of commercial or economic activity are exempt from
value-added tax.

4. Government entities engaged in commercial or economic activity are generally

exempt from value added tax.

5. SK Telecom was contracted by PLDT to fix the latter’s recurring technical issues for
2,000,000. The engagement is expected to last for not more than 1 month.

Question: How much is the applicable business tax of SK Telecom if any?

6. Pinas Energy Corp. entered into a BOT contract with the PNOC, for finance,
engineering, supply, installation, testing, and maintenance of 48.25 megawatts geothermal powerplant.
During the year, PINAS sold for P200,000 a fully depreciated vehicle used in business.

Question: is there a VAT? How much if any?