Percentage Tax

11/30/2023
Percentage
Taxes
K A R T V I C TO R L AG U S TA N
01 D E C E M B E R 2 0 2 3
Agenda
 Definition of Percentage Tax
 Transactions Subject to Percentage Taxes
 8% Preferential Rate
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Percentage Tax
 It is a tax imposed on sale, barter, or exchange of goods, or sales of services
based upon gross sales, value in money of receipts derived by the
manufacturer, producer, or seller measured by certain percentage of the
gross selling price or receipts.
(Title V, National Internal Revenue Code, as amended)
Kinds of Percentage Taxes

1. Tax on person exempt from value-added tax (Sec. 7. Tax on other non-bank financial intermediaries (Sec.
116) 122)
2. Percentage tax on domestic carriers and keepers of 8. Tax on life insurance premiums (Sec. 123)
garages (Sec. 117)
9. Tax on agents of foreign insurance companies (Sec.
3. Percentage tax on international carriers (Sec. 118) 124)
4. Tax on franchises (Sec. 119) 10. Amusement Tax (Sec. 125)
5. Tax on overseas dispatch, message, or conversation 11. Percentage Tax on POGOs (Sec. 125-A)
originating from the Philippines (Sec. 120)
12. Tax on winning (Sec. 126)
6. Tax on banks and non-bank financial intermediaries
13. Tax on sale, barter, or exchange of shares of stock
(Sec. 121)
listed and traded through the local stock exchange
(Sec. 127)
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Tax on Person Exempt from

Value-Added Tax (Sec. 116)
 Liable Persons:
1. Not a VAT-registered person whose annual gross sales/ receipts do not
exceed PhP 3 million
2. Persons who lease residential units where monthly rental per unit
exceeds PhP 15,000 but the aggregate of such rental of the lessor
during the year does not exceed PhP 3 million

 Exempt Persons:
1. Cooperatives
2. Self-employed individuals and professionals availing the 8%
Preferential Rate
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 Requisites:
1. Not VAT-registered person
2. Annual gross sales/ receipts do not exceed PhP 3 million
3. Not exempt from VAT [Sec. 109(1)(A) to (1)(BB), NIRC (as amended)]

 Tax Base:
1. Sale of Goods: Gross Sales
2. Sale of Services: Gross Receipts
 Formula:
Tax Base x Percentage Tax Rate1 = Percentage Tax
1Prior to July 1, 2020 – 3%; From July 1, 2020 to June 30, 2023 – 1%; Beg July 1, 2023 – 3%
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Percentage Tax on Domestic Carriers

and Keepers of Garages (Sec. 117)
 Common Carriers – refers to the persons, corporations, firms, or
associations engaged in the business of carrying or transporting passengers
or goods, or both by land for compensation, offering their services to the
public, and shall include transportation contractors.
 Common Carriers Tax (CCT) at 3% – pertains to percentage taxes of
domestic common carriers by land for the transport of passengers only.

 Liable Persons:
1. Cars for rent (rent-a-car business) or for hire driven by the lessee
2. Transportation contractors (including tourist buses for hire)
3. Other domestic carriers by land for transport of passengers
4. Keepers of garages
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Types of Business Taxes
Kind of Transportation
Domestic Carriers Applicable
By Land Persons Percentage Tax (CCT)
By Land Cargo/ Goods VAT or Percentage Tax
By Air Persons, Cargo/ Goods VAT or Percentage Tax
By Sea Persons, Cargo/ Goods VAT or Percentage Tax
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 Exempt Persons:
1. Owners of bancas
2. Animal drawn two-wheeled vehicles
 Gross receipts of common carriers derived from their incoming and outgoing
freight shall not be subject to local taxes under the Local Government Code
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 Tax Base (whichever is higher):
1. Actual Gross Receipts; or
2. Minimum Gross Receipts
 Formula:
Tax Base x CCT Rate of 3% = Percentage Tax (Common Carriers Tax)
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 Minimum monthly/ quarterly gross receipts per unit carrier:
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Percentage Tax on International

Carriers (Sec. 118)
 PRELIM EXAM QUESTION:
What is the tax base for common carrier’s tax on International Carriers?
A. Gross sales on goods
B. Gross receipts on goods
C. Gross receipts on transport of goods
D. Gross receipts on transport of passengers
ANSWER: C. Gross receipts on transport of goods
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Carriers (Sec. 118)
 Liable Persons:
1. International Air Carriers doing business in the Philippines on their
gross receipts from cargo transport to another country
2. International Shipping Carriers doing business in the Philippines on
their gross receipts from cargo transport to another country
 International carriers – refer to foreign international air carriers and shipping
carriers doing business in the Philippines (resident foreign corporations)
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Carriers (Sec. 118)
 Tax Base:
Gross Receipts – sum of amount from cargo and/ or mail transport
originating from the Philippines in a continuous and uninterrupted flight
 Formula:
Gross Receipts x CCT Rate of 3% = Percentage Tax (Common Carriers Tax)
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Carriers (Sec. 118)
Airline/ Shipping Company Business Taxes Applicable
Domestic Corporation VAT or Percentage Tax
Resident Foreign Corporation Percentage Tax (CCT)
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Tax on Franchises (Sec. 119)

 PRELIM EXAM QUESTION:
Which of the following companies are subject to 3% Franchise Tax?

A. Velarde Gas and Utilities Corp, a non-VAT registered company, with annual gross receipts of PhP 2
million
B. Laurente Radio Broadcasting Co., a VAT-registered company, with annual gross receipts of PhP 15
million
C. Velasco Television Network Co., a non-VAT registered company, with annual gross receipts of PhP 10.5
million
D. Lagustan Media Broadcasting System Corporation, a non-VAT registered company, with annual PhP 2.5
million
ANSWER: D. Lagustan Media Broadcasting System Corporation, a non-VAT registered company, with annual
PhP 2.5 million
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 Liable Persons:
1. Franchises on Gas and Water Utilities
2. Franchises on Radio and/ or Television Broadcasting Companies
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 Requisites:
1. Not VAT-registered person
2. Annual gross receipts of the preceding year do not exceed PhP 10
million1
1Radio and/ or Television Broadcasting Companies shall have an option to

register and pay for VAT; such option is irrevocable
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 Tax Base:
Gross Receipts
 Formula:
Gross Receipts x Percentage Tax Rate1 = Percentage Tax (Franchise Tax)
1Gas and Water – 2%; Radio and/ or Television Broadcasting Companies – 3%
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Tax on Overseas Dispatch, Message, or

Conversation Originating from the Philippines
(Sec. 120)
 PRELIM EXAMS QUESTION:
Requisites for Overseas Communications Tax are as follows, except:
A. It originated from the Philippines.
B. It is done by an international organization residing in the Philippines.
C. There is an overseas dispatch, message, or conversation.
D. It was made thru a telephone, telegraph, telewriter exchange, wireless and
other communication equipment.
ANSWER: B. It is done by an international organization residing in the Philippines.
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(Sec. 120)
 Liable Person:
The Caller
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(Sec. 120)
 Requisites:
1. There is an overseas dispatch, message, or conversation
2. It originated from the Philippines
3. It was made thru a telephone, telegraph, telewriter exchange, wireless,
and other communication equipment
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(Sec. 120)
 Exempt Persons:
1. Diplomatic Services
2. International Organizations
3. News Services
4. Government
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(Sec. 120)
 Tax Base:
Payment for Services
 Formula:
Payment for Services x Percentage Tax Rate of 10% = Percentage Tax
(Overseas Communications Tax)
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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 kinds of income, except:
A. Interest from lending activities and financial leasing
B. Dividends and equity shares and net income of subsidiaries
C. Royalty income
D. Net trading gains from previous taxable year on debts securities
ANSWER: D. Net trading gains from “previous” taxable year on debts securities
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 BANKS and BANKING INSTITUTIONS
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 NON-BANK FINANCIAL INTERMEDIARIES
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 NON-BANK FINANCIAL INTERMEDIARIES
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 Computation of Net Trading Gain
The net trading gain within the taxable year figure shall be the
cumulative total of the net trading gain or loss since the first months of the
same taxable years.
The net trading loss may only be deducted from the net trading gain,
but not from any other items of gross receipt to arrive at the total monthly
gross receipts due
Revenue Regulations No. 8-2008
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Tax on Other Non-Bank Financial

Intermediaries (Sec. 122)
Which of the following remaining maturity period of instruments is subject to 1% tax
rate under Section 122 of the National Internal Revenue Code?
A. 6 years
B. 5 years
C. 4 years
D. 3 years
ANSWER: A. 6 years
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 Money Changers – subject to Gross Receipts Tax under Section 121
 Pawnshops – subject to Gross Receipts Tax under Section 122
Source: Section 4.109-1 (B)(w), Revenue Regulations No. 4-2007
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Tax on Life Insurance Premiums

(Sec. 123)
What is the rate of tax on life insurance premiums?
A. 2%
B. 3%
C. 4%
D. 5%
ANSWER: A. 2%
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(Sec. 123)
 Tax Base:
Premiums Collected
 Formula:
Premiums Collected x Rate of 2% = Percentage Tax (Premiums Tax)
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(Sec. 123)
 EXEMPT FROM PREMIUMS TAX
1. Premiums refunded with six months after payment on account of rejection of risk or returned for
other reasons to the insured.
2. Reinsurance premiums where tax has previously been paid.
3. 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.
4. Premiums collected or received on account of RE-INSURANCE, 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.
5. 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.
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Tax on Agents of Foreign Insurance

Companies (Sec. 124)
Person/s liable for tax on agents of foreign insurance companies is/ are:
A. Fire, marine, or miscellaneous agents of non-resident foreign corporations
engaged in insurance business.
B. Owners of property directly obtaining insurance from non-resident foreign
corporations engaged in insurance business.
C. Both A and B.
D. Neither A nor B.
ANSWER: C. Both A and B.
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AGENTS OF NRFC ENGAGED IN INSURANCE BUSINESS
 Tax Base:
Premiums Collected
 Formula:
Premiums Collected x Rate of 4%* = Percentage Tax (Premiums Tax)
*twice the tax rate imposed in Section 123 (i.e., 2%)
41

OWNERS OF PROPERTY DIRECTLY OBTAINING INSURANCE FROM NRFC
ENGAGED IN INSURANCE BUSINESS
 Tax Base:
Premiums Payments
 Formula:
Premiums Payments x Rate of 5%* = Percentage Tax (Premiums Tax)
*higher rate as they are the direct owners
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Tax on Amusement Taxes (Sec. 125)

 Liable Persons:
Proprietor, lessee, or operator of cockpits, cabarets, night or day clubs,

boxing exhibitions, professional basketball games, Jai-alai, and racetracks
43

 Tax Base:
Gross Receipts – embraces all the receipts (such as from television, radio,
and motion picture rights, if any) of the proprietor, lessee or operator of the
amusement places
 Formula:
Gross Receipts X Rate Applicable* = Percentage Tax (Amusement Tax)
*depending on the amusement places/ types
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Which of the following amusement places/ events has the highest amusement
tax rate?
A. Jai-alia and racetracks
B. Cockpits, cabarets, night, or day clubs
C. Professional basketball games
D. Boxing exhibitions
ANSWER: A. Jai-alia and racetracks
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AMUSEMENT TAX RATES
Amusement Places/ Types Amusement Tax Rate

Jai-alai and Racetracks 30%
Cockpits, Cabarets, Night/ Day Clubs 18%
Professional Basketball Games 15%
Boxing Exhibitions 0%* or 10%
*there are certain boxing exhibitions that are exempted from Amusement Taxes
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REQUISITES FOR EXEMPTION OF BOXING EXHIBITIONS:
1. World or Oriental Championships is at stake;

2. One of the contenders is a citizen of the Philippines; AND
3. Promoted by citizens of the Philippines or by a corporation or association
at least 60% of the capital of which is owned by such citizens.
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Tax on POGOs (Sec. 125-A)

POGOs are subject to what type of percentage tax??
A. Casino Tax
B. Carriers Tax
C. Gaming Tax
D. Franchise Tax
ANSWER: C. Gaming Tax
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 Philippine Offshore Gaming Operations (POGOs)
- operation by an Offshore Gaming Licensee (OGL) on online games of
chance or sporting events via the internet using a network or software
or program exclusively for offshore customers/ players who are non-
Filipinos
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 Tax Base (whichever is higher):
1. Gross Gaming Revenue – gross wager less payouts of offshore gaming
customers
2. Agreed Pre-determined Minimum Monthly Revenue (APMMR) – minimum
monthly fee or equivalent (imposed by POGO Licensing Authority) divided
by the rate of prescribed regulatory fee
 Formula:
Tax Base X Gaming Tax Rate of 5% = Percentage Tax (Gaming Tax)
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PAYMENT OF GAMING TAX
Such Gaming Tax shall be directly remitted to the BIR not later than
20th day following the end of each month
INCOME FROM NON-GAMING OPERATIONS

Other income or earnings realized or derived by OGLs that are not
income from gaming operations shall be subject to VALUE-ADDED TAX
or PERCENTAGE TAX, as applicable
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Tax on Winnings (Sec. 126)

Statement A. Ordinary winnings have higher tax rate on winnings as compared to special winnings.
Statement B. Owners of losing horse in horse races are subject to percentage tax.
A. False, True
B. True, False
C. True, True
D. False, False
ANSWER: B. True, False (“losing”)
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 Liable Persons:
1. Owners of the winning horse; and

2. Bettor in a horse race or Jai-alai
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 Tax Base:
Prize/ Winnings
 Formula:
Prize/ Winnings X Winnings Tax Rate* = Percentage Tax (Tax on Winnings)
*depending on the type of taxpayer and winnings
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TAX RATES ON WINNINGS
Taxpayer Winnings From Rates Basis

Bettor Regular Bet Winnings or dividends
10%
less cost of ticket
Bettor Double, Forecast/ Winnings or dividends
Quinella, Trifecta Bets 4%
less cost of ticket
Horse Owners 10% Gross Winnings
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Tax on Sale, Barter or Exchange of Shares of Stock

Listed and Traded through the Local Stock Exchange
(Sec. 127)

Exchange of shares of stock listed and traded through local stock exchange is subject to.
A. Exchange Tax
B. Franchise Tax
C. Local Income Tax
D. Stock Transaction Tax
ANSWER: D. Stock Transaction Tax
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(Sec. 127)
 Kinds of Stock Transaction Tax

1. Tax on Sale, Barter, or Exchange of Shares of Stock Listed
and Traded through the Local Stock Exchange (“LSE”)
2. Tax on Shares of Stock Sold or Exchanged through Initial
Public Offering (“IPO”) - Repealed under Section 6 of
Republic Act No. 11494, otherwise known as the
"Bayanihan to Recover As One Act."
57

(Sec. 127)
TAX ON SALE, BARTER, OR EXCHANGE OF SHARES OF STOCK

LISTED AND TRADED THROUGH LSE
 REQUISITES:
1. Seller is NOT a dealer in securities; and
2. Shares sold is listed and traded through the local stock
exchange
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or through Initial Public Offering (Sec. 127)
TAX ON SALE, BARTER, OR EXCHANGE OF SHARES OF STOCK

LISTED AND TRADED THROUGH LSC
 Tax Base:
Gross Selling Price
 Formula:
Gross Selling Price X Rate of 0.006* = Stock Transaction Tax
*6/10 of 1%
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Percentage Tax
Filing of Returns and Payments
 Persons Liable to Pay Percentage Taxes
Within 25 days after the end of each taxable quarter
 Person Retiring from Business

Within 20 days after closing his business
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Thank You
K A R T V I C TO R L AG U S TA N
01 D E C E M B E R 2 0 2 3
61
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Percentage Tax

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11/30/2023

Kinds of Percentage Taxes

4. Tax on franchises (Sec. 119) 10. Amusement Tax (Sec. 125)

Tax on Person Exempt from

Tax on Person Exempt from

Tax on Person Exempt from

Tax on Person Exempt from

Percentage Tax on Domestic Carriers

Percentage Tax on Domestic Carriers

Percentage Tax on Domestic Carriers

By Land Cargo/ Goods VAT or Percentage Tax

By Air Persons, Cargo/ Goods VAT or Percentage Tax

By Sea Persons, Cargo/ Goods VAT or Percentage Tax

Percentage Tax on Domestic Carriers

Percentage Tax on Domestic Carriers

Percentage Tax on Domestic Carriers

Percentage Tax on International

ANSWER: C. Gross receipts on transport of goods

Percentage Tax on International

Percentage Tax on International

Percentage Tax on International

Airline/ Shipping Company Business Taxes Applicable

Domestic Corporation VAT or Percentage Tax

Resident Foreign Corporation Percentage Tax (CCT)

Tax on Franchises (Sec. 119)

Which of the following companies are subject to 3% Franchise Tax?

Tax on Franchises (Sec. 119)

Tax on Franchises (Sec. 119)

1Radio and/ or Television Broadcasting Companies shall have an option to

Tax on Franchises (Sec. 119)

Tax on Overseas Dispatch, Message, or

ANSWER: B. It is done by an international organization residing in the Philippines.

Tax on Overseas Dispatch, Message, or

Tax on Overseas Dispatch, Message, or

Tax on Overseas Dispatch, Message, or

Tax on Overseas Dispatch, Message, or

Tax on Banks and Non-Bank Financial

Tax on Banks and Non-Bank Financial

Tax on Banks and Non-Bank Financial

Tax on Banks and Non-Bank Financial

Tax on Banks and Non-Bank Financial

Tax on Banks and Non-Bank Financial

Tax on Other Non-Bank Financial

Tax on Other Non-Bank Financial

Tax on Other Non-Bank Financial

 Pawnshops – subject to Gross Receipts Tax under Section 122

Source: Section 4.109-1 (B)(w), Revenue Regulations No. 4-2007

Tax on Life Insurance Premiums

Tax on Life Insurance Premiums

Tax on Life Insurance Premiums

2. Reinsurance premiums where tax has previously been paid.

4. Premiums collected or received on account of RE-INSURANCE, if the insured, in case of personal

Tax on Agents of Foreign Insurance

ANSWER: C. Both A and B.

Tax on Agents of Foreign Insurance

*twice the tax rate imposed in Section 123 (i.e., 2%)

Tax on Agents of Foreign Insurance

*higher rate as they are the direct owners

Tax on Amusement Taxes (Sec. 125)

Proprietor, lessee, or operator of cockpits, cabarets, night or day clubs,

Tax on Amusement Taxes (Sec. 125)

Tax on Amusement Taxes (Sec. 125)