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DEPARTMENT OF ACCOUNTANCY
ACCTG163: REVIEW IN TAXATION
In lieu of VAT, Other Percentage Taxes are imposed on the following persons/transactions:
A. 3% percentage tax on any person whose sales or receipts are exempt from payment
of VAT because gross annual sales do not exceed P3,000,000.
Note: Such taxpayer may opt to register under VAT system not later than 10 days before the
beginning of the taxable quarter. Once registered under optional VAT registration, he/she
shall not be allowed to cancel his/her registration for the next three years.
3% of Gross Sales or Receipts from the transport of passengers, provided the gross receipts
are greater than or equal to the minimum levels provided by law.
Persons Subject:
Keepers of garage
Domestic carriers by land transporting passengers
Transporting contractors
Cars for rent driven by lessee
Taxicabs
Cars for hire owned by a rent-a-car companies
Tourist buses used for the transport of passengers
Exempted: Owners of Banca and animal drawn two-wheeled vehicle.
Note:
Optional Registration - Radio and TV broadcasting companies whose annual gross
receipts of the preceding year do not exceed P10,000,000 may opt to register within 10
days before the beginning of the calendar year under VAT system. Once the option is
exercised, it is irrevocable.
Franchise grantees to VAT:
1. Telephone and Telegraph Companies
2. Toll road operations
3. Electricity
4. Radio and TV Broadcasting companies whose gross sales of the preceding period
exceeded P10,000,000.
Taxed at 10% based on the amount paid for the services rendered.
Person subject:
1. Banks - entities engaged in the lending of funds obtained in the form of deposits.
2. Non-bank financial intermediaries performing quasi-banking functions:
Non-bank Financial Intermediaries - Refer to persons or entities whose principal
functions include the lending, investing, or placement of funds or evidences 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.
Quasi-banking Functions - Refer to borrowing of funds from 20 or more personal or
corporate lenders at any other time, through the issuance, endorsement, or
acceptance of debt instruments of any kind other than deposits for the borrower’s
own account, or through the issuance of certificates of assignment or similar
instruments, with recourse, or of repurchase agreements for purpose of relending or
purchasing receivables and other similar obligations.
On royalties, rentals of property, profits from exchange and all other items treated as 5%
gross income under the tax code
*It includes pawnshops
Person subject: Any person/entity offering life insurance in the Philippines, except purely
cooperatives companies or associations.
Exemptions:
1. Premiums refunded within 6 months after payment on account of rejection of risk, or
returned for any other reason to a person insured.
2. Premiums collected or received by any branch of a domestic corporation, firm, or
association doing business outside the Philippines on account of any life insurance of the
insured who is a non-resident, if any tax on such premium is imposed by the foreign country
where branch is established.
3. 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 premium is imposed by
the foreign country where the original insurance has been issued or perfected.
4. Portion of the premiums collected or received by the insurance companies on variable
contacts in excess of the amounts necessary to insure the lives of the variable contract
owners.
5. Management fees, rental income, or any other income earned by the life insurance
company from services which can be pursued independently of the insurance business
activity.
6. Investment income earned by the life insurance company from investing the premiums.
I. Tax on agents of foreign insurance companies
PERSON SUBJECT TAX
1. Every fire, marine, or miscellaneous insurance agent authorized 4% of total premiums
under the Insurance Code to procure policies of insurance as he collected
may have previously been legally authorized to transact, on risks
located in the Philippines for companies not authorized to transact
business in the Philippines.
2. Owners of property who obtain insurance directly with foreign 5% of premiums paid
companies
J. Amusement Taxes
1. Proprietors, operators or lessees of the following amusement places are subject to
percentage tax on gross receipts:
Cockpits - 18%
Boxing Exhibition - 10%
Professional Basketball Game - 15%
Cabarets, Night and Day Clubs - 18%
Jai-alai - 30%
Note: Income from television, radio, and motion pictures rights is included as part of the gross
receipts.
Boxing exhibition wherein World or Oriental Championship in any division is at stake, shall be
exempt from amusement tax, provided that at least one of the contenders is a citizen of the
Philippines, and said exhibitions are promoted by Filipino citizens or by a corporation or
association which at least 60% of its capital is owned by such citizens.
K. Tax on Winnings
1. Tax rates and tax base shall apply:
Winnings in horse races or jai-alai - 10% based on the amount paid for every ticket less
cost of the ticket.
Winnings from double, forecast, quinella, and trifecta bet - 4% based on the amount paid
for ticket less cost of the ticket.
Owner of the winning horse - 10% of the prize
Note: Percentage tax shall be collected/withheld from the prize by the operator or owner of
the amusement place.
Person Subject:
Issuing corporation in a primary offering or the selling shareholder of the shares in the
secondary offering.
In the case of secondary offering - it shall be the duty of the stockholder who effected the sale
to collect the tax, and remit the same to the BIR within five banking days from the date of
collection.
Exceptions:
1. Tax on Winnings - 20 days after the date withheld
2. Stock Transaction Tax - 5 banking days after the date withheld or collection
3. IPO stock transaction tax (Primary) - 30 days from the date of listing of the shares in
the local stock exchange
4. IPO stock transaction tax (Secondary) - 5 days from the date of collection.
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