Business and Transfer Taxation
( BABUSTAX)
DONOR’S TAX
Donation
→ an act of liberality whereby a person
disposes gratuitously of a thing or
right in favor of another, who accepts
it.
→ it is a contract, therefore, the
Certificate of Compliance (C.O.C)
must be present. If you did not pay,
you will not get the COC.
→ consideration for donation is the
liberal city of the donor.
Requisites of Donation (ACID)
✓ Acceptance of the Gift
- must be done during the lifetime of
the donor and donee.
✓ Capacity of the Donor
- capable of entering into donation.
(must be in legal age, sound mind, etc.)
- Right to transfer property.
✓ Intent of the Donor
- intent to donate.
- must be fully revocable. (can be take
back)
- real properties (land, buildings, and
structures attached to land) – Public
Instrument
- personal properties (movable
properties like cars, furniture, and
jewelry)
-
if more than P5,000, the contract
must be in writing.
- if less than P5,000, the contract
can be oral nor writing.
✓ Delivery of the Gift
- real contract – Delivery completes
the donation.
Donor’s Tax (Inter Vivos)
→ tax levied, assessed, collected and
paid upon the transfer by any person,
resident or nonresident, of the
property by gift.
→ it is a tax imposed on the transfer of
the property by the way of gift
during the lifetime of the donor.
→ File as you transfer.
→ Only person will special power from
the donor can file the donor’s tax.
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→ the goal is to prevent people from
avoiding paying higher income taxes
by spreading their income among
many recipients (donees), often
family
members, or into multiple trusts. By
doing this, they try to reduce their
own tax burden since income tax
rates increase progressively with
higher income.
→ Scenario: Imagine you earn a high
income, and to avoid paying high
taxes, you give parts of your income
to your family members as gifts. If
you split your income this way, each
recipient might fall into a lower tax
bracket, reducing the overall tax paid.
Note:
Arms Length Transaction - buyers and
sellers act independently without any
relationship to each other, ensuring that
they negotiate in their own self-interest.
This concept is crucial in ensuring that
transactions are fair and reflect the true
market value, especially for tax purposes.
Nature of Donor’s Tax
✓ Privileged or Excise Tax
- tax on the privilege to transfer.
✓ Annual tax
- every year taxable.
- it is accumulated every donation.
(ipag aadd lahat).
✓ Ad valorem
- Tax is depends upon the value of the
donor’s tax.
✓ Proportionate as to rate
- It is subjected to 6% rate only. (TRAIN
LAW)
✓ National tax
- it is imposed by the government.
✓ Direct tax
- the one that donate, is the one who
will also pay.
Note:
donor – the person who gives the gift.
donee – the person who receives the gift.
Time and Transfer
 Business and Transfer Taxation
( BABUSTAX)
→ Donor’s tax shall not apply unless
and until there is a completed gift.
→ The transfer of property by gift is
perfected from the moment the donor
knows of the acceptance by the
donee; it is completed by delivery,
either actually or constructively, of
the donated property, to the donee.
→ Thus, the law in force at the time of
the perfection/completion of the
donation shall govern the imposition
of the donor’s tax.
Scenario: You decide to give your friend a
car.
Acceptance: Your friend agrees to accept
the car.
Delivery: You hand over the car keys and
the car to your friend.
Legal Point: The laws and taxes that apply
to this gift are those that are in effect at
the time your friend accepts the car and
you deliver it to them.
In simple terms, a gift is officially given
when the giver knows the receiver accepts
it and the gift is handed over. The tax rules
that apply are the ones in place at that
exact time.
Law Governing Donor’s Taxation
→ On January 1, 2018, The Tax Reform for
Acceleration and Inclusion or TRAIN
Law was enacted.
→ The net estate shall be subjected to 6%
tax rate under TRAIN Law.
→ If relatives, the tax is progressive. If
stranger, subjected to 30%.
Types and Rules in Donor’s Tax
Note:
- r = reciprocity
- PH = within the Philippines
- A = abroad
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- real property - land, buildings, and
structures attached to land.
- tangible property - physical assets that
can be touched and seen. (cash,
inventories, equipment, vehicle)
- intangible property - non-physical assets
that cannot be touched but still have
value. (patents, rights, stocks, bonds)
- if problem is silent, the she/he is
Resident/Citizens.
- If the problem is silent, it is listed.
Sample Problem #1:
MM, who owns the following properties,
donated the same to Mikee:
i. A car located in New York, United
States, P2,000,000
ii. A tricycle located in New York,
Cubao, P200,000
iii. A Jollibee franchise exercisable in
the Philippines, P1,000,000
iv. Shares issued by San Miguel
Corporation, a domestic
corporation, P355,000
v. Shares issued by YG Corporation, a
foreign corporation, 90% of the
business of which is located in the
Philippines, P482,000
vi. Shares issued by HYBE
Corporation, 60% of the business
of
which is located in the Philippines,
P355,000
vii. Shares issued by JYP Corporation,
a foreign corporation, 30% of the
business of which is located in the
Philippines, P603,000
HOW MUCH IS THE GROSS GIFT?
Solution: (add all because mikee is an RC)
Car in U.S P2M
Tricycle in Cubao 200K
Jollibee Franchise in Ph 1M
Shares issued by Sanmig Corp 355k
90% Shares issued by YG Corp 482k
60% Shares issued by HYBE Corp 355k
 Business and Transfer Taxation
( BABUSTAX)
30% Shares issued by JYP Corp 603k
Total Gross Gift P4,995,000
Sample Problem #2:
MM, who owns the following properties,
donated the same to Mikee:
i. A car located in New York, United
States, P2,000,000
ii. A tricycle located in New York,
Cubao, P200,000
iii. A Jollibee franchise exercisable in
the Philippines, P1,000,000
iv. Shares issued by San Miguel
Corporation, a domestic
corporation, P355,000
v. Shares issued by YG Corporation, a
foreign corporation, 90% of the
business of which is located in the
Philippines, P482,000
vi. Shares issued by HYBE
Corporation, 60% of the business
of which is located in the
Philippines, P355,000
vii. Shares issued by JYP Corporation,
a foreign corporation, 30% of the
business of which is located in the
Philippines, P603,000
HOW MUCH IS THE GROSS GIFT IF NON
RESIDENT ALIEN LOCATED IN PH?
Solution: (add all 90% to 100% properties
located in PH)
Tricycle in Cubao 200K
Jollibee Franchise in Ph 1M
Shares issued by Sanmig Corp 355k
90% Shares issued by YG Corp 482k
Total Gross Gift P2,037,000
NET GIFT
→ refers to the actual value of the gift
given by a business, less any amount
considered as allowable deduction
under the Philippine tax laws.
→ It's part of the business tax obligations
and is subject to specific rules and
rates set by the Philippine tax
authorities.
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→ based on BIR: “net gift” shall mean the
net economic benefit from the transfer
that accrues to the donee. Accordingly,
if a mortgaged property is transferred
as a gift, but imposing upon the donee
the obligation to pay the mortgage
liability, then the net gift is measured
by deducting from the fair market
value of the property the amount of
mortgage assumed.
Valuation of Net Gift
General Rule
- Fair market value at the time of
donation.
Real Property
- whichever higher between Zonal
Value or Value fixed by Provincial or
City Assessor.
Shares of Stock
- For listed shares of stock (those
traded on the Philippine Stock
Exchange): The net gift of listed
shares is valued at the arithmetic
mean (average) between the highest
and lowest quotation of the shares on
the date nearest to the date of death.
If there is no quotation available on
the exact date of death, the valuation
is based on the nearest available date.
- For unlisted shares of stock: for
common shares, the net gift of
common unlisted shares is valued at
their book value. For preferred
shares, the net gift of preferred
unlisted shares is typically valued at
their par value.
Sample Problem #3:
Lita donated the following to Justin on
April 26, 2021:
i. A newly purchased car with a fair
value of P5,000,000. Lita
originally bought the car for
P4,500,000 ii.
ii. A used jewelry. At the time of
purchase, the jewelry was worth
P3,000,000. at the time of the
 Business and Transfer Taxation
( BABUSTAX)
donation, the jewelry was worth
P2,000,000
iii. 3,000 preference shares with par
value of P15 per share, a market
value of P20, a book value of P33
and a liquidation value of P24
iv. 4,000 ordinary shares with a par
value of P10 per share and a
market value of P12.50
HOW MUCH IS THE GROSS GIFT?
Solution:
Car @FMV P 5M
Jewelry @time of donation 2M
Preference Shares @par (3kxP15) 45K
Ordinary Shares @market (4KxP12.50) 50K
Gross Gift P 2,095,000
FORMULA: DONOR’S TAX
Transfers that are considered as Donation
1) Sale, Exchange, or Transfer of Property
for Less Than Adequate and Full
Consideration
→ When you transfer property
(excluding certain real estate
mentioned in Section 24(D)) for
less than its fair market value
(FMV), the difference between the
FMV and the amount you received
is considered a gift.
→ Exception: If you transfer the
property as part of regular
business activities and the
transaction is at arm's length (fair
and independent, as if between
unrelated parties), this rule does
not apply.
2) Condonation or Remission of Debt
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→ It is when a creditor voluntarily
and generously cancels the debt,
either fully or partially, without
expecting any repayment or
compensation.
→ It is an essential characteristic of
remission that it be gratuitous.
→ defined as an act of liberality.
3) Renunciation of inheritance
→ Renunciation means giving up your
right to inherit something. When
this renunciation benefits specific
individuals, it can be subject to
donor's tax.
Two Types of Renunciation
a) Surviving Spouse Renouncing Share:
→ When a marriage ends (due to
death), the surviving spouse is
entitled to a share of the
community property (ACP/CPG). If
the surviving spouse gives up their
share in favor of the deceased
spouse's heirs or any other
persons, it’s seen as a gift.
→ This act is subject to donor's tax
because the surviving spouse is
transferring their property rights to
others without compensation.
→ Example: A wife dies, leaving her
share of the family home to her
husband.
→ The husband renounces his share
of the home to their children.
b) Heir Renouncing in Favor of Specific
Heirs:
→ An heir gives up their right to
inherit in favor of a specific heir,
excluding others.
→ This specific and categorical
renunciation benefits certain heirs
and disadvantages others.
→ It’s subject to donor's tax because
it’s considered a gift to the
identified heirs.
→ Example: A person dies, leaving an
estate to be divided among three
children.
 Business and Transfer Taxation
( BABUSTAX)
→ One child renounces their share Do not forget to accumulate or add yung past
specifically in favor of one of the sa current donation na net gifts at tax credit.
(both ay na a-accumulate)
other two children.
→ This renunciation is subject to EXEMPT DONATIONS
donor's tax because it’s a gift to the
favored child. 1) Gifts made to or for the use of the
National Government or any entity
Sample Problem #4: created by any of its agencies which is
not conducted for profit, or to any
Carla is the owner of three lands: political subdivision of the said
Government.
i. Carla rented Land #1 to Jayson.
2) Gifts in favor of an educational and/or
Monthly rental payments amount
charitable, religious, cultural or social
to P20,000. The rental contract is
welfare corporation, institution,
set to last for 2 years. Land #1 has a
accredited nongovernment
value of P2,300,000 and is located
organization, trust or philanthropic
in Zamboanga.
organization or research institution or
ii. Carla gave Land #2 to Rein through
organization: Provided not more than
a revocable deed of donation on
30% of said gifts will be used by such
March 13, 2018. Carla revoked the
donee for administration purposes.
donation on September 2, 2018.
3) Encumbrances on the property
Land #2 has a value of P3,400,000
donated if assumed by the donee in the
on March 13 and P3,920,000 on
deed of donation.
September 2. the land is located in
4) Donations made to entities exempted
Zambales
under special laws.
iii. Carla gave Land #3 to Carl in
exchange of cash worth ✓ Aquaculture Department of the
P500,000. The land’s value is Southeast Asian Fisheries
P2,440,000. The transaction was Development Center of the Philippines
documented in a notarized deed. ✓ Development Academy of the
The land is located in Japan. Philippines
✓ Integrated Bar of the Philippines
COMPUTE FOR THE DONOR’S TAX ✓ International Rice Research Institute
PAYABLE
✓ National Museum
Solution: ✓ National Library
Gross Gift P2,440,000 ✓ National Social Action Council
Less: Allowable Deduction (500K) ✓ Ramon Magsaysay Foundation
Net Gifts 1,940,000 5. Donations made to entities exempted
Less: exempt 250k (250K) under special laws.
Taxable Net Gift 1,690,000 ✓ Philippine Inventor’s Commission
X: tax rate of 6% 6% ✓ Philippine American Cultural
Donor’s Tax Due 101,400 Foundation
Less: Tax Credit -
Donor’s Tax Payable 101,400
✓ Task Force on Human Settlement on
the donation of equipment, materials
and services
✓ University of the Philippines
Note: there is always no tax credit if wala pang ✓ Girl Scouts of the Philippines
past donation. Magkakaroon lang na tax credit 6. Donations for election campaigns
ay based yun sa nacompute na donor’s tax Transfers for insufficient consideration
payable nung unang donation. Ileless sya sa involving real property classified as
next donation kasi nabayaran na yung first capital assets DONOR’S TAX Exempt
tax. Donations

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 Business and Transfer Taxation
( BABUSTAX)
7. General renunciation by an heir, P3,500,000 and an assessed value
including the surviving spouse, of of P3,550,000
his/her share in the hereditary estate ii. On February 24, he transferred a
left by the decedent diamond ring to his girlfriend
8. Donation with reserved powers worth P2,300,000. (first donation)
9. Quasi-transfers iii. On April 8, Klaus’ niece graduated.
10. Void transfers At this time, the value of the land
11. Foreign donations of NRA Donors has increased both its zonal and
12. Donations of property exempt under assessed value by P200,000 (dito
reciprocity. palang marerecognized ang donation
na land ng feb 13 kasi sabi, @ the time
Net Gifts of donation)
iv. On August 22, Klaus’ gave 30,000
✓ Net Economic Benefit to the Donee: unlisted preference shares of JJJ
The donee (person receiving the gift) Corporation to his sister. Each
benefits from the donation. This share has a par value of P30 and a
benefit is measured at the time the market value of P32.
donation is made.
✓ Valuation at the Point of Completion:
The value of the donation is assessed
when the donation is completed or
perfected. This means the value is Solution:
based on the market value at the exact
time the gift is officially given. FOR FEB 24:
✓ Tax Computation Based on Total Gifts: Gross Gift P2,300,000
Donor's tax is calculated each calendar Less: Allowable Deduction -
year based on the total value of gifts Net Gifts 2,300,000
given during that year. Only the Less: exempt 250k (250K)
amount exceeding ₱250,000 is subject Taxable Net Gift 2,050,000
to tax. X: tax rate of 6% 6%
Donor’s Tax Due 123,000
Donation of Common Properties Less: Tax Credit -
✓ Husband and wife are considered as Donor’s Tax Payable 123,000
separate and distinct taxpayers for the
purpose of donor’s tax. Both must file FOR APRIL 8:
a separate donor’s tax return for the
donation. GrossGift(3.550 +200K+2.3M)
✓ Even though they are married, for the P6,050,000
Less: Allowable Deduction -
purposes of donor’s tax, a husband
Net Gifts 6,050,000
and wife are considered as separate Less: exempt 250k (250K)
individuals. Each must file their own
Taxable Net Gift 5,800,000
donor’s tax return for any donations X: tax rate of 6% 6%
they make.
Donor’s Tax Due 348,000
Sample Problem 5: Less: Tax Credit (123,000)
Donor’s Tax Payable 225,000
Klaus, a resident citizen, donated the
following in 2020:
Donor’s Tax Credit
i. On February 13, he donated 20,000
square meters parcel of land in ✓ The donor’s tax imposed upon a citizen
Cavite to his niece subject to the or resident at the time of the donation
condition that she will graduate. shall be credited with the amount of
The land was acquired at a price of any donor’s tax, of any character and
P3,000,000, with a zonal value of
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 Business and Transfer Taxation
( BABUSTAX)
description, imposed by the authority
of a foreign country.
✓ Resident or Citizens may claim the
credit.
✓ If you are a citizen or resident and
make a donation that is taxed both in
your home country and in a foreign
country, you can reduce the donor’s
tax you owe in your home country by
the amount of donor’s tax you paid to
the foreign country.

Filing of Return and Payment

✓ Every person, whether natural or
juridical, resident or non-resident, who
transfers or causes to transfer property
by gift, whether in trust or otherwise,
whether the gift is direct or indirect
and whether the property is real or
personal, tangible or intangible is liable
to file and pay donor’s tax.
Donor’s Tax Return
✓ Separate return is filed for each gift
made on different dates during the
year reflecting therein any previous
net gifts made in the same calendar
year.
✓ If the gift involves
conjugal/community property, each
spouse shall file separate return with
respect to his/her respective share in
the said property.
✓ The return must be filed within 30
days after the date when the gift was
made or completed.
✓ The tax due thereon shall be paid at the
same time that the return is filed (pay-
as you-file).

VALUE ADDED TAX

CONSUMPTION TAX

- Tax on the acquisition or utilization of

goods or services by any person.
(Purchase, Exchange or Other means)
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 Business and Transfer Taxation
( BABUSTAX)
- Business tax is a form of - these are not classifies as business and
consumption tax. also not subjected to business tax.

RATIONALE: REMEMBER: GROSS SELLING PRICE –

GOODS; GROSS RECEIPTS – SERVICE
1. Savings formation
If goods, gross selling price (lahat ng kita)
2. Benefit-received Theory is basis regardless kung kaylan narecieve
3. Wealth Redistribution If services, gross receipts (lahat ng
narecieve) ang basis regardless kung
Business kaylan kumita.
- Habitual engagement in a
commercial activity involving the sale
of goods or services for a profit. DESTINATION PRINCIPLE (Cross Border
- Must be intended for PROFIT. Doctrine) - Only goods and services
destined for consumption in the
- There must be a regularity in business Philippines (import) are subject to
transactions. (not habitual consumption tax while those destined for
engagement: decluttering clothes) consumption abroad (export) are not
- Business tax is an indirect tax, the taxed.
incidence falls on the seller or the
business. Only those cinonsume sa Philippines are
subjected to consumption tax.
Except: VAT on Importation
3 Types of Business Tax
The following are not considered as
business hence notsubjected to business 1. Value Added tax (VAT) – Levied on sale,
tax: barter and exchange or lease of goods or
properties and services in the Philippines
1. Isolated, Irregular and Casual Sales and on importation of goods into the
(ex: magbebenta ka kasi nag declutter ka) Philippines.
2. NGOs CHARACTERISTICS:
3. Government Agencies 1. Indirect Tax (ipinasa sa
consumer ang pagbabayad ng
4. Employment (income tax na kasi tax)
ito) 2. Tax on Value Added
5. Privilege Stores (tyange, sidera, 3. Collected through the
etc.) To be considered as Privilege Stores: Tax Credit Method (Output Tax
– Input Tax = VAT Payable)
Output Tax – tax sa lahat ng sales mo
Input Tax – tax sa lahat ng cost of sales
mo
a. Engaged in business for a 4. Transparent form of Sales Tax
cumulative period of not more than 15 (makikita agad ang breakdown sa
days (pag lumagpas ng 15 days, resibo)
considered na as business, subjected na sa
business tax) 2. Percentage Tax – Levied on sale of goods
and services not covered by the VAT
6. Business for Mere Subsistence system
- Residual, if not subjected to VAT, it is
- Gross Sales or receipts does not exceed subjected to percentage tax.
P100,000 (ex: nagtitinda ng candy sa gilid
gilid, maliliit na kita)

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 Business and Transfer Taxation
( BABUSTAX)
3. Excise Tax – Imposed on the consumption
of certain commodities at the point of
production and importation.
Note: VAT and PT are always mutually
exclusive. Pag tinaxan na ng vat, bawal na
taxan ng PT. but excise tax, can go along
with these two.
PERSONS LIABLE FOR VAT:
1. Any person or entity who, in the
course of his trade or business, sells,
barters, exchanges, leases or properties
and renders services subject to VAT, if the
aggregate amount of actual gross sales or
receipts exceed Three Million Pesos (Php
3,000,000.00)
2. Any person who imports goods
into the PH, whether or not in the course
of trade or business
3. A person required to register as VAT
taxpayer but failed to register
VAT-REGISTERED PERSONS:
1. Taxpayers who are required to
register in accordance with the law
(MANDATORY)
a. His gross sales or receipts for the
past 12 months, other than those exempt,
have exceeded P3M
b. There are reasonable grounds to
believe that his gross sales or receipts for
the next 12 months other than those that
are exempt will exceed P3M
2. Taxpayers who opted to be
registered as a VAT person (OPTIONAL)
NOTE: Such status is irrevocable until 3
consecutive years has lapsed and
thereafter he can decide to revert to
exempt status EXEMPTION SA 3 YEARS: If
you are a franchise grantee of radio and tv
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broadcasting and your annual gross
receipts do not exceed 10 MILLION and you
chose to register via optional method, your
registration is perpetually irrevocable.
EFFECT OF FAILURE TO REGISTER:
Liable to pay VAT as if he were a VAT-
registered person, but without the benefit
of input tax credits for the period in which
he was not properly registered.
VAT-EXEMPT PERSON:
1. His transactions are exempt from
VAT in accordance with the laws
2. He is specifically exempt from VAT
by specific provision of the laws or
international agreement
WHO ARE REQUIRED TO FILE A VAT
RETURN:
1. Every person liable to pay VAT shall
file a QUARTERLY RETURN of his gross
sales or receipts within 25 days following
the close of taxable quarter.
2. Monthly Returns and Quarterly
return VAT on IMPORTATION:
1. Purchase of goods or services by
Philippine residents (regardless if engaged
in trade or business) from nonresident
sellers
a. GOODS – VAT on Importation
b. SERVICES – Final Withholding Tax
2. Tax Base and Rate: 12% of Total
value used and collected by BOC or Landed
Cost (Invoice amount, customs duties,
freight, insurance, other charges, handling
fee)
ZERO-RATED SALES:
Taxable transaction for VAT purposes but
shall not result in any output tax. However,
input tax on purchase of goods, properties
 Business and Transfer Taxation
( BABUSTAX)
or services related to such zero-rated sale 7. Sale of goods, property and
shall be available as tax credit or refund. services by a VAT exempt supplier from the
Customs Territory to a PEZA registered
Comparing VAT-Exempt and Zero-rated enterprise shall be EXEMPT from VAT,
Sales: regardless of whether or not the PEZA
ZERO RATED SALES VAT EXEMPT SALES registered buyer is subject to taxes under
the NIRC or enjoying the 5% special tax
Still taxable but does not result to output regime.
tax Not subject to output tax
Input tax may be allowed as tax credit or
refund Seller is not entitled to any input OUTPUT and INPUT TAX:
tax VAT Payable Formula: Output Tax - Input
Required to register Registration is Tax = VAT Payable
optional
EXPORT SALES: OUTPUT TAX:
1. The (i) sale and actual shipment of 1. For sale of goods or properties
goods from the Philippines to a foreign
country AND (ii) paid for in acceptable = GSP x VAT rate (12% or 0%) = OUTPUT
foreign currency or its equivalent in goods TAX
or services, AND (iii) accounted for in
accordance with the rules and regulations 2. For sale of spices
of the BSP. = GR x VAT rate (12% or 0%) = OUTPUT TAX
2. The (i) sale of raw materials or 3. If Invoice mount is erroneously
packaging materials to a nonresident billed
buyer (ii) for delivery to a resident local
export-oriented enterprise (iii) to be used = Total Invoice Amount x 12%/112% =
in manufacturing, processing, packing or OUTPUT TAX
repacking in the Philippines of the said
buyer's goods AND (iv) paid for in
acceptable foreign currency AND (v) INPUT TAX:
accounted for in accordance with the rules
and regulations of the BSP. 1. Regular Input VAT
3. Sale of raw materials or packaging SOURCE TIMING OF CREDIT
materials to export-oriented enterprise
whose export sales exceed 70% of total Purchase of goods or properties
annual production.
Month of purchase
4. Those considered export sales
under the Omnibus Investment Code of Purchase of services Month paid
1987, and other special laws. Importation of goods Month paid
5. The sale of goods, supplies, Purchase of depreciable
equipment and fuel to persons engaged in capital
international shipping or international air
transport operations: Provided, That the goods or properties Month purchased
goods, supplies, equipment and fuel shall
be used exclusively for international Purchase of non- depreciable
shipping or air transport operations. vehicles Not creditable

6. ECOZONES
2. Transitional Input VAT
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 Business and Transfer Taxation
( BABUSTAX)
Who can claim?
a. Taxpayers who became VAT- CANCELLATION OF VAT REGISTRATION:
registered persons upon exceeding the
minimum turnover of P3,000,000 in any 1. A VAT-registered person may apply
12-month period for the issuance of tax credit certificate for
any unused input tax within 2 years from
b. Taxpayers who voluntarily the cancellation of the registration.
registers as a VAT payer even if turnover
does not exceed P3,000,000 (except 2. Such TCC can be used in the
franchise grantees) payment of other internal revenue taxes. If
there are no other internal revenue taxes,
it shall be refunded.
Allowed Transitional Input VAT, higher of: ADMINISTRATIVE AND PENAL SANCTIONS:
a. 2% of the value of the beginning
inventory on hand
1. The CIR or his duly authorized
b. Actual VAT paid on such goods, representative may order the suspension
materials or supplies or closure of a business establishment for
a period of not less than 5 days for any of
3. Presumptive Input VAT the following violations:
Who can claim? a. Failure to issue receipts and
a. Persons engaged in processing of invoices
mackerel, milk and sugar b. Failure to file VAT return
b. Persons engaged in manufacturing c. Understatement of taxable sales or
cooking oil, packed noodle-based instant receipts by 30% or more of his correct
meals and refined sugar taxable sales or receipt for the taxable
quarter

Allowed Input VAT: d. Failure of any person to register as

required
a. 4% of the Gross Value in money of
their purchases of primary agricultural
products which are used as input to their
production
4. Standard Input VAT
a. Allowed in sale of goods and
services to the government or any of its
political subdivisions, instrumentalities or
agencies, including GOCCs is subject to
5% Final Withholding VAT based on Gross
Payment.
b. The government or GOCCs shall
withhold it before making the payment
and remit within 10 days following the end
of the month the withholding was made.
5. Input VAT Carry-over
- Excess input VAT in a particular month or
quarter
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 Business and Transfer Taxation
( BABUSTAX)
- registered person and whose gross
annual sales or receipts does not
exceed P3,000,000.
Illustration 1
Mr. Arevalo is a trader. His gross sales
in the preceding year amounted to
P112,500. How much is the percentage
tax?
Answer: Gross sales P112,500 x 3% =
P3,375

Illustration 2
Mr. Balboa sells agricultural food
products in their original state. Last
year his gross sales amounted to
P1,900,000. What business tax would
he pay?
Answer: None (exempted on VAT)
OPT
2. Domestic carriers by land and keepers
of garage (common carrier’s tax)
→ Tax on the transaction and not on the
articles sold, bartered or exchanged. - 3% of Quarterly Gross Receipts
→ Tax Base and Rate: 3% of Gross - cars for rent or hire driven by the
Quarterly Sales or Receipts (with lessee
several exemptions.
- transportation contractors, including
→ Pag umabot ng 3m, 12% persons who transport passengers
for hire
→ Pag di umabot, 3%
- other domestic carriers by land
PERSONS LIABLE FOR OPT/FILING
- keepers of garage
✓ Every person subject to the percentage
taxes shall file a Quarterly Return and - cargos are not subject to tax
pay the tax due thereon within 25 days
after the end of each taxable quarter
✓ If the person is retiring from business Exempt: boater and two-wheeled animal
subject to percentage tax, it shall notify drawn vehicle
the nearest internal revenue officer, Illustration 3
file his return and pay the tax due
within 20 days after closing his
business
TRANSACTIONS COVERED BY OPT
1. Sale of goods or services of persons
who are exempt from VAT and who is
not VAT
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 Business and Transfer Taxation
( BABUSTAX)
MINIMUM QUARTERLY GROSS RECEIPTS
They have to pay for the minimum amount
written on this or the actual amount they
receive whichever is higher
Illustration 4
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3. International carriers (air and
shipping)
- 3% of Quarterly Gross Receipts
4. Franchises (Radio and TV Broadcasting
companies whose gross annual receipts do
not exceed P10M if exceeds, 0. )
- 3% of Quarterly Gross Receipts
5. Franchises (Gas and Water Utilities)
- 2% of Quarterly Gross Receipts
6.
Overseas dispatch, message or
 Business and Transfer Taxation
( BABUSTAX)
conversation originating from the 8. Life Insurance Policies
Philippines
- 2% on the Total Premium Collected,
- 10% of Amount paid for such services whether paid in money, notes, credits
or any substitute for money
- Exempt: Government, Diplomatic
services, Public International - Not included in taxable receipts
Organization, News Services
a. Premiums refunded within 6 months
7. Banks and Non-bank financial after payment on account of rejection
intermediaries performing quasi-banking of risk or others
functions
b. Reinsurance
- Interest, Commissions and Discounts
from Lending activities and finance c. Premiums collected by any branch of
leasing domestic corporation, firm or
association doing business outside PH
- If maturity is 5 years or less – 5%;
more than 5 years – 1% d. Premiums on variable contracts
- Dividends and Equity shares and net
income of subsidiaries – 0%

- Royalties, rental of property, profits

from exchange – 7%

- Net Trading Gains within taxable year

on foreign currency – 7%

9. Foreign Insurance Companies (Direct)

- 5% on the Total Premium Collected

(owner who procured the insurance
must pay)
10. Agent of Fire, Marine or Miscellaneous

- Insurance 4% on the Total Premium

Collected
11. Proprietors, lessee or operator of
amusement places

- Cockpits – 18%

- Cabarets, night or day clubs – 18%

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 Business and Transfer Taxation
( BABUSTAX)
- Boxing exhibitions – 10% - 10% of the actual amount paid to him
for every winning ticket after
- Boxing exhibitions wherein World or deducting the cost of the ticket
Oriental Championship is at stake
shall be exempt if at least 1 of the - Double, Forecast/Quinella and Trifecta
contenders is a Filipino citizen and – 4%
said exhibitions are promoted by
citizens or corporations at least 60% - Owners of winning racehorses – 10%
of the capital of which is Filipino-
owned.

- Professional basketball games – 15%

Jai alai and racetracks (whether or not
they charge admissions) – 30%

13. Sale, barter or exchange of shares of stock

listed and traded through the local stock
exchange or through initial public
offerings

- Traded through local stock exchange –

6/10 of 1% of GSP

- Exchanged through IPO

- Up to 25% - 4%

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

- Over 33 1/3% - 1%

12. Winnings

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 Business and Transfer Taxation
( BABUSTAX)
FILING AND PAYMENT
- BIRFormNo.2551Q/2552
- Within 25 days from the end of each
taxable quarter (except sale through
LSE– 5 banking days from the date of
collection; sale through primary
offering– 30 days from date of listing
in LSE; secondary offering– 5 baking
days from the date of collection)
OUTPUT TAX - The VAT due on the sale or
lease of taxable goods or properties or services
by any person registered or required to
register under VAT
- For sale of goods or properties GSP x
VAT rate (12% or 0%) = OUTPUT TAX
- For sale of seices GR x VAT rate (12%
or 0%) = OUTPUT TAX
- If Invoice mount is erroneously billed
Total Invoice Amount x 12%/112% =
OUTPUT TAX
INPUT TAX - The VAT due from or paid by a
VAT registered person in the course of his
trade or business on importation from a VAT-
registered person
1) Regular Input VAT
2) Transitional Input VAT
Who can claim?
- Taxpayers who became VAT-registered
persons upon exceeding the minimum
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turnover of P3,000,000 in any 12-
month period
- Taxpayers who voluntarily registers as
a VAT payer even if turnover does not
exceed P3,000,000 (except franchise
grantees
Allowed Transitional Input VAT, higher of:
- 2% of the value of the beginning
inventory on hand Actual VAT paid on
such goods, materials or supplier
A company who voluntarily registered as a
VAT taxpayer. He had the following
inventory:
VAT-exempt goods P80,000
Vatable goods 40,000
Equipment 112,000
3) Presumptive Input VAT
Who can claim?
- Persons engaged in processing of
mackerel, milk and sugar
- Persons engaged in manufacturing
cooking oil, packed noodle-based
instant meals and refined sugar
- 4% of the Gross Value in money of
their purchases of primary
agricultural products which are used
as input to their production
4) Standard Input VAT
- Allowed in sale of goods and services
to the government or any of its
political subdivisions,
instrumentalities or agencies,
including GOCCs is subject to 5% Final
Withholding VAT based on Gross
Payment.
 Business and Transfer Taxation
( BABUSTAX)
- The government or GOCCs shall
withhold it before making the
payment and remit within 10 days
following the end of the month the
withholding was made.

5) Input VAT Carry-over

- Excess input VAT in a particular month

or quarter

CANCELLATION OF VAT REGISTRATION

- A VAT-registered person may apply for

the issuance of tax credit certificate
for any unused input tax within 2
years from the cancellation of the
registration.

- Such TCC can be used in the payment

of other internal revenue taxes. If
there are no other internal revenue
taxes, it shall be refunded.

ADMINISTRATIVE AND PENAL

SANCTIONS

- The CIR or his duly authorized

representative may order the
suspension or closure of a business
establishment for a period of not less
than 5 days for any of the following
violations:

- Failure to issue receipts and invoices

- Failure to file VAT return

- Understatement of taxable sales or

receipts by 30% or more of his correct
taxable sales or receipt for the taxable
quarter

- Failure of any person to register as

required