PERCENTAGE

TAX
After this Chapter readers
are expected to master:
• The scope of the 3% general percentage tax
• The list of services specifically subject to
percentage tax
• The various tax rates and exceptions on
services specifically subject to percentage
tax
Percentage Tax
• It is a national tax measured by a certain
percentage of the GSP or gross value in money
of goods sold or bartered; or of the gross
receipts or earnings derived by any person
engaged in the sale o services.
 The Scope of the Percentage Tax
Coverage Type of % tax Tax rates
1. Services specifically Specific % tax Various Tax Rates
subject to percentage
tax
2. Sales of goods or General % tax 3% percentage tax
other services not
exempted
 Who pays percentage tax?
Type of Percentage VAT Registered Non-VAT taxpayers
Tax Taxpayers

Specific percentage
tax / /
General percentage
tax x /
Non Vat taxpayers are those who did not exceed the
VAT threshold and who did not register as VAT taxpayers
 Services
YOU Specifica
DO
lly
NOTE
THE
Subject
BICAP to
FLOW! Percentag
Tax on Banks and non-
bank financial
Intermediaries
Performing Quasi-
Banking Functions
• Banks
• Entities engaged in the lending of funds obtained in
the form of deposits
• Includes Cooperative and Islamic banks and others

• Non-Bank Financial Intermediaries

◦ Persons or entities whose principal function include
the lending, investing or placement of funds or
evidences of indebtedness
• Quasi- Banking Function
• Borrowing of funds from twenty or more personal
or corporate or corporate lenders at anyone time,
through the issuance, endorsement or acceptance
of debt instruments of any kind, other than
deposits
Tax Rates on Bank and Quasi-
banks
Source of Income or receipt % Tax Rate
1. Interest income, commissions and discounts from lending activities,
and income from financial leasing, on the basis of remaining
maturities of instruments from which the receipts were derived:

a. Maturity of period of five years or less 5%

b. Maturity period of more than five years 1%
2. Dividend and equity shares in the net income of subsidiaries 0%
3. On royalties, rentals of property 7%
4. On net trading gains within the taxable year on foreign currency,
debt securities, derivatives 7%
Gross Income
• Items referred to in Section 32 of the NIRC include
only those items of gross income subject to regular
income tax.
• Net trading gains within the taxable year on foreign
currencies, debts, securities, derivatives, and other
financial instruments
• RR4-2009, the figure to be reported in the monthly
percentage tax return shall be the cumulative total
of the net trading gain/loss
Tax on Other Financial
Intermediaries Without
Quasi-Banking Functions
Source of Incomeor receipt % Tax Rate
1. Interest income, commsions and discounts from lending activities,
and income from financial leasing, on the basis of remaining
maturities of instruments from which the receipts were derived:
a. Maturity period is five years or less 5%
b. Maturity period is more than five years 1%
2. From all other items treated as gross income under the NIRC 5%
Common Rules for Banks,
Quasi-banks and Other
Financial Institutions
1. Accounting rules
2. Finance lease and operating lease
3. Pre-termination of instruments
Percentage Tax
on International
Carriers
 2 types International Carriers
◦ Air Carriers
◦ Shipping Carriers

• International Carriers
• Air Carriers/ Sea Carriers owned by foreign
corporation that operate in the Philippines
 International Operations
Type of Domestic
carriers Operation Outgoing Incoming
Domestic
12% VAT 0%VAT Exempt
carrier
International
carrier
-Passengers N/A Exempt Exempt

-Goods, mails, Exempt

or cargoes N/A 3% OPT
 Table of Comparison:
Tax Rules Outgoing
flight or voyage
Sea or air carriers owned by
Domestic Corporation Foreign Corporation
Passengers Vatable Exempt
Cargoes/ Vatable 3% percentage tax
Baggages
Percentage Tax on
Domestic (Common)
Carrier and Keepers of
Garage
 Common Carrier
• Any person, corporation, firm, or
association engaged in the business of
carrying of carrying or transporting
passenger or goods or both, by land,
water, or air for compensation, and
offering their services to the public.
The following table summarizes the rules on the
common carrier.

Mode of Tran Passengers Baggage/Mails/

Cargoes
By land 3% percentage tax Vatable
By water or sea Vatable Vatable
By air Vatable Vatable
Common Carrier Tax
• Under the NIRC, the 3% percentage tax is
due quarterly upon the gross receipts of
common on their transport of passengers
by land. This is called the “Common
Carrier’s tax”. In practice, this quarterly tax
is paid in three monthly payments.
 Minimum presumptive gross receipts for common carriers and
keepers of garage
Quarterly Monthly
Jeepney for hire:
Manila and other cities P 2 400 P 800
Provincial 1 200 400
Public Utility Bus:
Not exceeding 30 passengers 3 600 1 200
Exceeding 30 but not 50 6 000 2 000
Exceeding 50 passenger 7 200 2 400
Taxis:

Manila and other cities 3 600 1 200

Provincial 2 400 800
Car for hire:
With chauffer 3 000 1 000
Without chauffer 1 800 600
Exemption to the common
carrier tax
• Owners of bancas
• Animal- drawn two-wheeled vehicles
• Pedicabs (Business for mere substinence)
Amusement Taxes
Proprietor, lessee or operator of the
following amusement places shall pay
the following respective tax rates on
their quarterly gross receipts.
Places of boxing exhibition 10%
Places of professional basketball 15%
games
Cockpits, cabarets, night or day clubs 18%
Jai-alai and race tracks 30%
Exempt receipts on
professional boxing
1. World Oriental Championship
2. At least one of the contender is a Filipino
citizen
3. The promoter is a Filipino citizen or a
corporation 60% of which is owned by
Filipinos Citizen.
Brokers in
effecting sales
of stocks
through the
Philippine Stock
Exchange and
corporations or
shareholders on
SUMMARY OF RULES ON SALES
OF STOCKS
Sales made Before IPO During IPO After IPO
by:
Corporate No tax IPO tax as No tax
Issuer primary offer

Shareholder Capital Gains IPO tax as Stock

Investor Tax secondary Transaction
offer Tax
 IPO TAX
Proportion of shares sold, Tax Rate
bartered or exchanged
Up to 25% 4%

Over 25% but not over 33 1/3% 2%

Over 33 1/3% 1%
 IPO TAX
Primary Offering = Primary Shares / Outstanding
shares after IPO

Secondary Offering = Secondary Shares

/Outstanding Shares before IPO

Follow Through Offering = No IPO tax

STOCK TRANSACTION TAX
60% of 1% based on gross selling price or
gross value in money
Certain Franchise
Grantees
*Vatable Franchises
FRANCHISE TAX
FRANCHISE GRANTEES % TAX RATES
1. Radio or television broadcasting 3%
companies whose annual gross
receipts do not exceed P10M
2. Gas and water utilities 2%
Tax on Life
Insurance Premiums
A person, company, or corporation doing life insurance
business of any sort in the Philippines is subject to a tax
of

2%
on the premiums collected, whether such premium is
paid in money, notes, credits or any substitute for
money.
 A life insurance company is a company which deals
with the insurance on human lives and insurance
appertaining thereto and connected therein.

• Underwritten by life insurance companies – premiums

tax
• Underwritten by non-life insurance companies –
vatable
EXCLUDED FROM GROSS
RECEIPTS OF AN
INSURANCE COMPANIES:
• Premiums refunded within six (6) months
after payment on account for rejection of
risk or returned for other reasons.
• Re-insurance premiums
EXCLUDED FROM GROSS
RECEIPTS OF AN
INSURANCE COMPANIES:
• Premiums from life insurance of non-
residents received from abroad by branches
of domestic corporation, firm or association
doing business outside the Philippines.
EXCLUDED FROM GROSS
RECEIPTS OF AN
INSURANCE COMPANIES:
• Excess of premium on vatable contracts in
excess of the amount necessary to insure the
lives of the variable contract owners
 REASONS FOR
EXCLUSION:
• Refunded premiums are not receipts
• Premiums on life insurance of non-
residents purchased abroad constitute
an except foreign consumption
 REASONS FOR
EXCLUSION:
• Excess of variable contracts over the life
insurance premium represents
investments
 TYPES OF INSURANCE
BUSINESS
• Direct Insurance
- underwrites insurance policy and negotiates them
to policyholders through insurance agents.
- to minimize risks, insurers assign parts of their
insurance premiums to reinsurers who shall undertake
to assume part of the risks.
 TYPES OF INSURANCE
BUSINESS
• Reinsurers
- are thus insurers of insurers.

• Retrocessionaires
- are insurers of reinsurers.
 TAXATION OF OTHER
RECEIPTS OF LIFE
INSURANCE BUSINESS
1. Renewal or re-insurance fee, re-instatement
fee and penalties
- considered incidental to or connected to insurance
policy contracts and are similar to premium.

2% premium tax
 TAXATION OF OTHER
RECEIPTS OF LIFE
INSURANCE BUSINESS
2. Management fees, rental income, or other
income from unrelated services

Vatable
 TAXATION OF OTHER
RECEIPTS OF LIFE
INSURANCE BUSINESS
3. Investment Income
- If realized from the investment of premiums earned

Exempt
 TAXATION OF OTHER
RECEIPTS OF LIFE
INSURANCE BUSINESS
3. Investment Income
- If realized from investment of funds obtained from others, it
is considered as income from quasi-banking.

Gross Receipt Tax

Tax on Agents of Foreign
Insurance
Under Section 124 of NIRC
Fire, marine or miscellaneous insurance agents
authorized under the Insurance Code to procure
policies of insurance on risks located in the Philippines
for companies not authorized to transact business in
the Philippines are subject to a tax

Equal to twice the tax

imposed on life insurance premiums.
Under RA 10001
The tax on agents of foreign insurance is

4%
Direct insurance from abroad
• If property owners obtain insurance directly from abroad without the
services of an insurance agent, the tax shall be

5%
of the premium paid
Overseas Calls
Call Origin Call Destination Business Tax
Philippines Philippines 12% VAT
Abroad Philippines 0% VAT
Philippines Abroad 10% overseas
communication tax
Exemptions
• Government - any of its political subdivisions or
instrumentalities
• Diplomatic Services – embassies and consular offices
of foreign governments
• International Organizations – those enjoying
privileges, exemptions and immunities under
international agreements
• News Services
Amusement Betting/
Winnings
Winnings in horse race or jai alai, in 10%
general

Winnings from double, 4%

forecast/quinella and trifecta bets
Owners of winning race horses 10%
 Types of race winnings
Combination Bets (4%)
1. Double – selecting winners in two races
2. Daily double – bet to forecast the first winning horse in two
consecutive races
3. Forecast – bet to predict the first and second finisher of a particular
race
4. Exacta or Perfecta – bet to pick the two finishers in exact order
5. Quinella – be where at least the first two finishersmust be picked in
either order
6. Trifecta – bet to predict the first three in a race in exact order
 Straight wagers (10%)
1. Win - the selected horse must finish first
2. Place - the selected horse must come first or
second
3. Show – the selected horse must come first,
second or third
 The tax shall be deducted from the “dividend’
corresponding to each winning ticket or the
“prize” of each winning race horse owner and
withheld by the operator or person in charge of
the horse race before paying the dividends or
prizes to the person entitled to.

It shall be paid within 20 days from the date it

was withheld.
Thank you! 