Section 116-128

THE PERCENTAGE TAXES

Description Tax Basis Percentage
A. 3% percentage tax Gross sales/ 3%
Gross receipts
B. Domestic common carrier’s tax (from passengers); Gross receipts 3%
International carrier’s tax
C. Franchise tax on:
 Gas and water facilities Gross receipts 2%
 Radios and/or broadcasting companies whose gross Gross receipts
3%
receipts in the preceding year did not exceed
P10,000,000
D. Overseas communication tax Amount paid 10%
E. Tax on banks and non-bank financial intermediaries Gross receipts 1%
performing quasi-banking functions from and
lending/financial 5%
leasing
Gross receipts 7%
from other gross
income
Dividends 0%
F. Tax on other non-bank financial intermediaries Gross receipts 1%
from and
lending/financial 5%
leasing
Gross receipts 5%
from other gross
income
G. Tax on insurance companies Premiums 2%
collected
H. Tax on agents of foreign insurance companies Premiums 4%
collected
I. Amusement taxes on:
 Boxing exhibitions Gross receipts 10%
 Professional basketball games Gross receipts 15%
 Cockpits, cabarets and night clubs Gross receipts 18%
 Jai-ala and race tracks Gross receipts 30%
J. Tax on winnings:
 On winnings or dividends of persons:
 In horse races or jai-ala Winnings 10%
 But if from double, forcast, quinella and trifecta Winnings 4%
bets Winnings 10%
 On winning of owners of winning horses
K. Stock transaction tax (secondary offering) Selling price 6/10 OF 1%
L. Initial offering resulting in public control:
 Up to 25% Selling price 4%
 Over 25% but not 33-1/3% Selling price 2%
 Over 33-1/3% 1%
Supplementary notes based on table above: (refer to letters)

A. Who are liable to 3%: Any Exemption: That cooperatives, self- employed and professionals with
person whose sales or receipts total annual gross sales and/or gross receipts not exceeding Five hundred
are exempt under Section 109 thousand pesos (P 500, 000)
(BB) from the payment of VAT
and who is not a VAT-
registered person
B. Who are liable to 3%: Exception: MINIMUM QUARTERLY
1.Cars for rent or hire driven by 1. Owners of bancas GROSS RECEIPTS
the lessee 2. Owners of animal-drawn two Jeepney for hire
2.Transportation contractors, wheeled vehicle Manila and other ₱ 2, 400
including persons who transport cities
Provincial ₱ 1, 200
passengers for hire Note: The gross receipts of common
Public utility bus
3. Other domestic carriers by carriers derived from their incoming
Not more than 30 ₱ 3, 600
land for the transport of and outgoing freight shall not be passengers
passengers subjected to the local taxes imposed More than 30 but ₱ 6, 000
4. Keepers of garages under Republic Act No. 7160. less than 50
5. International carriers, passengers
whether air or shipping, doing More than 50 ₱ 7, 200
business in the Philippines are passengers
liable to a 3% percentage tax on Taxis
quarterly gross receipts. Manila and other ₱ 3, 600
cities
Provincial ₱ 2, 400
Car for hire
With chauffeur ₱ 3, 000
Without chauffeur ₱ 1, 800

C. The radio and television broadcasting companies referred shall have an option to be registered as a value-
added taxpayer and pay the tax due thereon. Once the option is exercised, said option shall be irrevocable.
D. Who are liable to 10%:
 Shall be collected upon every overseas
dispatch, message or conversation
transmitted from the Philippines by
telephone, telegraph, telewriter exchange,
wireless and other communication equipment
service.
E.
1. From lending activities and financial leasing, on
the basis of remaining maturities of instruments
from which such receipts are derived:
a. Maturity period is five (5) years or less
b. Maturity period is more than five (5)
years
2. On dividends and equity shares and net income
of subsidiaries
3. On royalties, rentals of property, real or
personal, profits from exchange and all other items
treated as gross income
4. On net trading gains within the taxable year on
foreign currency, debt securities, derivatives and
other similar financial instruments
Exemptions:
1) Government
2) Diplomatic Services (embassy and consular
offices of a foreign government)
3) International Organizations (international
agreement)
4) News Services (messages deal exclusively
with the collection/dissemination of news
item)
•In case the maturity period is shortened
thru pre-termination, then the maturity
period shall be understood to end as of the
5%
date of pre-termination for purposes of
1%
classifying the transaction and the correct
rate of tax shall be applied accordingly.
0%
•Generally accepted accounting principles
7% be prescribed by the BSP shall likewise be
the basis for the calculation of gross
receipts.
7%
F.
TERM TO MATURITY %
Who are liable TAX •In case the maturity period is shortened
all finance Short-term Not in excess of 5% thru pre-termination, then the maturity
companies, as well maturity 2 years period shall be understood to end as of the
as other financial Medium- Over 2 years but 3% date of pre-termination for purposes of
intermediaries not term not exceeding 4 classifying the transaction and the correct
performing quasi- maturity years rate of tax shall be applied accordingly.
banking functions Long-term Over 4 years but 1%
doing business in maturity not exceeding 7
the Philippines years 0%
Over 7 years
G.
Who are liable to 2% Excluded in the taxable receipts
every person, company or  premiums refunded within six (6) months after payment on account of
corporation doing life rejection of risk or returned for other reason to a person insured
insurance business of any sort  reinsurance by a company that has already paid the tax
in the Philippines  premiums collected or received by any branch of a domestic corporation,
*(except purely cooperative firm or association doing business outside the Philippines on account of any
companies or associations) life insurance of the insured who is a non-resident, if any tax on such
premium is imposed by the foreign country where the branch is established
 premiums collected or received on account of any reinsurance, if the insured,
in case of personal insurance, resides outside the Philippines, if any tax on
such premiums is imposed by the foreign country where the original
insurance has been issued or perfected
 upon that 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 owners.
H.
In all cases where owners of property obtain insurance
Who are liable to 4%
directly with foreign companies
every fire, marine or miscellaneous  it shall be the duty of said owners to report to the Insurance
insurance agent authorized under the Commissioner and to the Commissioner each case where
Insurance Code to procure policies of insurance has been so effected
insurance for companies not authorized  shall pay the tax of five percent (5%) on premiums paid, in the
to transact business in the Philippines manner required by Section 123
I. For the purpose of the Amusement Conditions & Exemptions
amusement tax, the term "gross a) Boxing Boxing exhibitions wherein World or Oriental
receipts" embraces all the exhibitions Championships in any division is at stake shall be
receipts of the proprietor, lessee exempt from amusement tax: Provided, further, that
or operator of the amusement at least one of the contenders for World or Oriental
place. Said gross receipts also Championship is a citizen of the Philippines and
include income from television, said exhibitions are promoted by a citizen/s of the
radio and motion picture rights, Philippines or by a corporation or association at
least sixty percent of the capital of which is owned
if any.
by such citizens;
b) Professional Provided, however, the tax herein shall be in lieu of
basketball all other percentage taxes of whatever nature and
games description
c) Jai-Alai and Irrespective, of whether or not any amount is
racetracks charged for admission.
J. 1. Owners of winning horses – 10%
2. Wagerer / Bettors:
a. 10% tax on winnings or ‘dividends’ derived from horse races based on the actual amount paid to
person for every winning ticket after deducting the cost of the ticket.
b. 4% tax, on winning from:
1) “Double” – winning number for 2 consecutive races;
2) “Forcastiquinella’ – winning numbers for 1st and 2nd in a race; and
 3) “Trifecta’ – winning numbers for 1st, 2nd and 3rd in a race.
K. Tax on sale, barter or exchange of shares of stock listed and traded through the local stock exchange
L. Determination is based on stock ownership:
(1) Stock Not Owned by Individuals- Stock owned directly or
Who are liable: indirectly by or for a corporation, partnership, estate or trust shall be
Closely held corporations- any considered as being owned proportionately by its shareholders, partners
corporation at least 50% in or beneficiaries.
value of outstanding capital (2) Family and Partnership Ownerships- An individual shall be
stock or at least 50% of the total considered as owning the stock owned, directly or indirectly, by or for
combined voting power of all his family, or by or for his partner (includes only his brothers and
classes of stock entitled to vote sisters [whether by whole or half-blood], spouse, ancestors and lineal
is owned directly or indirectly descendants)
by or for not more than twenty (3) Option- If any person has an option acquire stock, such stock shall
(20) individuals. be considered as owned by such person (an option to acquire such an
option and each one of a series of options shall be considered as an
option to acquire such stock)
# Of Stocks Sold / Bartered / (4) Constructive Ownership as Actual Ownership- Stock
Exchanged / Disposed constructively owned by reason of the application of paragraph (1) or
divided by (3) hereof shall, for purposes of applying paragraph (1) or (2), be
Total # of Outstanding Stocks treated as actually owned by such person; but stock constructively
owned by the individual by reason of the application of paragraph (2)
hereof shall not be treated as owned by him for purposes of again
applying such paragraph in order to make another the constructive
owner of such stock.
Returns of Gross Sales, Receipts or Earnings and Payment of Tax.
The taxpayer may file a separate return for each branch or place of business, or a consolidated return for all.
General Rule: Every person liable to pay a percentage tax must file a monthly return of the amount of
his gross receipts and pay the tax thereon, within 20 days after the end of each month.
Exceptions:
Overseas communications tax w/in 20 days after the end of the quarter
Amusement tax w/in 20 days after the end of the quarter
Tax on winnings Remitted to the BIR w/in 20 days from the date withheld
Stock transaction tax of 6/10 of 1% Remitted to the BIR w/in 5 banking days from the date
withheld by the broker
Stock transaction tax of 4%, 2% and On primary offering w/in 30 days from the date of listing
1% in the local stock exchange

PRACTICE PROBLEMS
(a) What rate of tax shall be applied in computing the tax on the following independent cases?
Gross Receipts Registered? Answer
Case 1 P2,500,000 Yes 12% VAT
Case 2 3,200,000 Yes 12% VAT
Case 3 3,500,000 No 12% VAT
Case 4 2,200,000 No 3% Non-VAT
Case 5 450,000 No Exempt
Case 6 600,000 Yes 12% VAT

(b) Juragan Corporation had the following gross

Receipts during the month: Required: compute the Common Carrier’s tax
Passenger Cargo Jeepney P58,000
Jeepneys P 73,000 P - Buses 274,000
Buses 274, 000 14,500 Taxi 88,000
Taxi 88,000 - Total P420,000
Sea vessel 1 103,400 33,450
 Sea vessel 2 183,650 75,990 Rate of tax 3%
Common carrier’s tax P12,600

(c) Problem: Philippine Airline, a domestic airline company is engaged in domestic and
international transports. During the month, it had the following gross receipts:
Place of Travel Passenger Cargo
From PH to other Asian countries P12,000,000 P1,000,000
From other Asian countries to the PH 15,000,000 1,500,000
Domestic operations only 20,000,000 2,500,000
 Is the airline subject to VAT? Yes, it is.
From domestic operation:
Passenger (P20M*0.12) 2,400,000
Cargo (P2.5M*0.12) 300,000 2,700,000
From the Philippines to other Asian countries
(P12M+P1M)*0%
Output tax 2,700,000

(d) Problem: Laban Lang Company, a television broadcasting company had the following data in its
books:
Gross receipts during the month P2,000,000
Purchases of materials and services (subject to VAT) 165,000
Purchases of materials and services (not subject to VAT) 130,000
Required:
1. The other percentage tax due if the gross 2. The VAT payable if the gross receipts last
receipts last year amounted to year amounted to P12,600,00.
P9,750,000. Solution:
Solution: Output tax P240,000
Gross receipts P2,000,000 Less: Input tax 19,800
Rate of tax 3% VAT payable 220,200
Franchise tax 60,000

(e) Problem: The Bayani Telephone Company is engaged in selling telephone services to the public.
Leonor Rivera availed of its services by calling her boyfriend in Europe. She was billed P6,000,
exclusive of tax, for a fifteen-minute call.
Required:
1. How much is the overseas communication 2. What business tax is due if the telephone
tax? call was transmitted to Calamba, Laguna?
Solution: Answer: Subject to VAT because it was a
P6,000 x 10% = P600 domestic call.

(f) The Filipino Bank has the following income/loss:

March April
Interest income with maturity of less than 5 years P70,000 P100,000
Rentals 40,000 40,000
Net trading gain (loss) (15,000) 20,000
Required: Compute the gross receipts tax for the months of March and April.
March:
Interest income with maturity of less than 5 years (P70k x 5%) P3,000
Rentals (P40k x 7%) 2,800
Gross receipts tax, March 5,800

April:
Interest income with maturity of less than 5 years (P100k x 5%) 5,000
 Rentals (P40k x 7%) 2,800
Net trading gain, April 20,000
(Less: Net trading loss, March) (15,000)
Adjusted net trading gain 5,000
Rate of tax 7% 350
Gross receipts tax, April 8,150

(g) Chika Babes insured her life with Filipino Life Insurance Company. The total amount of
premiums paid to the company during the month was P30,000. Out of this amount, P9,000 was
paid in cash and the balance in a promissory note. How much is the tax on life insurance?
Gross premiums collected P30,000
Rate of tax 2%
Tax on life insurance premium 600

(h) Karen Sita operates a racetrack. Other than the restaurant that it operates it also allows Burger
Queen, a burger stand that operated by a concessionaire, to sell foods inside its premises. The
gross receipts during the month are as follows:
From operations of race track P1,800,500
From restaurant 600,000
From television coverage 400,000
 How much amusement tax is payable by Karen Sita?
Race track P1,800,500
Restaurant 600,000
Television coverage 500,000
Gross receipts 2,900,500
Rate of tax 30%
Amusement tax 870,150
 Is Burger Queen subject also to amusement tax? When a restaurant is owned or operated
by a person other than proprietor, lessee or operator of the amusement place, the receipts
derived from the operation of the restaurant is subject to either VAT or to 3% percentage
tax on exempt from VAT.

(i) Problem: Bill Gates bought a P200 ticket and put his bet on race horse Red Horse who
eventually won the race.
The prize for the winning ticket is P20,000 and for the winning horse, P200,000. What are the
percentage taxes of Bill Gates and the owner of Red Horse?
Answer: Amusement tax of Bill Gates = 1,980
Amusement tax of Red Horse = 20,000
Solution:
Prize P20,000 Prize P200,000
Less: Cost of ticket 200 Multiply by amusement tax rate x 10%
Net winnings P19,800 Amusement tax P 20,000
Multiply by amusement tax rate x 10%
Amusement tax P1,980

(j) Richie sold 1,000 shares of stock costing P95,000 for P100,000. The par value of the stocks per
share is P90.
 If the shares are listed in the Philippine Stock Exchange, how much is the stock
transaction tax on the sale?
Gross selling price P100,000
Rate of tax 1/2%
Stock transaction tax 500
 If the shares are not listed and traded in the Philippine Stock Exchange, how much is
the stock transaction tax on the sale? None. However, it is subject to a final
withholding tax computed as follows:
Gross selling price P100,000
Less: cost 95,000
 Net capital gain 5,000
Rate of tax 5%
Final withholding tax 250

(k) Echosero Corporation, close held, has an authorized capital stock of 10,000 shares with a par
value of P1.00 per share as of January 1, 2018. Of the 10,000 authorized shares, 2,500 thereof is
subscribed and fully paid up by the following stockholders:
Goyo 500
Luna 500
Celso 500
Chenngoy 500
Basilio 500
Total shares outstanding 2,500
Echosero Corporation finally decides to conduct an initial public offering and initially offers
2,500 of its unissued shares to the investing public. After the PO in March 2018, the corporation
issued shares increased from 2,500 to 5,000 shares.
At the IPO, one of the existing stockholders, Goyo, has likewise decided to sell his entire 500
shares to the public.
 If the unissued shares ere offered at P10 per share, how much is the tax due
on the primary offering?
Shares offered to the public 2,500
Divide by number of shares of outstanding 5,000
Ratio of percentage 50%

Initial offer price 25,000

Rate (over 33 1/3%) 1%
Initial Public Offering Tax 250
 If the shares of Goyo were offered also at P10 per share, how much is he
total tax due on the Initial Public Offering?
On primary offering P250
On secondary offering:
Shares offered by Goyo to the public 500
Divide by number of shares outstanding 5,000
Ratio of percentage 10%

Initial offer price 5,000

Rate (over 25%) 4% 2000
Total tax on Initial Public Offering Tax 450