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.
■ Under CREATE LAW, 1%
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 – marginal income earner – exempt from business tax
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
Sales of fresh vegetables 500,000
Sales of dried fish 500,000
Sales of refined sugar 500,000
Sales of cooking oil 500,000
1,000,000 x 3% = 30,000
Only 50% of the above sales were collected

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:

Annual Gross Receipts Restaurant 1,350,000
Annual Gross Sales, Restaurant, 1,000,000
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
1,350,000 + 625,000 = 1,975,000 x 3% = 59,250
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, P 1,300,000
If Ms. Jaysa is a seller of goods, how much is the Percentage tax during the
year?
a. P45,000 c. P51,000
b. P39,000 d. nil 1,300,000 x 3% = 39,000
If Ms. Jaysa is a seller of services, how much is the percentage tax during the
year? 500,000 + 1,300,000 – 300,000 = 1,500,000 x 3% = 45,000
 Sec. 117 – Domestic 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 – Sec. 116
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% domestic common carrier’s tax?

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

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

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

a. Owner of a parking lot/building

b. Rent-a-car companies
c. Common carriers engaged in carriage of goods or cargo
d. Domestic airline companies
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
From transport of cargoes 200,000
From bus rentals for school fieldtrips 400,000
1,200,000 x 3% = 36,000
Domestic 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 250,000 364,000 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 (domestic 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 485,000 + 30,000 = 515,000
x 3% = 15,450
Assuming that the amounts given do not include the tax, the value –added
tax due 220 + 33,000 x 12% = 30,360 – (99,000 x 12%) = 18,480
Sec. 117
Which of the following transportation providers is not subject to
percentage Tax (domestic common carrier tax)?
a. School bus operators
b. Cargo truck operators
c. Passenger Jeepney operators
d. Car rental business
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
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

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 not covered.
c. Domestic corporation with international flights
d. Domestic corporation with international voyages
Sec. 118
Which of the following carrier shall be subject to International 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.
a. I only c. III only
b. I and II only d. I, II and III
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
Passenger airfare from Philippines to China 1,500,000
Airfare for cargoes from China to Philippines 700,000
Airfare for cargoes from Philippines to China 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:

a. P340,000 c.P40,000 b. P300,000 d.P190,000

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 from 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

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

 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.
b. The person liable to overseas communications tax may or may not
be engaged in any trade business.
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.
b. Monthly telephone bill from Bayantel.
c. Telephone bill on a call by a mother in Philippines to her son in
London.
d. Telephone call by Magda in Hongkong to her friend in Manila.
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.
b. Amounts paid for messages transmitted by an embassy and
consular offices of a foreign government is not subject to 10%
overseas communications tax.
c. Overseas communications initiated by a resident citizen not engaged
in trade or business is subject to overseas communication tax.
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
Overseas call originating in the Philippines, P 880,000
Local calls 2,240,000
How much is the overseas communication tax to be remitted
by Moon for the 2nd quarter of 2018?

OPT 880,000/1.10 x 10% = 80,000; VAT - 2,240,000/1.12 x 12%

 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. 121
Piggy Bank has the following data for the month of January 2018:
Interest income, the remaining maturity of the instrument is 5
years (net of 20% w/tax) 80,000/.80 = 100,000 x 5% = 5,000
Rentals (gross 5% expanded withholding tax) 50,000 x 7% = 3,500
Net trading loss (10,000)
How much is the gross receipts tax on the collections of Piggy for
January 2018?
a. P5,000 c.P7,800
b. P3,500 d.P8,500
Sec. 121
In addition to the information in the preceding number, Piggy Bank has the
following information for the month of February 2018:
Interest income, the remaining maturity of the instrument is 6 years (net of
20% final withholding tax) P 80,000/80% = 100,000 x 1% = 1,000
Rentals (gross of 5 % expanded withholding tax) P 50,000 x 7% = 3,500
Net trading gain 20,000 – 10,000 = 10,000 x 7% = 700
How much is the gross receipts tax on the collections of piggy for February
2018?
a. P5,200 c.P9,200
b. P5,900 d.P9,900
Sec. 121

The following selected financial data were provided by Banco de Uro:

Trading Gain (Loss):
January P50,000
February (100,000)
March 80,000
April 30,000
How much is the net trading gain subject to gross receipts tax for the month of
March? Quarterly: 50,000 – 100,000 + 80,000 = 30,000
Monthly: 80,000 – 10,000 = (20,000)
Based on the preceding, how much is the net trading gain subject to percentage tax
for the month of April? 30,000 – 20,000 = 10,000
 Sec. 122 – Tax on other non – bank
financial intermediaries (GRT Tax)
■ Applies to all finance companies and other financial intermediaries not
performing quasi – banking;
■ 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%
■ The tax shall be 5% of the gross receipts from interest, discounts, and all
other items treated as gross income under this Code;
Sec. 122
In addition to the information in the preceding number, Non-Piggy Bank non
quasi banking function has the following information for the month of
February 2018:
Interest income, the remaining maturity of the instrument is 6 years (net of
20% final withholding tax) P 80,000/80% = 100,000 x 1% = 1,000
Rentals (gross of 5 % expanded withholding tax) P 50,000 x 5% = 2,500
Net trading gain 20,000 x 5% = 1,000
How much is the gross receipts tax on the collections of piggy for February
2018?
Answer: 4,500
 Pre-Termination

■ 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.
 Sec. 121
4 years and 1month

Mr. D executed on January 1, 2009, a long-term loan Interest income

from bank C in the amount of P6,000,000 payable 6M x 2% x 4 years = 480,000
6M x 2% x 1/12 = 10,000
within ten 10 years, with an annual interest of 2%. Total 490,000 x 5%
However, on January 31, 2013 the loan was pre-
Tax: 480,000 x 1%
terminated; from 2009 to 2012, the applicable gross Still due
receipts taxes were paid, how much gross receipts tax
should be paid for the year 2013?
a. P100 c.P19,700
b. P24,500 d. P500
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;
– Reinsurance 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. 123
Rose Insurance Co. furnished us its data shown below:
Insurance Premiums collectible is P3,750,000
The breakdown of the above premiums is as follows:
Life Insurance premiums 75%
Non –life insurance premiums 25%

During the month, life insurance premium collected represents 70%.

3,750,000 x 75% x 70% x 2% = 39,375
The premiums Tax Payable in life insurance is:
a. P94,437.50 c.P78,750.00
b. P39,375.00 d.P196,875.00
 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. 124

Paelo wants to procure fire insurance from his mansion in

Dasmarinas Village from ABC Insurance Co., a non-resident foreign
corp. through its agent in the Philippines, Mr, Webner. He paid
premiums in 2014 amounting to P 5M. How much is the premium
tax payable on the transactions?
a. P 500,000 c. P 100,000
b. P 250,000 d. P 200,000

5M x 4% = 200,000
Sec. 124

Using the same information above, assuming Paelo directly obtained

the insurance policy from ABC Insurance Co., how much is the
premiums tax payable on the transactions?
a. P 250,000 c. P 100,000
b. P 250,000 d. P 200,000

5M x 5% = 250,000
 Sec. 125 – Amusement of Taxes
■ The proprietor, lessor or operator are liable;
– Cockpits – 18%
– Cabarets, night and day clubs – 18%
– Boxing exhibitions – 10% subject to exception
– Professional basketball games – 15%;.
– 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, lessor 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. 125

Sinner Corp, a cabaret, had the following data during the month of
February:
Net Income during the month P 80,00
Collections during the month:
From services rendered in January P 100,000
From services rendered in February P 600,000
From services rendered to be performed in March P 20,000

How much is the amusement tax for the month? 720,000 x 18% = 129,600
Based on the preceding number, if it is a racetrack, how much
is the amusement tax for the month?

720,000 x 30% = 216,000

Sec. 125
Ka Emong operates a cockpit in Bacolod City. Inside the cockpit is a
restaurant which he also operates. The data during the month are
presented below.
Receipts from Entrance Fee P 780,000
Gross receipts from restaurant
Sale of food and beverages 42,000
Sale of wines and liquor 66,000
Expenses 444,000
Amusement tax of Ka Emong (780,000 + 42,000 + 66,000) x 18%
a. P 79,920 c. P 143,640
b. 159,840 d. P 79,920
Sec. 125
Based on the preceding number, suppose the restaurant is owned and
operated by Rico, a non-VAT registered person, the percentage tax
payable by Rico is:
■ a. P 3,240 c. P 19,440
■ b. P 159,840 d. P 79,920 108,000 x 3% = 3,240

the percentage tax due on Ka Emong is

■ a. P 79,920 c. P 143,640
■ b. P 159,840 d. P 140,400 780,000 x 18% = 140,400
Sec. 125
Golden Boy is the operator of Golden Coliseum. During the month had the
following gross receipts from various activities:
Concert by Pedro P 1,170,000
Professional basketball game P 1,240,000 x 15% = 186,000
Boxing Exhibition 1,780,000 x 10% = 178,000
Note: The boxing exhibition is a world championship fight between March
weather and Chavez, American and Mexican. The fight is promoted by Chris,
a Filipino citizen.
How much is the amusement tax?
a. P 186,000 c. P 178,000
b. P 364,000 d. nil
Based on the preceding number, if Chavez is a Filipino,
how much is the amusement tax payable?
a. P 186,000 c. P 178,000
b. P 364,000 d. nil
 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. 126
A race rack bettor won the following bets:
• On double, a bet of P 200 and dividend of P 200 per P 20
ticket. 200/20 = 10 x 200 = (2,000 – 200) x 4% = 72
• On winner take all, a bet of P 500 and a dividend of P 1,000
per P 50 ticket. 500/50 x 1,000 – 500 = 9,500 x 10% = 950
• On forecast, a bet of P 1,000 and dividend of P 100 per P 20
ticket. 1,000/20 x 100 = 5,000 – 1,000 = 4,000 x 4% = 160
■ The total percentage tax due from the winnings is:
■ a. P 682 c. P 1,280
■ b. P 1,182 d. P 1,530
Sec. 126
Hinete has the following winnings (losses) during the year:
Cockfighting P 90,000
Philippine charity sweepstakes 2,000,000
Lotto (PAGCOR) 1,000,000
Horse race winnings 100,000
Cost of tickets, P 1,000 pertains to winning tickets P (30,000)
Billiards losses (400,000)
Casino losses (300,000)
The business tax on winnings is:
a. P 9,900 c. P 249,000 100,000 – 1,000 = 99,000 x 10% = 9,900
b. P 18,900 d. P 319,000
 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 shares of stock after listing
■ Up to 25% …………………….4%GSP in accordance with outstanding
■ 25 to 33 1/3% .................2%
■ More than 33 1/3% ……. 1%
■ Mr. Chris sold his domestic shares from Jollibee Food Corporation.
Mr. Chris owned 100,000 shares with a par value of P 2.00. He
sold the said shares to the stock markert at the selling price of P
5.00 per share. How much is the tax to be paid by Mr. Chris?

6/10 of 1% of GSP
100,000 x P 5 = P 500,000 x .006 = 3,000
 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
Sec. 127

Valdez Realty Corp. a closely held corporation, has an authorized capital

stock of 100,000,000 shares with par value of P 1.00 per share.
Of the 100,000,000 authorized shares, 25,000,000 thereof is subscribed and
fully paid up by the following stockholders:
Mr. Cajucom 5,000,000
Mrs. Clavaton 5,000,000
Mr. Felipe 5,000,000
Mr. Pua 5,000,000
Mr. Ty 5,000,000
Shares outstanding 25,000,000
 Continued…
On March of this year, Valdez Realty Corp. finally decides to
conduct an IPO and initially offers 25,000,000 of its
unissued shares to the investing public for P 1.50 per share.
At the IPO, one of its existing stockholders, Mrs. Clavaton
has likewise decided to sell her entire 5,000,000 shares to
the public for P 1.50 per share.
How much is the percentage tax due on the primary
offering?
■ a. P 375,000 c. P 750,000
■ b. P 1,500,000 d. P nil
■ How much is the percentage tax due
on the secondary offering?
a. P 75,000 c. P 150,000
b. P 300,000 d. nil
Sec. 127

In its June of this year, Valdez Realty Corp. decides to increase

capitalization by offering another 30,000,000 of unissued shares
to the public at P 2.00 per share, how much is the percentage tax
due?
 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.