2nd Sem Final

Business Taxation

Business Tax is a tax imposed on the onerous transfer of product, property, and services.

Onerous transfer- subject to Business Tax Gratuitous Transfer- subject to Transfer Tax

1. Value Added Tax 1. Estate Tax

2. Percentage Tax 2. Donor’s Tax
3. Excise Tax

Types of Business Taxes

1. NIRC- RA 8424 as amended

a. Valued Added Tax is 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 indirect tax, thus it can be passes on the buyer.

VAT is imposed on the following:

- Sale of goods or properties in the ordinary course of business

- Sale of services and use or lease of properties in the ordinary course of business
- Importation of goods or properties whether or not in the course of business or trade
b. Percentage Tax is a business tax imposed on the persons or entities who sell or lease a
goods, properties or services in the course of business whose annual sales or receipts do not
exceed Php 3M and are not VAT registered.
c. Excise Tax is 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 the things that
are imported.

- Alcohol - Mineral Products

- Automobiles - Indigenous Petroleum
- Non-essential Products - Tobacco Products

Percentage Taxes

Sec 116- Tax on Persons Exempt from VAT

Requisites

1. Not a VAT registered

2. Annual Gross Sales/ Gross Receipt do not exceed 3M

Exempt Person

1. Cooperatives
2. Self-employed individual and professional availing the 8% tax on gross sales and or receipts and
other non-operating income under the Train Law.

Formula: Tax base x 1% = Percentage Tax (July 1, 2020 to June 20, 2023 only) 3% onwards

TAX BASE: Seller of Goods- Gross Sales, Seller of Services- Gross receipts
2nd Sem Final
Business Taxation

Summary:

Annual GR/GS is greater than 3M- Subject to VAT

Annual GR/GS is less than 3M- OPT, VAT if opt to VAT, it will be irrevocable for 3 consecutive years.

Sec 117- Percentage Tax on Domestic Carriers and keepers of Garages

Person Liable:

- Cars for rent or hire driven by the lessee (rent-a-car)

- Transportation contractors, including persons who transport passengers for hire
- Other domestic carriers by land for transport of passenger
- keepers of garages

Exempt Person

- owner of bancas
- owner of animal drawn two-wheeled vehicle

Transport Network Vehicle Services (TNVS) domestic transport of passengers by air and water is subject
to VAT under RA 9337. Likewise, under RMC 70-2015, such as UBER GRAB TAXI and the likes their
partners/suppliers and similar arrangement which are holders of valid and current certificate of public
convenient are known as common carriers, subject to 3% common carrier tax under Sec 117.

Formula: Tax base x 3%= Common carrier tax

Tax base: Actual Gross Receipts vs. minimum Gross Receipts whichever is higher

Summary:

Types of Domestic CC Transporting Business Tax

By Land Persons OPT
Cargo/Goods OPT or VAT
By Air Persons, Goods or Cargo OPT or VAT
By Sea Persons, Goods or Cargo OPT or VAT

Sec 118- Percentage Tax on International Carriers

Person Liable:

- International Air Carriers

- International Shipping Carriers

Formula: Gross Receipts x 3%= common carrier tax

Gross Receipts- Shall include but shall not be limited to, the total amount of money or its equivalent
representing the contract, freight/cargo fees, mail fees, deposits applied as payments, advances
payments and other service charges and fees actually or constructively received during the taxable
quarter from cargo/or mail originating from the Philippines in a continuous and uninterrupted flight
irrespective of the place of sale or issue and the place of payment of the passage documents.
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Business Taxation

Summary:

 If the Airline/ Shipping Co is Domestic- VAT or OPT is a bus tax applicable

 If the Airline/ Shipping Co is Resident Foreign Corp – OPT is a bus tax applicable

Sec 119- Tax on Franchise

Person Liable

1. Not a VAT registered and

2. Annual Gross receipt of the preceding year do not exceed 10M
- Franchise on Gas and Water Utilities 2%
- Franchise on Radio and/or TV broadcasting Co 3%

Formula: Gross Receipts x Rate= Franchise Tax

Rules Applicable for radio and or TV broadcasting companies

Summary:

 More than 10M- VAT

 10M below- VAT or OPT, if opt to VAT irrevocable
 Vatable Franchise
- Electricity
- Telecommunication
- Transportation
- Private Franchise

Sec 120- Tax on Overseas Dispatch, Message or Conversation Originating from Philippines

Person Liable- The Caller

Formula: Payment for the services x 10% = overseas communication tax

The person Liable is the caller so some amount should be divided to 1.10 before the rate.

Exempt:

a. Diplomatic Services
b. International Organization
c. News Services
d. Government