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Villanueva, CPA
PERCENTAGE TAX:
Percentage Tax is a business tax imposed on the gross
sales/receipts of a taxpayer. Unlike VAT percentage tax is a
deductible tax (under taxes and licenses expense) under Sec. 34(C)
of the Tax Code, except for stock transactions tax.
Kinds of Percentage Taxes:
1. Ordinary/Other Percentage Tax (Sec. 109 and 116)
Any person whose sales or receipts are exempt under Section
109(CC) 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, 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%)
Exempt taxpayers:
a. Cooperatives; and
b. Self-employed individuals and/or professionals availing
of the 8% flat rate of income tax.
Tax Rate:
• July 1, 2020-June 30, 2023- 1%
• Before July 1, 2020 and after June 30, 2023- 3%
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J.A.
Requisites:
• Non-VAT registered person;
• The annual gross sales/receipts do not exceed
P3,000,000; and
• Not exempt from VAT under section 109(1)(A) to
109(1)(BB) of the tax code. (EXEMPT TRANSACTIONS,
refer to OUPUT VAT Handout)
2. Common Carrier’s Tax (Sec 117)
Cars for rent or hire driven by the lessee, transportation
contractors, including persons who transport passengers for
hire, and other domestic carriers by land, for the transport of
passengers [except owners of bancas] and owners of animal-
drawn two wheeled vehicle), and keepers of garages shall pay
a tax equivalent to three percent (3%) of their quarterly
gross receipts.
The gross receipts of common carriers derived from their
incoming and outgoing freight shall not be subjected to the
local taxes imposed under Republic Act No. 7160, otherwise
known as the Local Government Code of 1991.
Requisites:
• The taxpayer must be a domestic carrier;
• The mode of transport should be by land; and
• It should be for transport of passengers.
Absence of any of the three requisites will render the Common
Carrier’s Tax not applicable.
National Internal Revenue Code as Amended
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2|P age J.A. Villanueva, CPA

In computing the percentage tax provided in this Section, the 3. Percentage Tax on International Carriers (Sec 118)
following shall be considered the minimum quarterly gross (A) International air carriers doing business in the Philippines
receipts in each particular case: (Presumptive Minimum on their gross receipts derived from transport of cargo from the
Quarterly GR for the purpose of computing CCT) Philippines to another country shall pay a tax of three percent
(3%) of their quarterly gross receipts.
JEEPNEY FOR HIRE:
Manila and Other Cities P2,400 (B) International shipping carriers doing business in the
Provincial P1,200 Philippines on their gross receipts derived from transport of
PUBLIC UTILITY BUS: cargo from the Philippines to another country shall pay a tax
Not exceeding 30 passengers P3,600 equivalent to three percent (3%) of their quarterly gross
Exceeding 30 but not exceeding 50 passengers P6,000 receipts.
Exceeding 50 passengers P7,200
TAXIS: 4. Franchise Tax (Sec 119)
Manila and Other Cities P3,600
Provincial P2,400 Any provision of general or special law to the contrary
Car for Hire (with chauffer) P3,000 notwithstanding, there shall be levied, assessed and collected
Car for Hire (without chauffer) P1,800 in respect to all franchises on radio and/or television
broadcasting companies whose annual gross receipts of the
preceding year do not exceed Ten million pesos (P10,000.00),
Rules on Business Taxes of Domestic Common Carriers:
subject to Section 236 of this Code, a tax of three percent (3%)
MODE SUBJECT BUSINESS TAX
and on gas and water utilities, a tax of two percent (2%) on
Passengers 3% CTT (Sec 117) regardless
the gross receipts derived from the business covered by the
of gross receipts.
law granting the franchise: Provided, however, That radio and
3% OPT (Sec 116) if Non-VAT television broadcasting companies referred to in this Section
By Land Registered and GR do not shall have an option to be registered as a value-added taxpayer
Goods/Cargoes exceed P3,000,000 and pay the tax due thereon: Provided, further, That once the
VAT- if VAT registered or option is exercised, said option shall be irrevocable.
GR>P3,000,000
3% OPT (Sec 116) if Non-VAT
By Air or Passengers/ Registered and GR do not
Sea Goods/ exceed P3,000,000
Cargoes VAT- if VAT registered or
GR>P3,000,000
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3|P age J.A. Villanueva, CPA

Summary Rules on Franchise Tax: 5. Overseas Communication Tax (Sec 120)

Type of Franchise Business Tax
There shall be collected upon every overseas dispatch,
3% Franchise Tax if non-VAT
message or conversation transmitted from the Philippines by
registered, and GR does not
Radio and/or TV exceed P10,000,000 telephone, telegraph, telewriter exchange, wireless and other
Broadcasting 12% VAT if VAT-registered communication equipment service, a tax of ten percent (10%)
(irrevocable) or GR exceeds on the amount paid for such services. The tax imposed in this
P10,000,000 Section shall be payable by the person paying for the services
Income from Franchise is subject rendered and shall be paid to the person rendering the services
to 2% Franchise Tax regardless of who is required to collect and pay the tax within twenty (20)
amount. days after the end of each quarter.
Gas and Water Utilities Other Income not arising from
franchise will be subjected to 3% Exemptions.
OPT or 12% VAT whichever is a. Government. - Amounts paid for messages transmitted
applicable. by the Government of the Republic of the Philippines or
Income from casino operations is any of its political subdivisions or instrumentalities;
subject to 5% franchise tax (in lieu b. Diplomatic Services. - Amounts paid for messages
of all other taxes) transmitted by any embassy and consular offices of a
PAGCOR foreign government;
Income from other sources shall be
c. International Organizations. - Amounts paid for
subject to 30% Regular Corporate
messages transmitted by a public international
Income Tax
organization or any of its agencies based in the
3% OPT (Sec 116) if Non-VAT
Philippines enjoying privileges, exemptions and
Registered and GR do not exceed
immunities which the Government of the Philippines is
Other Franchises P3,000,000
committed to recognize pursuant to an international
VAT- if VAT registered or
agreement; and
GR>P3,000,000
d. News Services. - Amounts paid for messages from any
newspaper, press association, radio or television
newspaper, broadcasting agency, or news tickers
services, to any other newspaper, press association,
radio or television newspaper broadcasting agency, or
news ticker service or to a bona fide correspondent,
which messages deal exclusively with the collection of
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4|P age
news items for, or the dissemination of news item
through, public press, radio or television broadcasting or
a news ticker service furnishing a general news service
similar to that of the public press.
6. Gross Receipt Tax on Banks and Non-Bank Financial
Intermediaries performing Quasi-Banking Operations
(Sec 121)
There shall be collected a tax on a gross receipt derived from
sources within the Philippines by all banks and non-bank
financial intermediaries in accordance with the following
schedule:
Kind of Income Tax Rate
Interest, commissions and discounts from
lending activities as well as income from
financial leasing, on the basis of remaining
maturities of instruments from which such
receipts are derived:
Maturity period is five years or less 5%
Maturity period is more than five years 1%
dividends and equity shares and net income of 0%
subsidiaries
royalties, rentals of property, real or personal, 7%
profits, from exchange and all other items
treated as gross income under Section 32 of
the Tax Code
net trading gains within the taxable year on 7%
foreign currency, debt securities, derivatives,
and other similar financial instruments
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J.A. Villanueva, CPA
7. Tax on Other Non-Bank Financial Intermediaries (Sec
122)
There shall be collected a tax of five percent (5%) on the gross
receipts derived by other non-bank financial intermediaries
doing business in the Philippines, from interests, commissions,
discounts and all other items treated as gross income under
this code.: Provided, That interests, 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 accordance with the following schedule:
• Maturity period is five years or less 5%
• Maturity period is more than five years 1%
8. Tax on Life Insurance Premiums (Sec 123)
There shall be collected from every person, company or
corporation (except purely cooperative companies or
associations) doing life insurance business of any sort in the
Philippines a tax of two percent (2%) of the total premium
collected, whether such premiums are paid in money, notes,
credits or any substitute for money
Exemptions:
a. Premiums refunded within 6 months after payment on
account of rejection of risk or returned for other reasons
to the insured;
b. Reissuance premiums where tax has previously been
paid;
National Internal Revenue Code as Amended
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5|P age J.A. Villanueva, CPA

c. Premiums collected or received by any branch of a
domestic corporation, firm, or association doing business
outside the Philippines on account of any life insurance
of a NON-RESIDENT insured, if any tax on such
premium is imposed by a foreign country where the
branch is established;
d. Premiums collected or received on account of re-issuance
if the insured, in case of personal insurance resides
outside the Philippines, if any tax on such premiums is
imposed by a foreign country where the original
insurance has been issued or perfected; and
e. 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 workers.
company or corporation residing or doing business in the
Philippines. In all cases where owners of property obtain
insurance directly with foreign companies, it shall be the duty
of said owners to report to the Insurance Commissioner and to
the Commissioner each case where insurance has been so
effected, and shall pay the tax of five percent (5%) on
premiums paid, in the manner required by Section 123
TAX RATE
International/Foreign Insurance Companies:
Thru Agent (on Premiums Collected) 4%
If directly contracted by the insured in the 5%
Philippines (on Premiums paid)
10. Amusement Taxes (Sec 125)

9. Tax on Agents of Foreign Insurance Companies (Sec There shall be collected from the proprietor, lessee or operator
124) of cockpits, cabarets, night or day clubs, boxing exhibitions,
professional basketball games, Jai-Alai and racetracks, a tax
Every fire, marine or miscellaneous insurance agent authorized equivalent to:
under the Insurance Code to procure policies of insurance as Amusement Places Tax Rate
he may have previously been legally authorized to transact on Jai-alai 30%
risks located in the Philippines for companies not authorized to Cockpits, cabarets, night or day clubs 18%
transact business in the Philippines shall pay a tax equal to Professional Basketball games 15%
twice the tax imposed in Section 123: Provided, That the Boxing Exhibitions 10%
provision of this Section shall not apply to reinsurance:
Requisites of Exempt Boxing Exhibitions:
Provided, however, That the provisions of this Section shall not
a. What is at stake is a World or Oriental Championship in
affect the right of an owner of property to apply for and obtain
any division;
for himself policies in foreign companies in cases where said
b. At least one of the contenders is a citizen of the
owner does not make use of the services of any agent,
Philippines; and
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6|P age J.A. Villanueva, CPA

c. The exhibition is promoted by a citizen/s if the Philippines of winning race horses, the tax shall be ten percent (10%) of
or by a corporation or association at least 60% of the the prizes.
capital is owned by such citizens.
The tax herein prescribed shall be deducted from the
For the purpose of the amusement tax, the term ‘gross 'dividends' corresponding to each winning ticket or the 'prize'
receipts’ embraces all the receipts of the proprietor, lessee or of each winning race horse owner and withheld by the operator,
operator of the amusement place. Said gross receipts also manager or person in charge of the horse races before paying
include income from television, radio and motion picture rights, the dividends or prizes to the persons entitled thereto.
if any. A person or entity or association conducting any activity
subject to the tax herein imposed shall be similarly liable for The operator, manager or person in charge of horse races shall,
said tax with respect to such portion of the receipts derived by within twenty (20) days from the date the tax was deducted
him or it. and withheld in accordance with the second paragraph hereof,
file a true and correct return with the Commissioner in the
Amusement taxes imposed herein shall be payable at the end manner or form to be prescribed by the Secretary of Finance,
of each quarter and it shall be the duty of the proprietor, lessee and pay within the same period the total amount of tax so
or operator concerned, as well as any party liable, within deducted and withheld.
twenty (20) days after the end of each quarter, to make a true
and complete return of the amount of the gross receipts Summary of Taxes on Winnings
derived during the preceding quarter and pay the tax due Taxpayer Winnings Tax Base Tax Rate
thereon. Regular Bet 10%
Double, Winnings or
11. Tax on Winnings on Horse Races (Sec 126) Bettor forecast/ dividends less 4%
quinella and cost of tickets
Every person who wins in horse races shall pay a tax equivalent trifecta bets
to ten percent (10%) of his winnings or 'dividends', the tax to Horse Owner - Gross
Winnings 10%
be based on the actual amount paid to him for every winning
ticket after deducting the cost of the ticket: Provided, That in
the case of winnings from double, forecast/quinella and trifecta
bets, the tax shall be four percent (4%). In the case of owners

Business and Transfer Taxation: Banggawan Transfer and Business Taxation: Tabag National Internal Revenue Code as Amended
Business and Transfer Taxation: Valencia and Roxas Relevant Revenue Regulations Related Laws
7|P age J.A. Villanueva, CPA

12. Stock Transactions Tax (Sec 17)

There shall be levied, assessed and collected on every sale,

barter, exchange, or other disposition of shares of stock listed
and traded through the local stock exchange other than the
sale by a dealer in securities, a tax at the rate of six-tenths of
one percent (6/10 of 1%) of the gross selling price or gross
value in money of the shares of stock sold, bartered,
exchanged or otherwise disposed which shall be paid by the
seller or transferor.

Business and Transfer Taxation: Banggawan Transfer and Business Taxation: Tabag National Internal Revenue Code as Amended
Business and Transfer Taxation: Valencia and Roxas Relevant Revenue Regulations Related Laws