Percentage Tax

VATable Transactions

GS/GR > P3,000,000 GS/GR ≤ P3,000,000

VAT VAT 3% OPT

 based on GS/GR
o Goods: GSP
o Services: GR]
 If you pay the 3% OPT, but during the year you breached the P3M
o you have to pay the VAT prospectively
 for income tax you have the option to pay 8% tax or graduated rate
o 8% tax – no 3% OPT
o graduated rate – there is still 3% OPT

GS/GR > P3,000,000

Graduated Rates VAT-Registered?

VAT-Registered Non-VAT-Registered
VAT

VAT Graduated Rates 8% Tax

3% OPT Exempt on VAT and OPT

Situation A: If you are paying graduated rates, you pay quarterly OPT na, so pag nagbreach ka, magbayad ka pa rin ng OPT
for the month na nagbreach ka. After that month, you need to register as a VAT-registered entity, and then subsequently
pay the VAT prospectively.

Situation B: If you are paying 8% Tax and you breach the threshold, you have to pay the OPT retroactively

 Problem 1
 requisites for deductibility of sales discounts on VAT is also applicable for OPT
 deadline of filing and payment of quarterly VAT (regardless if manual system or EFPS): 25th day following the
month

 Problem 2
 original case: he did not actually pay OPT except in the quarter he breached the threshold (paid lump sum on Oct
25)
 req#4-6: he is already paying OPT (paid quarterly because u are already paying the graduated income tax rate)
Common Carrier’s Tax (CCT)
 3%
 only imposed on domestic transportations (PAL, CEBUPAC, AIR ASIA) – passengers
 if cargoes, subject to VAT
 Domestic Transportation
Passengers Cargoes
Land % VAT
Air VAT VAT
Water VAT VAT
 based on GR (with quarterly threshold P2,400,000)
o if you did not breach the threshold, the basis is the minimum
 starting 2018, filing of VAT return, wala nang monthly

International Carriers’ Tax

 3%
 imposed on international carriers (SG AIRLINES, CATHAY PACIFIC, CATHAY AIRWAYS)
 based on GR
o origination from the PH, outgoing
 only transport of cargoes and excess baggage
 transport of passengers is exempt from ICT
 does not matter where payment was made

Franchise Tax
 franchise granted by the government
1. radio and TV broadcasting
o Max = P10,000,000 (VAT)
o If did not meet threshold – 3%
 there is an option to be subject to VAT (irrevocable)
2. gas and water utilities
o 2%

Overseas Communication Tax (OCT)

 10%
 outgoing calls from the Philippines
 EXPLICIT: tax is shouldered by the buyer
 yung sa taas, depends upon the company whether they are gonna pass on the tax
 Contract Price = 100,000, exclusive of OPT
o OPT=3%
o GR = 100000/.97=103093
 Contract Price = 100,000
o OCT = 10^
o TOTAL=110,000
 Pag papasok un call, di kasama sa OCT
 TelCo Revenue Streams:
o Voice
o SMS
o Data
 SMS – local 12%
 data – local 12%
  Exemptions to OCT
1. Government
2. Diplomatic Services
3. International Organizations
4. News Services
 exemption to the rule: deadline is 20th day after the end of the month

Banks
 banks
o all income of banks are taxable
o (GAAP) IFRS is used for purposes of tax – Based on FS as it is prepared
 non-bank financial intermediaries – quasi-banking functions
o both allowed to accept deposits
1. Interest. commissions, and discounts from lending
 maturity ≤ 5 yrs : 5%
 maturity > 5 yrs: 1%
 if there is pretermination of contract (original term is 10 yrs, but after 2 yrs of payment, borrower said he will
reduce it to 5 yrs)
o there is retroactive payment
o you have to pay additional 4% at the time of pretermination
2. Dividend / Equity Shares
 0%
3. Rentals, royalties, and others
 7%

Other non-bank financial intermediaries not performing quasi-banking functions

 (GAAP) IFRS is used for purposes of tax – Based on FS as it is prepared
1. Lending – same as VAT
 (5% or 1%)
2. Others
 5%
Pretermination of Loan [Illustration]
Given:
Loan: P1,000,000
Interest: 5% per annum
Term: 6 years
Date granted: 7/1/2018
Pretermintion of Loan: 1/31/2020

Requirement: How much is the quarterly GRT?

Answer:
Interest Income (1,000,000 x 5 x 1/4) 12,500

3rd Quarter 2018

Interest Income 12,500
GRT Rate 1%
GRT Rate 125

4th Quarter 2018

GRT Rate 125

1st Quarter 2019

GRT Rate 125

2nd Quarter 2019

GRT Rate 125

3rd Quarter 2019

Interest Income 12,500
GRT Rate 5%
GRT Rate 625

4th Quarter 2019

GRT Rate 625

6/1/2018 to 1/31/2020 = 19 months (5%)

Adjusted GRT:
Quarterly Interest (12,500 x 5%( 625
Number of Quarteers
GRT, Adjusted
GRT, Paid
Additional GRT

GRT for 1/2020

(1,000,000 x 5% x 1/12 x 5%) 208

GRT 2,208
Premium Tax
 only applies to life insurance
 non-life insurance premium – VATable
 life insurance – 2% Premiums Tax
o based on actual premiums collected but the following will not form part of premiums tax base:
a. premiums returned within 6 months
 not necessarily relating to rejection or other reasons
b. reinsurance premiums
Insurance Reinsurance
Insured Insurance Company A Insurance Company B
Insurance Premiums Reinsurance Premiums
2% PT Exempt
 only those insurance premiums collected directly from the insured is part of the premiums tax base
c. if insured is NR, effectively the risk that is insured is outside the Philippines

Tax on Agents of Foreign Insurance Companies

 agents are selling insurance of foreign
 if agents collects insurance premiums from the insured, taxable in the Philippines
Premiums Premiums
Insured Agent of FIC (Philippines) Foreign Insurance Company
4% Tax
 Reinsurance is exempt still
 If directly collected from Insured
Premiums
Insured Foreign Insurance Company
5% Tax

Amusement Tax Rate

 imposed to the proprietor, lessee or incorporation of those enumerated
 if not enumerated, VATable
1. cockpits – 18%
2. cabaret, night and day clubs – 18%
3. boxing exhibition – 10% (exemption: those where world or oriental division is exempt if there is a Filipino
contender, and provided that the exhibition is promoted by a citizen of the PH or a corporation whose shares is
70% owned by Fil
4. professional basketball games – 15%
5. jai-alai, race tracks – 30%

 exemption to the rule: 20 days after

 Problem 12
 to minimize VAT, owner of jai-alai can lease the space and let another person to operate the restaurant business
so that it can be subject to 12% VAT instead of 30% amusement tax
Winnings
 Horse race winnings
 Total amount less ticket cost
 pati owner nagtatax
 ang magremit yung operator ng race track
 remit 20 days following the day withheld
Stock Transaction Tax

Sale of Shares

Foreign Shares Domestic Shares

Foreign Corporation / Resident Citizen / OTC PSE

Aliens Domestic *minimum public % met
*if not met, CGT

Individual / Domestic RFC / NRFC 6/10 of 1% STT

Exempt Graduated Rates / Corporation Tax Base: GSP = FMV
RCIT / MCIT

15% CGT 5% / 10% CGT

Initial Public Offering Tax

 X > 33 1/3% - 1%
 25% < X ≤ 33 1/3% - 2%
 X ≤ 25% - 4%

Other Percentage Taxes (Summary)

OPT BASE SUBJECT TO OPT

1. 3% OPT All GSP or GS
2. 3% CCT Transportation business
3. 3% ICT Transportation business
4. 2% / 3% FT Franchise business
5. 10% OCT Outgoing communication
6. 0% / 1%/ 5%/ 7% GRT All GSP or GS
7. 1%/ 5% GRT All GSP or GS
8. 2% PT Life insurance premiums
9. 4%/ 5% PT Foreign insurance (marine, fire and miscellaneous insurance)
10. 10%/ 15%/ 18%/ 30% AT Amusement business, except for jai-alai and race tracks (All GSP/GR)
11. 6/10 of 1% STT Shares
12. 1%/ 2%/ 4% IPO tax Shares

Deadlines

OPT DEADLINE PARTY

GENERAL RULE 25th day following the end of the quarter Seller
E
X 1. OCT 20th day following the end of the quarter Seller
C
E 2. AT 20th day following the end of the quarter Operator / Lessor
P
T 3. Tax on Winnings 20 days after withholding Operator
I
O 4. 6/10 of 1% STT 5 banking days from collection Broker
N
S 5. IPO Tax 30 days from listing Issuer / Secondary Broker