OTHER

PERCENTAGE
TAX (OPT)
As amended by TRAIN LAW

Christopher de Guzman, CPA, CAT

Sec. 116 – Tax on person exempt from
VAT
■ Applies to a person who is exempt under
Sec. 109BB and a non – VAT registered
person whose sales or receipts do not
exceed P 3M.
■ He shall pay 3% tax on gross quarterly sales
or receipts.
Sec. 109BB

Sale or lease of goods or properties or the performance of

services other than the transactions mentioned in the
preceeding paragraph, the gross annual sales and/or
receipts do not exceed the amount of P 3M.
Sec. 116
One of the following is subject to three percent (3%) percentage tax
a. Establishments whose annual gross sales or receipts exceed P
3,000,000 and who are VAT registered.
b. Businesses whose annual gross sales or receipts exceed
P3,000,000 and who are not VAT registered.
c. VAT registered establishment whose annual gross sales or receipts
do not exceed P3,000,000 and who are VAT registered.
d. Establishments whose annual gross sales or receipts do not
exceed P 3,000,000 and who are not VAT registered.
Sec. 116

Which of the following is subject to 3% percentage tax under Section

116 of the Tax Code?
I. Fruit dealer whose gross receipts for the year amounted to P1,200,000
exempt
II. An individual taxpayer whose gross sales for the year amounted to
P100,000 exempt – marginal income earners
a. I only
b. II only
c. Both I and II
d. Neither I nor II
Sec. 116
Mr. Ancho, not a Vat – registered person, has the following data for the year 2018:
Sales of fresh fruits 500,000 - exempt
Sales of fresh vegetables 500,000 - exempt
Sales of dried fish 500,000 - exempt
Sales of refined sugar 500,000 – 3% OPT
Sales of cooking oil 500,000 – 3% OPT

Only 50% of the above sales were collected

1M x 3% = 30,000
How much is the VAT or percentage tax for the year 2018?
a. P75,000 c. P30,000
b. P45,000 d. P210,000
Sec. 116

Mahigos owns the following businesses: Receipts from restaurant P 1,350,000

Annual Gross Receipts Restaurant 1,350,000 Receipts from barber shop 625,000
Total P 1,975,000
Annual Gross Sales, Restaurant, 1,000,000 OPT 3% P 59,250
Barbershop, receipts, 625,000
Barbershop, sales 600,000
Seller of marine food products, receipts 1,875,000
Seller of marine, food products, sales, 2,000,000

Purchases of goods from VAT supplier totaled P 1,200,000 (related to VAT

business if applicable).

How much is the VAT payable or percentage tax for the year?
Sec. 116
Ms. Jaysa, not VAT registered, has the following data for the taxable year 2018:
Accounts Receivable, 12/31/2017, 500,000
Accounts Receivable, 12/31/2018, 300,000
Sales 1,300,000 x 3% = 39,000
If Ms. Jaysa is a seller of goods, how much is the Percentage tax during the year?
a. P45,000 c. P51,000 AR, beg 500,000
Sales 1,300,000
b. P39,000 d. nil AR, end (300,000)
Collection 1,500,000 x 3% = 45,000

If Ms. Jaysa is a seller of services, how much is the percentage tax during the
year?
■ VAT registered person – liable to VAT
■ NON – VAT registered person – liable to VAT or not;
less than 3M – OPT
Sec. 116 – exempt under Sec, 109BB and not –VAT registered
Sec. 109BB –

VAT exempt – Sec. 116 of the Tax Code:

109E – percentage tax
 Sec. 117 – Common Carrier Tax
■ Applies to cars for rent or hire;
■ Transportation contractors, including persons who transport passengers for
hire;
■ Other domestic carriers by land for the transport of passengers;
■ Except owners of bancas and owners of animal drawn two wheeled
vehicle;
■ Keepers of garages;
■ Tax shall be 3% of quarterly gross receipts;
■ Gross receipts of common carriers are not subject to local taxes;
■ Subject to minimum quarterly gross receipts.
 Minimum quarterly gross receipts
■ Jeepney for hire –
1. Manila and other cities P 2,400
2. Provincial P 1,200
■ Public utility bus –
Not exceeding 30 passengers P 3,600
Exceeding 30 but not exceeding 50 passengers P 6,000
Exceeding 50 passengers P 7,200
■ Taxis –
1. Manila and other cities P 3,600
2. Provincial P 2,400
■ Car for hire (with chauffeur) P 3,000
■ Car for hire (without chauffeur) P1,800
Summary – Domestic Carriers
Domestic Carrier Transporting within Business Tax
the Philippines Applicable
Land Passengers OPT (Carrier Tax)
Land Cargo/ Goods VAT/OPT
Air Passengers, cargo, VAT/OPT
goods
Sea Passengers, cargo, VAT/OPT
goods

Philippines to other country (air or sea) – zero

rated (0%)
Sec. 117

Which of the following is subject to the 3% common carrier’s tax?

a. Transportation contractors on their transport of goods or cargoes.

VAT/OPT – Sec. 116
b. Common carriers by air and sea relative to their transport of passengers.
– VAT/OPT – Sec. 116
c. Owner of animal-drawn two-wheeled vehicle. – exempt under Sec. 117
d. Domestic carriers by land for the transport of passengers – Sec 117
Sec. 117

All of the following, except one, are not subject to common carrier’s tax

a. Owner of a parking lot/building – VAT/OPT

b. Rent-a-car companies -
c. Common carriers engaged in carriage of goods or cargo - VAT/OPT
d. Domestic airline companies – VAT/OPT – domestic flight/ voyage
Sec. 117
Masbate liner Co. is a common carrier with passenger buses and cargo trucks.
For the month, it had the following data on receipts, taxes not included:
From transport of passengers 800,000 –Sec. 117
From transport of cargoes 200,000 – VAT/OPT – Sec. 116
From bus rentals for school fieldtrips 400,000 – Sec. 117
1,200,000 x 3% = 36,000
Common carriers’ tax is:
a. P36,000 c. P24,000
b. P12,000 d. nil
Sec. 117

Milagros Lines , VAT – registered person, has the following gross receipts in February:
Bus 1 (carriage of goods, P13,000) 100,000 87,000
Bus 2 (carriage of goods, P13,500) 165,000 151,500
Taxi 90,000
Jeepney 35,500
Cargo truck 45,000
Sea vessel 250,000 Total receipts: 364,000 x 3% = 10,920
Additional Information:
■ Salaries of drivers and conductor 125,000
■ Cost of oil gasoline 75,000
■ During the month, Bus 1 was bumped by another bus lines owned by Mandaton Lines
and paid Milagros Lines P120,000 for the damage.
■ The percentage tax due (common carrier tax) on Milagros Line in February is:
Sec. 117

The next two (2) question are based on the following:

Siksikan Transport Company had the following gross receipts for the month:
From transport of passengers P485,000; From transport of cargo
220,000; From the rental of cargo trucks 33,000 ; From “rent a car” to
balikbayans 30,000.
Payments to VAT registered persons during the month amounted to
P99,000.
The percentage tax (common carrier tax) due is : 515,000 x 3% = 15,450
Assuming that the amounts given do not include the tax, the value –added
tax due is (253,000 – 99,000) x 12% = 18,480
Sec. 117
Which of the following transportation providers is not subject to
percentage Tax?
a. School bus operators - common carrier
b. Cargo truck operators – VAT/OPT Sec. 116
c. Passenger Jeepney operators - common carrier
d. Car rental business - common carrier
Sec. 118 – Tax on international carrier

■ Applies to International air or shipping carriers;

■ Doing business in the Philippines (RFC) on their
CARGO from the Philippines to another
country;
■ Shall pay a tax of 3% of their quarterly gross
receipts.
■ Passengers – Exempt
Sec. 118

Determine the carrier that is subject to the percentage tax:

a. Resident foreign corporation operating International shipping
carrier
b. Non-resident foreign corporation operating as international air
carrier
c. Domestic corporation with international flights – Zero Rated
d. Domestic corporation with international voyages – Zero rated
Sec. 118
Which of the following carrier shall be subject to Common carrier’s tax?
I. Air/sea carrier classified as Resident Foreign Corporation, annual gross
receipts is less than P3,000,000.
II. Air/sea carrier classified as Resident Foreign Corporation, annual gross
receipts is more than P3,000,000.
III. Sea carrier classified as Domestic Corporation voyage is from Philippines to
Japan, annual gross receipts are P3,000,000. OPT 3% Sec. 116 More than 3M –
0%
a. I only c. III only
b. I and II only d. I, II and III
Gross Receipts, meaning

■ Shall include, but not limited to, the total amount of money or
its equivalent representing the contract, freight/ cargo fees,
mail fees, deposits applied as payments, advance payments and
other service charges and fees actually or constructively
received during the taxable quarter from cargo and/or mail,
originating from the Philippines in a continuous and
uninterrupted flight, irrespective of the place of sale or issue
and the place of payment of the passage documents.
■ RR # 10378, RR 3 15-2013, RR 13-2018
Not applicable to –

■ Offline international carriers having a branch/office or sales

agent in the Philippines which sells passage documents for a
compensation or commission to cover off-line flights or
voyage of its principal or head office, or for other airlines or
sea carriers covering flights or voyages originating from
Philippines ports or offline flights or voyages. (RR15-2013).
Sec. 118

Statement 1: International air carriers and international shipping

carriers shall not be subject to 12% value added tax but to 3% common
carrier’s tax based on gross receipts derived from their transport of
passengers and goods from Philippines to other countries. False

Statement 2: In cases where the Gross Philippines Billings Tax of 2.5%

for international carriers is not applicable (i.e., tax exempt based on
reciprocity or treaty), the common carrier’s tax under Sec. 118 of the
NIRC as amended shall still apply. True
Sec. 118
China Northern Airlines Inc., a resident foreign corp. has the following Collections
for the month of May 2018:
Passengers airfare from China to Philippines 1,800,000 - exempt
Passenger airfare from Philippines to China 1,500,000 - VAT
Airfare for cargoes from china to Philippines 700,000 - exempt
Airfare for cargoes from Philippines to China 1,300,000 - 3% Sec. 118
1,300,000 x 3% = 39,000

How much is the International Common Carrier Tax payable for the month?
Sec. 118

The Republic of Korea, as an act of goodwill, does not impose business taxes to
Philippine carriers. Korean Air is operating in the Philippines having two flights a
week. If you were engaged by Korean air as its tax consultant and asked you
whether it is liable to percentage tax, which of the following will be your advice?
a. Korean Air is liable to percentage tax based on gross receipts from passengers,
goods, cargoes and mails.
b. Korean Air is liable to percentage tax based on gross receipts from passenger
only.
c. Korean air is liable to percentage tax based on gross receipts from goods,
cargoes and mails only
d. Korean air is not liable to percentage based on the principle of reciprocity.
 Sec. 119 – Tax on franchises
■ Applies to radio and/or television broadcasting companies;
■ Annual gross receipts of the preceding year do not exceed
P 10,000,000;
■ The tax shall be 3% of their gross receipts.
■ Also applies to gas and water utilities;
■ The tax shall be 2% of the gross receipts.
■ Optional registration for broadcasting but not to gas and
water utilities.
Sec. 119
Water Gas Company, operators of a gas and radio/television
broadcasting franchise it has the following data for the year
2018:
Gas franchise P2,000,000 x 2% = 40,000
Radio franchise P10,000,000 x 3% = 300,000
Operating expenses (5,000,000)
Net Income P7,000,000

The total franchise tax is: 340,000

Sec. 119
Meralco is a holder of franchise to sell electricity. It also leases its
first-class auditorium and theatre. In a particular month, its gross
receipts form sale of electricity amounted to P10,000,000. The gross
receipts from the lease of its auditorium and theatre amounted
P2,000,000. How much is the franchise tax due for the month?
a. P1,440,000 c. P300,000
b. P1,200,000 d. Zero

VAT: 10M + 2M = 12M x 12% = 1,440,000

 Sec. 120 – Communication Tax

■ It covers overseas dispatch, message or conversation;

■ Transmitted from the Philippines by telephone, telegraph,
telewriter exchange, wireless and other communication
equipment services;
■ The tax shall be 10% on the paid amount for such services.
■ To paid within 20 days after the end of the each quarter.
■ Exemptions: (1) government and its political subdivision or
instrumentalities; (2) diplomatic services (embassy and consular
office); international organization, and news services. (DING)
Sec. 120
One the following statements is incorrect
a. Overseas communication tax is imposed on overseas communication
originating from the Philippines. Correct.
b. The person liable to overseas communications tax may or may not be
engaged in any trade business. correct
c. The overseas communications tax is imposed whether the overseas
communications are made in the course of trade or business or not.
d. The overseas communications tax is imposed on the owner of the
communications facilities used to make overseas communications.
Sec. 120

One of the following is subject to overseas communications tax:

a. Long distance call by a son from Manila to his father in Iloilo City.
VAT
b. Monthly telephone bill from Bayantel. VAT
c. Telephone bill on a call by a mother in Philippines to her son in
London Sec. 120
d. Telephone call by Magda in Hongkong to her friend in Manila.
exempt
Sec. 120
Which of the following statements is false?
a. BBC, an international news agency, is required to pay 10% percentage tax
from messages originating from the Philippines by telephone or telegraph
exempt
b. Amounts paid for messages transmitted by an embassy and consular
offices of a foreign government is not subject to 10% overseas
communications tax. exempt
c. Overseas communications initiated by a resident citizen not engaged in
trade or business is subject to overseas communication tax. correct
d. None of the above
Sec. 120
Moon Telecom Inc. has the following collections for the 2nd
quarter of 2018.
Overseas call originating abroad P1,120,000 - exempt
Overseas call originating in the Philippines, P 880,000
Local calls 2,240,000 /1.12 x 12 % = 240,000
880,000/1.10 x 10% = 80,000
How much is the overseas communication tax to be remitted by
Moon for the 2nd quarter of 2018?
 Sec. 121 – Tax on banks and non – bank financial
intermediaries performing quasi banking (GRT Tax)
a. On interest, commissions and discounts from lending activities as well as
income from financial leasing, on the basis of remaining maturities from
which such receipts are derived;
– 5 years or less…………………………………….............. 5%
– More than 5 years……………………………………….....
1%
b. On dividends and equity shares and net income of subsidiaries ………… 0%
c. On royalties, rentals of property, real or personal, profits, from exchange and
all other items treated as gross income under Sec. 32 of this Code …… 7%
d. On net trading gains within the taxable year on foreign currency, debt
securities, derivatives, and other similar financial
instruments…………………………….. 7%
Definition –
■ Banks are entities engaged in lending of funds obtained in the form of deposits. It may
either be a commercial bank, a rural bank or a specialized government bank.
■ Non – bank financial intermediary – financial intermediary authorized to perform
quasi – banking functions.

– Quasi – banking means borrowing funds from twenty (20) or more personal or
corporate lenders at any one time, through the issuance, endorsement, or acceptance
of debt instruments of any kind other than deposits for the borrowers own account,
or though the issuance of certificates or assignments or similar instruments, with
recourse, or of repurchase agreements for purposes of relending or purchasing
receivables and other similar obligations. Provided, however, that commercial,
industrial, and other non financial companies which borrow funds through any of
these means for the limited purpose of financing their own needs of their agents,
dealers, shall not be considered as performing quasi – banking functions.
 Sec. 122 – Tax on other non – bank
financial intermediaries (GRT Tax)
■ Applies to all finance companies and other financial intermediaries not
performing quasi – banking;
■ The tax shall be 5% of the gross receipts from interest, discounts, and all
other items treated as gross income under this Code;
■ Interest, commissions, and discounts from lending activities, or from
financial leasing shall be taxed based on its remaining maturities as
follows:
– Maturity period five (5) years or less ……. …….. 5%
– Maturity period is more than five (5) years …….. 1%
 Sec. 122 – Tax on other non – bank
financial intermediaries
■ In case of pre-termination under (a), the maturity
period shall be reckoned to end as of the date of pre-
termination for purposes of classifying the transaction
as short, medium or long – term and the correct tax
shall be applied accordingly.
Notes on Sec. 121 – 122.
■ Gross income (receipts) includes those income subject to final tax;
■ The GRT shall be based on the amount of income, gross of the
final tax;
■ The net trading loss shall not be deductible to other categories of
receipts;
■ If the bank has a cumulative net loss at the end of the year, the
same cannot be carried over as deduction against trading gain in
the following year.
■ Exempt from GRT - BSP
 Sec. 123 – Tax on life insurance
premiums
■ Applies to persons, company or corporations doing insurance
business in the Philippines;
■ Except purely cooperative companies or associations;
■ The tax shall be 2% of the total premium collected, whether
paid in money, notes, credits, or any substitute for money;
■ Except
– Premiums refunded within six (6) months;
– Reissuance premium;
 Sec. 123 – Tax on life insurance
premiums
■ Except premiums collected or received by any branch or domestic corporation,
firm, association doing business outside the Philippines on account of any
life insurance of the insured who is a nonresident, if any tax on such
premium is imposed by the foreign country where the branch is established,
■ or premiums collected or received on account of any reinsurance, if the
insured, in case of personal insurance, reside outside the Philippines, if ant
tax on such premiums is imposed by the foreign country where the original
insurance has been issued or perfected, or upon that portion of the premiums
collected ore received by the insurance companies on variable contracts, in
excess of the amount necessary to insure the lives of the variable contract
workers.
Notes on Sec. 123 –

■ Premiums on health and accident insurance underwritten by

life insurance companies are subject to premium tax;
■ Premium on health and accident insurance underwritten by non
– life insurance policies are vatable.
■ Except for crop insurance, non – life insurance are vatable.
Notes on Sec. 123 –

■ Renewal or re-insurance fee, re-instatement fee and penalties – 2%

premium tax;
■ Management fees, rental income, or other income from unrelated services
– VAT;
■ Investment income from the premiums of life insurance – exempt;
■ Investment income where funds used is from other sources – OPT;
 Sec. 124 – Tax on agents of foreign
insurance companies
■ Applies to authorized agent of fire, marine, or miscellaneous insurance
from foreign insurance companies;
■ The tax shall be 4% of the total premium collected whether such amount
is paid in money, notes, credits or any substitute in money;
■ Except reinsurance.
■ It does not prohibit those who want to procure policies directly to the
foreign companies provided the agent is not be affected, and the person
must report it to Insurance Commissioner.
■ The tax shall be 5% on premiums paid collected whether such amount is
paid in money, notes, credits or any substitute in money;
 Sec. 125 – Amusement of Taxes
■ The proprietor, lessee or operator are liable;
– Cockpits – 18%
– Cabarets, night and day clubs – 18%
– Boxing exhibitions – 10%
– Professional basketball games – 15%; subject to exception.
– Jai alai and race tracks – 30%
■ Payable at the end of each quarter within 20 days after the end of each
quarter.
Gross receipts -
■ Embraces all the receipts of proprietor, lessee or operator of the
amusement place.
■ It also includes income from television, radio, and motion picture rights,
if any.
■ A person or entity or association conducting any activity subject to tax
herein shall be similarly liable for said tax with respect to such portion of
the receipts derived by him or it.
Exceptions – boxing exhibition

■ It must be World or Oriental Championship in any division;

■ One of the contenders must be a citizen of the Philippines;
■ Promoted by a citizen of the Philippines or by a corporation or
association at least 60% of the capital is owned by such citizen.
 Sec. 126 - Tax on Winnings

■ Winner of horse races – 10% of winnings or dividends less

cost of the ticket;
– Double, forecast, quinella and trifecta – 4%
– Owners – 10% of the prizes
■ Payable at the end of each quarter within 20 days after the end
of each quarter.
 Sec. 127 – Stock Transaction Tax
■ Listed thru stock market
– Other than dealer in securities;
– 6/10 of 1% of GSP;
– Domestic or foreign stocks;
■ IPO
– By closely held corporation
– Based on GSP in accordance with outstanding shares of stock after
listing
■ Up to 25% …………………….4%
■ 25 to 33 1/3% .................2%
■ More than 33 1/3% ……. 1%
 Continued…

■ IPO tax shall be paid by issuing corporation and by the seller in the
secondary offering
■ Closely held corporation – at least 50% of the outstanding capital stock is
owned directly or indirectly by or for not more than 20 individuals.
■ Primary offering – unissued shares of the closely held corporation;
■ Secondary offering – issued shares or shares of existing shareholders who
wish to sell their shares in the IPO.
 Continued…

■ Test:
1. Stock not owned by individuals
2. Family and partnership ownership
■ Brothers and sister (full or half blood), spouse, ancestors, and
lineal descendants
3. Stock option
4. Constructive ownership
■ Test 1 and 3 applies but not test 2
 Filing of the return
■ Listed thru stock market
– The broker shall remit the tax within 5 banking days from the date of
collection;
– He must also submit a true and complete return every Monday of
each week to the secretary of stock exchange;
■ IPO
– Primary offering, the corporate issuer shall file and pay the tax
within 30 days from the listing
– Secondary offering, same as listed.
 Sec. 128 – Returns and Payment
■ Quarterly filing – within 25 days after the end of each quarter;
■ Cancelled VAT registration – accrue from the date of cancellation;
■ Retired business – notify the BIR, pay the tax within 20 days after the
closure of business.
■ Determination of correct sales or receipts by BIR is prima facie correct.
■ File a separate return for each branch or consolidated at taxpayer’s
option.
– Authorized agent bank
– RDO
– Collection agent or authorized city or municipal treasurer.
Other Provisions –

■ Sales to Government is subject to 3% withholding tax at

source;
■ Cooperatives are exempt from 3% OPT, except those business
outside their registered activities.
End of Presentation