PERCENTAGE TAX

Definition: a national tax measured by a certain percentage of the GSP or GV in money of goods sold,
bartered or imported; or of the GR or Earning derived by any person engaged in the sale of services.

Nature: excise tax (tax on transaction); direct tax(seller shoulders tax and files with the BIR, unlike VAT);
NOT subject to withholding unlike income tax; gross receipts tax; applies to entire receipts without any
exemption; business tax; national tax

Purpose: to maintain simplicity in tax collection; to assure a steady source of state revenue even during
periods of economic slowdown

Entities liable to pay: Any person whose sales or receipts are exempt under Sec 109(1) (W) from VAT
payment and not a VAT registered(Sec1091w.sale or lease of goods and services to senior citizens and
persons with disability;

1. Persons, who are not VAT-registered, who sell goods, properties or services, whose annual gross
sales and/or receipts do not exceed three million pesos (Php3,000,000.00) and are exempt from
value-added tax (VAT) under Section 109 (BB) of the National Internal Revenue Code, as
amended by Republic Act (RA) No. 10963.
2. Persons who lease residential units where the monthly rental per unit exceeds fifteen thousand
pesos (Php15,000.00) but the aggregate of such rentals of the lessor during the year does not
exceed three million pesos (Php3,000,000.00)
3. Persons engaged in the following industries/transactions: TRANSACTIONS COVERED
0. 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
a. International air/shipping carriers doing business in the Philippines on their gross receipts
derived from transport of cargo from the Philippines to another country
b. Franchise grantees of – 
0. radio and/or television broadcasting companies whose annual gross receipts for
the preceding year do not exceed Php 10,000,000.00 and did not opt to register
as VAT taxpayers, and
i. gas and water utilities.
c. Overseas dispatch, message or conversation transmitted from the Philippines by
telephone, telegraph, tele-writer exchange, wireless and other communication equipment
services, except those transmitted by:

0. The Philippine Government or any of its political subdivisions or instrumentalities;

i. Diplomatic services;
ii. Public international organizations or any of their agencies based in the
Philippines enjoying privileges, exemptions and immunities which the Philippine
Government is committed to recognize pursuant to international agreement; and
iii. News services for messages which deal exclusively with the collection of news
items for, or the dissemination of news item through, public press, radio or
television broadcasting or a newsticker service furnishing a general news service
similar to that of the public press.
d. Banks, non-bank financial intermediaries performing quasi-banking functions
 e. Other non-bank financial intermediaries (including pawnshops as clarified under Revenue
Regulations [RR] No. 10 – 2004)
f. Person, company or corporation (except purely cooperative companies or associations)
doing life insurance business in the Philippines
g. Fire, marine or miscellaneous agents of foreign insurance companies
h. Proprietor, lessee or operator of cockpits, cabarets, night or day clubs, boxing exhibitions,
professional basketball games, Jai-Alai and racetracks, including videoke bars, karaoke
bars, karaoke televisions, karaoke boxes and music lounges as clarified under Revenue
Memorandum Circular (RMC) No. 18 – 2010
i. Winnings or 'dividends' in horse races

Tax base: Gross quarterly sales or receipt

Tax rate: 3%

Transactions covered☹carrier’s tax;

1. Sale of goods or services of persons VAT EXEMPT (Non vat reg whose gross annual sales or
receipts do not exceed 3m)
2. Other kinds of business, regardless of 3m threshold
a. Domestic carriers by land and keepers of garages(3%)
b. International carriers
c. Franchise guarantees
d. Overseas dispatch, message or conversation originating from the Philippines(10% on amt
paid)
e. Banks and non bank financial intermediaries
f. Other non banking financial intermediaries(5% on gr
g. Life insurance companies(2% on total premiums colelcted
h. Agents of foreign insurance companies(5% on premiums paid)
i. Proprietors of amusement places(18% for cockpits and clubs; 10% boxing exhibitions; 15%
prof. basketball games; 30% jai alai and race tracks
j. Winnings(10%
k. Sale, barter or exchange of shares of stock listed and traded through local stock exchange or
through IPO(if listed ½ of 1%; IPO,

Exempt from 3% gross receipts tax: cooperatives and self-employed individuals and professionals with
total annual GS/GR not exceeding 500K

Percentage tax on transactions involving shares of stock; entities covered tax base;tax rate

Date of filing/payment: 25d after each taxable quarter

GR: quarterly

E: tax on overseas dispatch, amusement tax, winnings and tax on sale/shares

When return filed&paid: not later than 20 th day following the end of each month; 5 days later than
deadline set for those under EFPS

First planters v CIR: BIR informed first planters about a deficiency on its VAT and DSY liabilities for 2000.
Protested. FAN received. BIR denied protest. CTA upheld the deficiency assessment. W subject to PT
beginning 2004 up to the present, by virtue of R.A. No. 9238? Yes: Since petitioner is a non-bank
financial intermediary, it is subject to 10% VAT for the tax years 1996 to 2002; however, with the levy,
assessment and collection of VAT from non-bank financial intermediaries being specifically deferred by
law, then petitioner is not liable for VAT during these tax years. But with the full implementation of the
VAT system on non-bank financial intermediaries starting January 1, 2003, petitioner is liable for 10%
VAT for said tax year. And beginning 2004 up to the present, by virtue of R.A. No. 9238, petitioner is no
longer liable for VAT but it is subject to percentage tax on gross receipts from 0% to 5 %, as the case may
be.

CIR v San Lhuillier Pawnshop: CIR issued RMO imposing 5% lending investor’s tax on pawnshops.
Lhuillier filed a protest against assessment notice contending that (1) neither the Tax Code nor the VAT
Law expressly imposes 5% percentage tax on the gross income of pawnshops; (2) pawnshops are
different from lending investors. W subject to 5%? NO. While it is true that pawnshops are engaged in
the business of lending money, they are not considered "lending investors" for the purpose of imposing
the 5% percentage taxes. Under Section 157(u) of the NIRC of 1986, as amended, the term lending
investor includes "all persons who make a practice of lending money for themselves or others at
interest." A pawnshop, on the other hand, is defined under Section 3 of P.D. No. 114 as "a person or
entity engaged in the business of lending money on personal property delivered as security for loans
and shall be synonymous, and may be used interchangeably, with pawnbroker or pawn brokerage."

Gulf Air v CIR: GF also made a claim for refund of percentage taxes for the first, second and fourth
quarters of 2000 CTA En banc dismissed. It found that Revenue Regulations No. 6-66 was the applicable
rule because the period involved in the assessment covered the first, second and fourth quarters of
2000 and the amended percentage tax returns were filed on October 25, 2001W definition of “gross
receipts” should include special commissions on passengers and on cargo for purposes of computing
pt on international carriers? YES While the petitioners interpretation has been vindicated by the new
rules which compute gross revenues based on the actual amount received by the airline company as
reflected on the plane ticket, this does not change the fact that during the relevant taxable period
involved in this case, it was Revenue Regulations No. 6-66 that was in effect.

EXCISE TAX
Definition: taxes applicable to certain specified goods or articles manufactured or produced in the
Philippines for domestic sale or consumption or for any other disposition and to things imported into
the Philippines

Nature:

a. tax on production (collected only from manufacturers or producers);

b. indirect tax(directly levied upon manufacturers or importer upon removal of the taxable goods
from its place of production or from the customs custody HOWEVER may be actually passed on
to the end consumer as part of the transfer value or selling price of goods sold, bartered or
exchanged);
c. taxes on property( imposed directly on certain specified goods)
d. not a business tax accdg to petron case

PETRON CORP. V. TIANGCO: Petron is engaged in the selling of diesel fuels for vessels used in
commercial fishing. Navotas Mayor Tiangco assessed business taxes for the sale of diesel. Petron
protested alleging that it was exempt from local business taxes because it is an excise tax. W sale of
diesel partakes Of an excise tax? NO, excise tax(property tax) is different from business tax. Petron is
still exempt since the law does not distinguish on whether tax exempted is business or excise.

same as excise/privilege tax(imposed on the enjoyment of a privilege, exercise of profession)? NO

Purpose: to discourage the sale of goods that the government thinks are harmful to the public health
like cigarettes, alcohol, and high-pollutant gasoline. It is a way to make money off of the sale of these
things.

Transactions covered:

PERSONS LIABLE TO EXCISE TAX:

In General:
a. On Domestic or Local Articles


Manufacturer

Producer

Owner or person having possession of articles removed from the place of

production without the payment of the tax
b. On Imported Articles


 Importer
 Owner
 Person who is found in possession of articles which are exempt from
excise taxes other than those legally entitled to exemption
Others:
On Indigenous Petroleum
 

 Local Sale, Barter or Transfer
o
o First buyer, purchaser or transferee
 Exportation
o
o Owner, lessee, concessionaire or operator of the mining claim
TIME OF PAYMENT:

CIR V PILIPINAS SHELL: Pilipinas Shell is engaged in the business of processing, treating and refining
petroleum. It filed claim for refund representing excise taxes claiming that since it was sold to
international carriers, it is exempted. Inaction of CIR, CTA div entitled to refund, CTA En banc upheld. W
Pilipinas Shell as manufacturer is exempt since it was sold to international carriers. YES.
Excise tax on aviation fuel used for international flights is practically nil as most countries are
signatories to the 1944 Chicago Convention on International Aviation (Chicago Convention). Article
249 of the Convention has been interpreted to prohibit taxation of aircraft fuel consumed for
international transport.
The rationale for exemption of fuel from national and local taxes was expressed by ICAO as follows:
To recognize the uniqueness of civil aviation and the need to accord tax exempt status to certain
aspects of the operations of international air transport and were adopted because multiple taxation
on the aircraft, fuel, technical supplies and the income of international air transport, as well as taxes
on its sale and use, were considered as major obstacles to the further development of international
air transport.

Types:

1. Specific-based on weight or volume capacity or any other physical unit of measurement

(alcohol, tobacco products, petroleum); and
2. Ad Valorem-based on SP or other specified value of the goods (automobiles, non-essential
goods like jewelry and perfume)

Units of measurement: Volume, Length, Number, Weight

Tax basis: Net manufacturer’s price/Importer’s SP

Tax computation

Automobiles:
Petroleum products:

Sweetened beverages:

P6.00 per liter of volume capacity on using purely caloric sweeteners

P12.00 per liter of volume capacity on sweetened beverages using purely high fructose corn syrup

EXEMPT: sweetened beverages using purely coconut sap sugar and purely steviol glycosides

EXCLUDED: milk products, meal replacements, ground coffee, instant coffee, 100% natural veg/fruit
juice

Cigarettes:
Mineral products:

Classification of excisable articles:

Articles subject to excise taxes: ATP-M2

1. Alcohol products
a. Distilled spirits and preparations of which distilled spirits form the chief ingredients(both)
b. Wines (both)
c. Fermented liquors(ST)
2. Tobacco products
a. Products of tobacco(ST)
b. Cigars
c. Cigarettes(ST)
3. Petroleum products
a. Lubricating oils, greases
 b. Processed gas
c. Waxes and petrolatum
d. Denatured alcohol for motive power
e. Napta, regular gasoline, and other similar products of distillation
4. Miscellaneous articles
a. Automobiles
b. Certain non essential goods jewelry, pefume)
5. Mineral products
a. Coal and coke (ST)
b. Non-metallic minerals and quarry resources (AV)
c. Metallic minerals (AV)
d. Indigenous petroleum

Entities liable, Who pays?

a. For manufactured goods, GR: the manufacturer or producer E: if removed from place of
production without paying the tax, owner or person having possession
b. For imported goods, GR: the importer or the owner E: if tax-free articles are brought or
imported by persons exempt from tax which are then sold to non-exempt persons, the
purchasers

CHEVRON PHILS v. CIR: Cehvron soled petroleum products to Clark Dev. Corp. CDC is exempted, so
Chevron filed a claim for refund. CTA div denied ruling that under Sec135 shifting the burden of excise
tax to tax exept entites who buys petroleum products from manufacturer/seller is prohibited. W there is
prohibition of such and therefore Chevron is entitled to refund. YES, petroleum products sold to tax-
exempt entities, are exempted. Exemption cannot be granted to buyers like CDC because they are not
liable to pay the excise tax. Prior to the sale to CDC, Chevron was not exempted but once it was sold to
cuh it became exempted and therefore may be refunded.

Date of filing/payment:

a) For locally manufactured goods, PRIOR to removal of the article from the place of production
b) For imported goods, pay prior to the release of the article from customs custody
DOCUMENTARY STAMP TAX

Definition: a tax on documents, instruments and papers evidencing the acceptance, assignment, sale or
transfer of an obligation, right or property incident thereto.
 a tax on documents, instruments, loan agreements and papers evidencing the acceptance, assignment, sale or
transfer of an obligation, right or property incident thereto

Nature:

a. Excise/privilege tax (levied on the exercise of persons of certain privileges conferred by law for
the creation, revision or termination of specific legal relationships through the execution of
specific instruments) like lease, mortgages, pledges ans trusts and conveyances of real property
b. NOT A TAX ON THE BUSINESS TRANSACTED BUT ON PRIVILEGE
c. It is an indirect tax, thus, it can be passed on to the buyer.

PHIL. HOME ASSURANCE V CA: Petitioners are engaged in the insurance business. They paid DST under
protest alleging that the premiums on the policies had not been paid and therefore, dst were not yet
due. Inaction of BIR; CTA denied claim for refund and CA affirmed. W Petitioners were liable despite
non payment of premiums. YES. The dst must be paid upon issuance regardless of the status of the
contract which gave rise to them. Such non-payment does not affect liability for payment of dst. Why?
Cause what is levied is not the contract which gave rise from the instrument but the privilege as to legal
relationships.

Purpose: evidencing the acceptance, assignment, sale or transfer of an obligation, rights, or property
incident thereto(?)

Who are liable:

- Any person(masit) making, signing, issuing accepting or transferring the document

- Any of the parties provided that said parties may agree on who shall be liable. If one of the
parties are exempted the non-exempt party shall be the one liable

How?

When DS stamped: Once taxable document is issued/executed or signed by the parties or within 24
hours from the time the act is done or transaction had

When filing of return and paid: filed and paid within five (5) days after the close of the month when the
document was made, signed, issued or accepted (upon ISSUANCE of the said instruments, without
regard to W the contracts which give rise to them are void, voidable, rescissible or unenforceable)

How paid: upon filing of return

Documentary Requirements
Mandatory
1. Photocopy of the document to which the documentary stamp shall be affixed
2. Proof of exemption under special laws, if applicable;
 3. Proof of payment of documentary stamp tax paid upon the original issue of the
stock, if applicable.

Failure to pay DST:

Effect: will NOT affect validity of the instrument

Legal implications:

a. instrument, doc or paper shall NOT BE RECORDED, nor shall it be admitted or used in evidence in
any court until the required stamp or stamps are affixed.
b. Notary public is not allowed to add his jurat or acknowledgement to the document

PHILACOR CREDIT CORP V CIR: Philacor is engaged in the business of retail financing(prospective buyer
of home appliance with neither cash or credit card may purchase appliances on installment basis from
an appliance dealer). It conducts credit investigation and approved buyer’s application then buyer
executes a unilateral PN in favor of the appliance dealer. The same promissory note is subsequently
assigned by the appliance dealer to Philacor.BIR assessed deficiency dst. It protested alleging that
such is not taxed. CTA div sustained the deficiency dst. CTA en banc affirmed. W Philacor is liable for
DST on the assignment of PN. NO, no provision to specifically impose dst on such Tax Code implies
that an assignment or transfer becomes taxable only in connection with mortgages, leases and
policies of insurance. The list does not include the assignment or transfer of evidences of
indebtedness; rather, it is the renewal of these that is taxable.

PB COMMUNICATIONS V CIR: PB Com was authorized by BIR to use a DS Metering machine. It

purchased ds from BIR and loaded them to the machine, it executed repurchase agreements and were
imprinted. It filed a claim for tax credit. CIR inaction; CTA denied on the ground of prescription counting
from date of payment. W the reckoning period should be on the date of imprinting the ds? YES. The
payment of DST upon loading/reloading of the machine is not considered as “date of payment” since it
merely an advanced payment for future application.