PERCENTAGE TAXES

(SECTIONS 116 TO 127 OF THE NIRC OF 1997)

A. 3% percentage tax on persons exempt from VAT because their gross annual sales
do not exceed P1.5m , and who are not reuired to pa! a percentage tax under an!
of "#$ to "%$, below.
#. Tax on domestic carriers
&. Tax on international carriers
'. (ranchise tax
). *+erseas communications tax
(. Tax on ban,s and non-ban, financial intermediaries performing uasi-ban,ing
functions.
/. Tax on other non-ban, financial intermediaries.
0. Tax on life insurance companies.
1. Tax on agents of foreign insurance companies.
2. Amusement tax.
3. Tax on winnings.
%. Tax on stoc, transactions.
*ne who is sub4ect to an! of the percentage taxes can not be sub4ect to the +alue-
added tax, howe+er, a registered business ma! ha+e two lines of acti+ities, one of
which is sub4ect to the VAT and the other sub4ect to a percentage tax.
/enerall!, percentage taxes are based on gross receipts.
Percentage taxes are pa!able b! the sellers of the ser+ices, except the o+erseas
communications tax which is pa!able b! the user of the facilities of the seller.
Persons who are exempt from the VAT because their gross annual sales or
receipts do not exceed P1.5m are sub4ect to the 3% percentage tax.
The following are sub4ect to the percentage tax ,nown as 5common carrier6s tax78
o &ars for rent or hire dri+en b! the lessee "rent a car$
o Transportation contractors, including persons who transport passengers for
hire
o *ther domestic carriers b! land for their transport of passengers, except
owners of animal-drawn two-wheeled +ehicles. and
o 3eepers of garages- closed shelter for automobiles
VAT or Percentage tax on domestic carriers
&ommon carrier b! %A9'8
Transporting goods or cargoes - 1:% VAT
Transporting passengers - 3% common carrier6s tax
&ommon carrier b! A1; or <)A8
(rom one point the Phils to another
point in the Phils
goods, cargoes, passengers - 1:% VAT
(rom one point the Phils to a point
outside the Phils
goods, cargoes, passengers - =% VAT
The following are sub4ect to a percentage tax commonl! called 5franchise tax78
o /as and water utilities - :%
o ;adio and >or tele+ision broadcasting companies whose
Annual gross receipts of the preceding
!ear did not exceed P1=,===,=== - 3%
<pecial rule on radio>tele+ision
a. if the gross receipts in the preceding !ear
exceeded P1=,===,=== - VAT
b. if the gross receipts in the preceding !ear
did not exceed P1=,===,===, but ma!
opt to be registered under the VAT s!stem - percentage tax
*+erseas communications tax
o The tax is on o+erseas dispatch message or con+ersation originating from
the Philippines "outgoing message$.
o The tax is based on the amount paid b! the user to the pro+ider of the
communication facilit!.
o The tax is imposed on the person pa!ing for the ser+ices rendered, and not
on the pro+ider of the communication facilit!, the latter to be considered
merel! as collector of the tax.
o The tax is 1=% of the amount paid.
o The tax shall not appl! to the /o+ernment of the Philippines or an! of its
political subdi+isions. diplomatic ser+ices. international organi?ations. and
news ser+ices.
Tax of :% on life insurance companies @ called premium tax.
o Tax base @ total life insurance premiums collected "gross receipts$,
whether in mone!, notes, credits or an! substitute for mone!.
o Tax rate @ :%
o )xemptions8
Premiums refunded within six months after pa!ment on account of
re4ection of ris, or returned for other reasons to a person insured.
;einsurance premiums paid b! a compan! that has alread! paid a
tax.
Premiums collected or recei+ed b! an! branch of a domestic
corporation, firm or association doing business in the Philippines
on account of an! life insurance of an insured who is a non-
resident, if an! tax on such premiums is imposed b! the foreign
countr! where the branch is established.
;einsurance premiums, if the insured of personal insurance resides
outside the Philippines, if an! tax on such premium is imposed b!
the foreign countr! where the original has been issued or perfected.
Portion of the premiums collected or recei+ed b! insurance
companies on +ariable contracts in excess of the amount necessar!
to insure the li+es of +ariable contract owners.
9on-life insurance are sub4ect to VAT
Amusement tax. There are man! ,inds of amusement places, but
not all are sub4ect to the amusement taxes.
There are man! acti+ities for amusement, but not all are sub4ect to
the amusement taxes.
At present, there is an amusement tax which is a local tax.
Amusement tax on admissions to theaters, cinematographs, concert halls, circuses
and other places of amusement.
Tax on winnings @ a person who wins in horse races and 4ai lai,
based on his winnings or 5di+idends7 "the tax to be based on the actual amount
paid to him for e+er! winning tic,et, after deducting the cost of tic,et8 and owner
of winning race horses, based on the pri?e.
;eturn and pa!ment of percentage taxes.
o Taxpa!er ma! file a separate return for each branch or place of business,
or a consolidated return for all.
o /eneral rule @ e+er! person liable to pa! a percentage tax will file a
uarterl! return of the amount of his gross sales, receipts or earnings and
pa! the tax thereon, within :5 da!s after the end of each taxable uarter.
o )xceptions8
3% - within := da!s after the end of the month except when the
tax was a final tax, through the withholding tax s!stem.
*&T - within := da!s after the end of the uarter
Amusement tax - within := da!s after the end of the uarter
Tax on winnings @ remitted to the #1; within := da!s from the
date withheld
<toc, transaction tax of A of 1%- remitted to the #1; within 5
ban,ing da!s from the date withheld b! the bro,er
<toc, transaction tax B%, :% and 1% - on the primar! offering,
within 3= da!s from the date of listing in the local stoc, exchange
EXCISE TAXES
A national internal re+enue tax to which onl! "a$ manufacturers>producers or "b$
importers ma! be sub4ect is the excise tax.
Two ,inds of excise taxes8 "a$ specific tax "b$ ad +alorem tax
An excise tax imposed and based on weight or +olume capacit! or an! other
ph!sical unit of measurement is a specific tax.
An excise tax imposed and based on selling price or other specified +alue of the
article is an a !a"#$e% tax.
The following are the articles sub4ect to excise taxes8
o 'istilled spirits
o Cines
o (ermented liuors
o Tobacco products
o &igars
o &igarettes
o Automobiles
o Danufactured oils and other fuels
o Dineral products and
o 9on essential goods.
Chen should the excise taxes be paidE
o 1n the case of a locall! manufactured article, the excise tax must be paid
prior to the remo+al of the article from the place of production.
o 1n the case of imported article, the excise tax must be paid prior to the
release of the article from customs custod!.
" Philippine Transfer and #usiness Taxes, a new approach, ;e!es, Virgilio '., 9o+ember
:=1= )dition$