chapter iv other percentage taxes

8/9/2019 Chapter IV Other Percentage Taxes

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CHAPTER IV

OTHER PERCENTAGE TAXES1

Percentage taxes of varying rates are imposed on the persons or activities

enumerated below and are payable within 25 days after the end of each taxable

quarter, unless otherwise specified. Every person liable to the percentage taxes may,

at his option, file a separate return for each branch or place of business or a

consolidated return for all branches or places of business with the authorized agent

bank, Revenue District Officer, Collection Agent or duly authorized Treasurer of the

city or municipality where the business or principal place of business is located, as the

case may be.2

The percentage taxes are:

A. TAX ON PERSONS EXEMPT FROM VALUE ADDED TAX (VAT)3

On the gross quarterly sales or receipts of persons who are otherwise subject

to the VAT but whose annual sales or gross receipts do not exceed P1.5 million 4

3%, except cooperatives.

B.

PERCENTAGE TAX ON DOMESTIC CARRIERS AND KEEPERS OFGARAGE

5

On the quarterly gross receipts of cars for rent or hire driven by the lessee;

transportation contractors, including persons who transport passengers for hire, and

other domestic carriers by land6 for the transport of passengers, except owners of

bancas, and owners of animal-drawn two-wheeled vehicles and keepers of garages

3%.

1 Title V, NIRC, as amended by RAs 7716, 7717, 8241, 8424 9238 and 9337.

2 Sec. 128,supra.

3 Sec. 116,supra.

4 Adjusted from P550,000 to P1.5 million with the imposition of RA No. 9337. As required

by the same Act, it should be adjusted to present value using the CPI published by the NSO not later

than January 31, 2009 and every three (3) years thereafter.

5 Sec. 117,supra.

6 Domestic transport of passengers by air and water is now subject to VAT under RA No.

9337.


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The gross receipts of common carriers derived from their incoming and

outgoing freight shall not be subject to the local taxes imposed under RA No. 7160,

otherwise known as the Local Government Code of 1991.

The following shall be considered the minimum quarterly gross receipts ineach particular case:7

Jeepney for hire:

Manila and other cities

Provincial

P2,400

P1,200

Public Utility Bus:

Not exceeding 30 passengers

Exceeding 30 but not exceeding 50 passengers

Exceeding 50 passengers

P3,600

P6,000

P7,200

Taxi:

Manila and other cities

Provincial

P3,600

P2,400

Car for hire:

With chauffeur

Without chauffeur

P3,000

P1,800

C. PERCENTAGE TAX ON INTERNATIONAL CARRIERS8

On the gross quarterly receipts of international air carriers and international

shipping carriers doing business in the Philippines3%.

7 It is noted that the BIR had issued RR No. 9-2007 on 4 July 2007, prescribing the updated

minimum monthly/quarterly gross receipts in computing the percentage tax of domestic carriers and

keepers of garages. However, Senate Committee Report No. 37 (dated 11 February 2008)

recommended for the suspension of RR No. 9-2007 based on the following grounds:

a) Public consultation with all the sectors purportedly affected by the proposed increase in

the minimum quarterly gross receipts must first be undertaken before the imposition ofthe same be recommended. It is necessary that, although taxes have always been defined

as the lifeblood of a government"," fundamental guidelines limiting the exercise of the

taxing and revenue-raising powers of the government such as the principles of "taxation

must always be based on the ability of the taxpayers to pay", and "no taxation without

representation" be essentially adhered to.

b) The power to amend, modify or repeal any provision of the National Internal Revenue

Code is lodged exclusively In the legislative department, therefore the BIR and/or the

DOF should not depart from the ambit of the authority merely delegated upon them by

Congress.

8 Sec. 118,supra.


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D. FRANCHISE TAX9

On the annual gross receipts derived by the franchise grantees of:

1.

Gas and water utilities from the business covered by the law granting thefranchise2%10

2.

Radio and/or television broadcasting companies whose annual gross

receipts of the preceding year do not exceed P10 million 3%11. Said

company may opt to be registered as a VAT taxpayer. The option, once

exercised, cannot be revoked.

3. National Grid Corporation on all its gross receipts derived from its

operation covered by the law granting the franchise3%12

E. OVERSEAS COMMUNICATION TAX13

On the amount paid on every overseas dispatch, message or conversation

transmitted from the Philippines by telephone, telegraph, telewriter exchange,

wireless and other communication equipment services10%

The tax shall be payable by the person paying for the services rendered and

shall be paid to the person rendering the services who is required to collect and pay

the tax within twenty (20) days after the end of each quarter.

The tax does not apply to the amounts paid for messages transmitted by:

1. The Government, its political subdivisions or instrumentalities;

2. Diplomatic services;

3. Public international organizations or any of their agencies based in the

Philippines; and

4. News services.

9 Sec. 119,supra.

10 Electric utilities are now subject to VAT under RA No. 9337.

11 Companies whose annual gross receipts of the preceding year exceed P10 million are

subject to VAT.

12

Sec. 9, RA No. 9511

13Sec. 120,supra.


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F. TAX ON BANKS14

AND NON-BANK FINANCIAL INTERMEDIARIES15

PERFORMING QUASI-BANKING FUNCTIONS16

On the gross receipts derived by all banks and non-bank financial

intermediaries:17

Kind of I ncome Rates

1. On interest, commissions and discounts from lending activities as

well as income from 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

5%

1%

2.

On dividends and equity shares and net income of subsidiaries 0%

3. On royalties, rentals of property, real or personal, profits from

exchange and all other items treated as gross income under

Section 32 of the Tax Code.

7%

4.

On net trading gains within the taxable year on foreign currency,

debt securities, derivatives and other similar financial instruments

7%

Note: Income or revenue realized by the BSP from its transactions undertaken in pursuit of its

legally-mandated functions are exempt from the GRT imposed on banks and non-bank

financial intermediaries performing quasi-banking functions under Sec. 121 of the Code. [Sec.

5, RR No. 8-2008]

14 Banks or banking institutionsshall refer to those entities as defined under Section 3 of

Republic Act No. 8791, otherwise known as the General Banking Law of 2000, or more specifically, to

entities engaged in the lending of funds obtained in the form of deposits. The term banks or

banking institutionsare synonymous and interchangeable and specifically include universal banks,

commercial banks, thrift banks (savings and mortgage banks, stock savings and loan associations, and

private development banks), cooperative banks, rural banks, Islamic banks and other classifications of

banks as may be determined by the Monetary Board of the BSP. [Sec. 3.1, RR No. 8-2008]

15 Non-bank financial intermediaries shall refer to persons or entities whose principal

function include the lending, investing or placement of funds or evidence of indebtedness or equity

deposited with them, acquired by them, or otherwise coursed through them, either for their own

account or for the account of others. This includes all entities regularly engaged in the lending of fundsor purchasing of receivables or other obligations with funds obtained from the public through the

issuance, endorsement or acceptance of debt instruments of any kind for their own account, or through

the issuance of certificates, or of repurchase agreements, whether any of these means of obtainingfunds from the public is done on a regular basis or only occasionally. [Sec. 3.2, RR No. 8-2008]

16 Quasi-banking functionsshall refer to the borrowing of funds from twenty (20) or more

personal or corporate lenders at any one time, through the issuance, endorsement or acceptance of debt

instruments of any kind, other than deposits, for the borrowers own account or through the issuance of

certificates of assignment or similar instruments, with recourse, or of repurchase agreements for

purposes of relending or purchasing receivables or other similar obligations. Provided, however, that

commercial, industrial and other non-financial companies, which borrows funds through any of these

means for the limited purpose of financing their own needs or the needs of their agents or dealers, shall

not be considered as performing quasi-banking functions. [Sec. 3.3, RR No. 8-2008]

17Sec. 121,supra,as amended by RA 9337.


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G. TAX ON OTHER NON-BANK FINANCIAL INTERMEDIARIES18

On the gross receipts derived by other non-bank financial intermediaries doing

business in the Philippines, from interests, commissions, discounts and all other items

treated as gross income under the Tax Code5%.

On interest, commissions and discounts from lending activities, as well as

income from financial leasing, on the basis of remaining maturities of the instruments

from which such receipts are derived, the tax shall be:

Remaining Maturi ty of I nstrument Rates

1.

Maturity period is five (5) years or less

2.

Maturity period is more than five (5) years

5%

1%

Note: Income or revenue realized by the BSP from its transactions undertaken in pursuit of its

legally-mandated functions are exempt from the GRT imposed on other non-bank financial

intermediaries under Sec. 122 of the Code. [Sec. 5, RR No. 8-2008]

H. TAX ON LIFE INSURANCE PREMIUMS

1.

On gross premium collected (with certain exceptions) by life insurance

companies5%19

2.

On gross premium collected by agents of foreign life insurance companies10%20

I. TAX ON AMUSEMENT ACTIVITIES21

On gross receipts from/of:22

Cockpits, cabarets, night or day clubs 18%

Boxing exhibitions23 10%

18Sec. 122,supra,as amended by RA 9238.

19Sec. 123,supra.

20Sec. 124,supra.

21Sec. 125,supra.

22 The term gross receiptsembraces all the receipts of the proprietor, lessee or operator of

the amusement place. Said gross receipts also include income from television, radio and motionpicture rights, if any. In the case of jai-alai and race tracks, the tax shall be based on gross receipts

irrespective of whether or not any amount is charged for admission.


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Professional basketball games 15%

Jai-alai and race tracks 30%

J. TAX ON WINNINGS24

On dividends or winnings in horse races 10%

On winnings from double, forecast/quinellaand trifecta

bets in horse races

4%

On the prize of owners of winning race horses 10%

K. TAX ON SALE OF SHARES OF STOCKS LISTED AND TRADED

THROUGH THE LOCAL STOCK EXCHANGE OR THROUGH INITIAL

PUBLIC OFFERINGS25

1. On every sale, barter or exchange of shares of stock26listed and traded through

the local stock exchange27(other than the sale by a dealer in securities28)

of 1% of the gross selling price29or gross value in money30of the shares of

23Boxing exhibitions wherein World or Oriental Championships in any division is at stake

shall be exempt from amusement tax if at least one of the contenders for World or OrientalChampionships is a citizen of the Philippines and said exhibitions are promoted by a citizen/s of the

Philippines or by a corporation or association at least sixty percent of the capital of which is owned by

such citizens.

24Sec. 126,supra.

25Sec. 127,supra.

26 Shares of stockshall include shares of stock of a corporation; warrants and/or options to

purchase shares of stock; as well as units of participation in a partnership (except general professionalpartnerships), joint stock companies, joint accounts, joint ventures taxable as corporations,

associations, and recreation or amusement clubs (such as golf, polo or similar clubs); and mutual fund

certificates. [Sec. 2 (c), RR No. 6-2008]27

Local stock exchange refers to any domestic organization, association, or group of

persons, whether incorporated or unincorporated, licensed or unlicensed, which constitutes, maintains,or provides a market place or facilities for bringing together purchasers and sellers of stocks, and

includes the market place and the market facilities maintained by such exchange. [Sec. 2 (g), RR No.

6-2008]

28 Dealer in securities means a merchant of stocks or securities, whether an individual,

partnership or corporation, with an established place of business, regularly engaged in the purchase of

securities and the resale thereof to customers; that is one, who as merchant buys securities and re-sells

them to customers with a view to the gains and profits that may be derived therefrom. Dealer in

securities means any person who buys and sells securities for his/her own account in the ordinary

course of business. [Sec. 2 (b), RR No. 6-2008]

29 Gross selling price refers to the total amount of money or its equivalent which the

purchaser pays the seller as consideration for the shares of stock. [Sec. 2 (h), RR No. 6-2008]


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stock sold, bartered, exchanged or otherwise disposed which shall be paid by

the seller or transferor.

Every stock broker31 who effected the sale shall collect the tax and

remit the same to the Bureau of Internal Revenue within 5 banking days fromthe date of collection thereof. The said stockbroker is also required to submit

on Mondays of each week to the secretary of the stock exchange, of which

he/she is a member, a true and complete return which shall contain a

declaration of all the transactions effected through him/her during the

preceding week and of taxes collected by him/her, and turned over to the

Bureau of Internal Revenue.

2. On every sale, barter, exchange or other disposition through initial public

offering32of shares of stock in closely-held corporations33, a tax based on the

gross selling price or gross value in money of the shares of stock sold,

bartered, exchanged or otherwise disposed of in accordance with the followingschedule:

Proportion of shares of stock disposed of to total outstanding shares of

stock after the listing in the local stock exchange:

Rate of Tax

Up to 25% 4%

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

Over 33 1/3% 1%

The tax shall be paid by the issuing corporation in primary offering34

or by the seller in secondary offering35.

30 Gross value in moneymeans the fair market value. In the case of shares traded thru

the stock exchange, fair marketvalueshall consist of the actual selling price at which the transaction

was executed in the trading system and/or facilities of the Local Stock Exchange. [Sec. 2 (i), RR No.

6-2008]31

Stockbroker includes all persons whose business t is, for other brokers, to negotiate

purchases or sales of stocks, or engaged in the business of effecting transactions in securities for theaccount of others but does not include a bank or underwriters for one or more investment companies as

defined in the Investment Company Act. [Sec. 2 (f), RR No. 6-2008]

32Initial public offering (IPO)refers to public offering of shares of stock made for the first

time in the Local Stock Exchange. [Sec. 2 (j), RR No. 6-2008]

33 Closely-held Corporation means corporation at least 50% in value of the outstanding

capital stock or at least 50% of the total combined voting power of all classes of stock entitled to vote is

owned directly or indirectly by or for not more than 20 individuals. [Sec. 2 (q), RR No.6-2008]

34Primary offering refers to the original sale made to the investing public by the issuer

corporation of its unissued Shares of Stock. [Sec. 2 (k), RR No. 6-2008]


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Any gain derived from the disposition of shares of stock subject to the

aforementioned tax shall be exempt from the tax imposed under Sec. 24(C),

Sec. 27(D)(2), Sec. 28(A)(8)(c) and Sec. 28(B)(5)(c) and from the regular

individual or corporate income tax. The tax paid shall not be deductible for

income tax purposes.

35

Secondary offering refers to an offer for sale to the investing public by the existingshareholders of their securities which is conducted during an IPO or a follow-on/follow-through

offering. [Sec. 2 (l), RR No. 6-2008]

chapter iv other percentage taxes

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