PERCENTAGE TAX

- Percentage tax is a business tax imposed on persons, entities, or transactions specified under
Sections 116 to 127 of the National Internal Revenue Code of 1997 (also known as Tax Code),
as amended, and as required under special laws.
- A tax imposed on sale, barter or exchange of goods or sale of services based upon gross
sales, value in money or receipts (except insurance companies) derived by the manufacturer,
producer, or seller measured by certain percentage of the gross selling price or receipts

Characteristics of Percentage Tax:

1. It is a business tax
2. It is a form of sales tax
3. It is a deduction from gross income

Percentage Tax in NIRC TAX RATE

Sec. 116 – Tax on persons exempt from VAT or whose annual gross sales or receipts 1%
do not exceed P3 Million. (7/1/20 –
Notes: 6/30/23)
1. Applicable to individuals and non-individuals including estates, trusts, 3%
partnerships and corporations (1/1/98 –
2. Persons, who are not VAT-registered, who sell goods, properties or services, 6/30/20)
whose annual gross sales and/or receipts do not exceed three million pesos 3%
(Php3,000,000.00) and are exempt from value-added tax (VAT) under Section 109 7/1/23 -
(BB) of the National Internal Revenue Code, as amended by Republic Act (RA) No. Onwards
10963.
3. Persons who lease residential units where the monthly rental per unit exceeds Of
fifteen thousand pesos (Php15,000.00) but the aggregate of such rentals of the
lessor during the year does not exceed three million pesos (Php3,000,000.00) GROSS
4. Self-employed individuals who availed 8% preferential tax is not subject to 3% SALES/RECEIPTS
percentage tax
5. Cooperatives are exempted
6. RC, NRC, RA, NRAE whose business income was subjected to graduated tax rate
may be subject to 1% tax (old rate 3%)
7. CREATE LAW: Effective April 11, 2021
Sec. 117 – Percentage tax on domestic carriers and keepers of garage (transport of 3%
passengers)
actual or
Common carrier refers to persons, corporations, firms minimum
or associations engaged in the business of carrying or transporting passengers or quarterly gross
goods or both by land, water, or air, for compensation, offering their services to the receipts
public and shall include transportation contractors whichever is
Notes: higher
1. Applicable to the following:
• Cars for rent or for hire
• Taxicabs
• Utility cars for rent
• Tourist buses
• Transport contractors of passengers
 • Keepers of garages
2. Does not apply to:
• Owner of bancas
• Animal-drawn two-wheeled vehicles
3. Domestic air or sea are subject to VAT
4. Transport Network Companies or Transport Network Vehicle System (Grab/Uber)
are treated as follows:
• With Certificate of Public Convenience (franchise) subject to 3%
• Without CPC – 3% if gross receipts does not exceed P3M; 12% VAT if
gross receipts exceeded P3M
Sec. 118 – Percentage tax on international carriers 3% of Gross
Receipts
• International air carrier - flights originating from the Philippines
• International sea carrier – shipment originating from the Philippines NOTE: If with
On cargo/mail (does not include passenger or excess baggage) with uninterrupted reciprocity, it
flight regardless of whether the tickets are sold within/without can be
exempted or be
subjected to
lower than 3%
Sec. 119 – Tax on franchises

Note: electric utilities are subject to 12% VAT

Franchise tax is based from Gross receipts:

Franchises on radio and/or TV broadcasting companies whose annual gross receipts

of the preceding year do NOT exceed Php 10 million 3%
-------------------------------------------------------------------------------------- -----------
Franchises on gas and water utilities 2%
--------------------------------------------------------------------------------------- -----------
Gaming operations of PACCOR 5%
--------------------------------------------------------------------------------------- -----------
Transmission operation of National Grid Corporation of the Philippines 3%
Sec. 120 – Tax on overseas dispatch, message or conversation originating from the 10%
Philippines

Overseas Communication Tax is based on the amount paid for such services (by the
person who used the communications facilities)
Exceptions:
a. government to gov’t calls
b. diplomatic services (embassies and consular offices of foreign
governments)
c. international organizations – for messages transmitted by international
organization or any of its agencies based on the Philippines enjoying
privileges, exemptions and immunities which the Philippine Government
recognize pursuant to international
agreements
 d. news services
Sec. 121 – Tax on banks and non-bank financial intermediaries performing quasi-
banking functions
Notes:
1. Banks refer to persons and entities engaged in lending funds obtained
from public.
2. Non-bank financial intermediaries are persons or entities whose
principal functions include lending, investing or placement of funds or
evidences of indebtedness or equity deposited with them, acquired by
them, or otherwise coursed through them, wither for their own account or
for the account of others
3. This rule applies to Money changers

Gross receipts on interest, commissions and discounts from lending activities;

income from financial leasing:

Remaining maturity period of instrument is 5 years or less 5%

--------------------------------------------------------------------------------------------- ----------
Remaining maturity period of instrument is more than 5 years 1%
--------------------------------------------------------------------------------------------- -----------
Dividends and equity shares in net income of subsidiaries 0%
--------------------------------------------------------------------------------------------- ----------
Royalties, rentals of property, real or personal, profits from exchange and all other 7%
items treated as gross income under the Tax Code
--------------------------------------------------------------------------------------------- -----------
Net trading gains within the taxable year on foreign currency, debt securities, 7%
derivatives and other similar financial instruments
Sec. 122 – Tax on other non-bank financial intermediaries (not performing quasi-
banking functions)

Notes: This rule applies to:

1. Pawnshops
2. Non-stock Savings and Loan Associations

Gross receipts derived from interest, commissions, discounts and all other items
treated as gross income under the Tax Code 5%
--------------------------------------------------------------------------------------------- ----------
Interests, commissions and discounts from lending activities, as well as income
from financial leasing:

Remaining maturity of instrument is 5 years or less 5%

------------------------------------------------------------------------------------------ ----------
Remaining maturity of instrument is more than 5 years 1%

Sec. 123 – Tax on life insurance premiums 2% of TOTAL

Exceptions: PREMIUMS
1. Purely cooperative companies COLLECTED
 2. Premiums refunded within 6 months after payment
3. Reinsurance by a company (local or foreign) that has already paid the tax Note: 5% under
4. Premiums of insured who is non-resident and taxes are paid abroad RMC 59- 2008
Note: Premium on Health and Accident Insurance, whether received by a life or
non-life insurance company, shall be considered as premium on life
insurance and, therefore, likewise subject to Premium Tax and not Value-added Tax
Sec. 124 – Tax on agents of foreign insurance companies (fire, marine or
miscellaneous insurance)

Total premiums collected/paid (twice of Sec. 123) 4%

------------------------------------------------------------------------------------------- -----------
Owners of property obtain insurance directly with foreign insurance companies 5%
Sec. 125 – Amusement taxes

Gross receipts
Jai-alai and racetracks 30%
--------------------------------------------------------------------------------------------- -----------
Cockpits, cabarets, night or day clubs 18%
--------------------------------------------------------------------------------------------- -----------
Videoke, karaoke bars, karaoke TVs, karaoke boxes, music lounges - 18%
--------------------------------------------------------------------------------------------- ----------
Professional basketball games (in lieu of all other percentage taxes of 15%
whatever nature)
--------------------------------------------------------------------------------------------- -----------
Boxing exhibitions 10%

Note: For boxing exhibitions, to be exempt, a World or Oriental Championships in

any division is at stake provided that one boxer is a citizen and promoter is a
corporation or organization owned by at least 60% by Filipino citizens

Sec. 126 – Tax on winnings on race horses

Bettor: Winning or dividends less cost of the ticket 10%

--------------------------------------------------------------------------------------------------------- -----------
Bettor: Winnings or dividends less cost of ticket from double, forecast/quinella and 4%
trifecta bets
--------------------------------------------------------------------------------------------------------- ----------
Owner of horse: Prize of winning race horse owners 10%

Sec. 127
(A) Tax on sale, barter or exchange of shares of stock listed and traded through
the local stock exchange 6/10 of 1%
Of
Gross selling
price or gross
value in money
Compliance

A. 2551Q – withing 25 days after the end of each taxable quarter

B. Special Deadlines
1. 20 days counted from end of each quarter
a. Overseases communication tax – within 20 days after the end of each
quarter
b. Amusement Tax – within 20 days from end of the quarter
2. 20 days from specified event
a. Tax on Winnings – within 20 days from withholding or deduction of the tax
b. Persons retiring in the business - within 20 days after closing the business
3. 5 banking days from date of collection – stock brokers on sales of stocks to PSE