OTHER PERCENTAGE TAXES

Percentage taxes of varying rates are imposed on the persons or activities enumerated
below and are payable within 25 days after the end of each taxable quarter, unless otherwise
specified. Every person liable to the percentage taxes may, at his option, file a separate return
for each branch or place of business or a consolidated return for all branches or places of
business with the authorized agent bank, Revenue District Officer, Collection Agent or duly
authorized Treasurer of the city or municipality where the business or principal place of
business is located, as the case may be.205

The percentage taxes are:

TAX ON PERSONS EXEMPT FROM VALUE ADDED TAX (VAT)

On the gross quarterly sales or receipts of persons who are otherwise subject to the VAT but
whose annual sales or gross receipts do not exceed PhP1,919,500207 – 3%, except cooperatives.

B. PERCENTAGE TAX ON DOMESTIC CARRIERS AND KEEPERS OF

GARAGE208

On the quarterly gross receipts of cars for rent or hire driven by the lessee;
transportation contractors, including persons who transport passengers for hire, and other
domestic carriers by land209 for the transport of passengers, except owners of bancas, and
owners of animal-drawn two-wheeled vehicles and keepers of garages – 3%.

The gross receipts of common carriers derived from their incoming and outgoing
freight shall not be subject to the local taxes imposed under RA 7160, otherwise known as
the Local Government Code of 1991.

The following shall be considered the minimum quarterly gross receipts in each
particular case:210

Jeepney for hire:

Manila and other cities PhP2,400

Jeepney for hire:

Provincial PhP1,200

Public Utility Bus:

Not exceeding 30 passengers PhP3,600

Exceeding 30 but not exceeding

50 passengers PhP6,000

Exceeding 50 passengers PhP7,200

Taxi:

Manila and other cities PhP3,600

Provincial PhP2,400

Car for hire (with chauffeur) PhP3,000

Car for hire (without chauffeur) PhP1,800

C. PERCENTAGE TAX ON INTERNATIONALCARRIERS211

On the gross quarterly receipts derived from transport of cargo from the
Philippines to another country of international air carriers and international shipping
carriers doing business in the Philippines – 3%.212

D. FRANCHISE TAX

On the annual gross receipts derived by the franchise grantees of:

Gas and water utilities from the business covered by the law granting the franchise – 2%
214.
 Radio and/or television broadcasting companies whose annual gross receipts of the
preceding year do not exceed PhP10 million – 3%215.

Said company may opt to be registered as a VAT taxpayer. The option, once exercised,
cannot be revoked.

National Grid Corporation on all its gross receipts derived from its operation covered by
the law granting the franchise – 3% 216.

OVERSEAS COMMUNICATION TAX

On the amount paid on every overseas dispatch, message or conversation

transmitted from the Philippines by telephone, telegraph, telewriter exchange, wireless
and other communication equipment services – 10%.

The tax shall be payable by the person paying for the services rendered and shall
be paid to the person rendering the services who is required to collect and pay the tax
within twenty (20) days after the end of each quarter.

The tax does not apply to the amounts paid for messages transmitted by:

The Government, its political subdivisions or instrumentalities;

Diplomatic services;
Public international organizations or any of their agencies based in the Philippines; and

News services.

TAX ON BANKS AND NON-BANK FINANCIAL INTERMEDIARIES219

PERFORMING QUASI-BANKING FUNCTIONS

On the gross receipts derived by all banks and non-bank financial intermediaries
 On interest, commissions and discounts from lending activities as well as
income from financial leasing, on the basis of remaining maturities of
instruments from which such receipts are derived:

“Banks or banking institutions” shall refer to those entities as defined under Section 3
of RA 8791, otherwise known as the General Banking Law of 2000, or more specifically, to
entities engaged in the lending of funds obtained in the form of deposits. [Sec. 3.1, RR 8-
2008]

“Non-bank financial intermediaries” shall refer to persons or entities whose principal

function include the lending, investing or placement of funds or evidence of indebtedness or
equity deposited with them, acquired by them, or otherwise coursed through them, either for
their own account or for the account of others. [Sec. 3.2, RR 8-2008]

“Quasi-banking functions” shall refer to the borrowing of 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 borrower’s own
account or through the issuance of certificates of assignment or similar instruments, with
recourse, or of repurchase agreements for purposes of relending or purchasing receivables or
other similar obligations. [Sec. 3.3, RR 8-2008]

Sec. 121, supra, as amended by RA 9337. It is noted that income or revenue realized by
the BSP from its transactions undertaken in pursuit of its legally-mandated functions and all
rural banks created and organized under the provision of RA 7353, and rural banks already in
operation as of the date of the approval of the Act on April 2, 1993 for a period of 5 years
from the date of commencement of operations or from approval of the Act as the case may be
are exempt from the GRT imposed under Sec. 121 of the Code. (Sec. 5, RR 8-2008 and Sec.
15, RA 7353)

a. Maturity period is five (5) years or less 5%

b. Maturity period is more than five (5) years 1%

2. On dividends and equity shares and net income 0%

of subsidiaries

3. On royalties, rentals of property, real or personal, 7%

 a. Maturity period is five (5) years or less 5%

profits from exchange and all other items treated

as gross income under Section 32 of the Tax Code

4. On net trading gains within the taxable year on 7%

foreign currency, debt securities, derivatives

and other similar financial instruments

G. TAX ON OTHER NON-BANK FINANCIAL INTERMEDIARIES222

On the gross receipts derived by other non-bank financial intermediaries doing

business in the Philippines, from interests, commissions, discounts and all other items
treated as gross income under the Tax Code – 5%.

On interest, commissions and discounts from lending activities, as well as income

from financial leasing, on the basis of remaining maturities of the instruments from which
such receipts are derived, the tax shall be:

Remaining Maturity of Instrument Rates

1. Maturity period is five (5) years or less 5%

2. Maturity period is more than five (5) years 1%

 H. TAX ON LIFE INSURANCE PREMIUMS223

On gross premium collected from every person, company or corporation (except

purely cooperative companies or associations) doing life insurance business of any sort in
the Philippines – 2%.224

I. TAX ONAGENTS OFFOREIGN INSURANCE COMPANIES225

1. On gross premium collected on agents 4% 226

of foreign insurance companies –

2. On premiums paid by owners of 5%

property who obtained insurance directly

from foreign companies –

TAX ONAMUSEMENTACTIVITIES On gross receipts

from/of:228

Sec. 123, supra.

RA 10001 reduced the tax on life insurance premiums from 5% to 2%. However, the 2%
shall apply only to insurance policies that will be issued after the effectivity of the Act on
April 1, 2010. For insurance policies taken out before the effectivity of the Act but the
premiums are not yet fully paid, the rate of 2% shall be applied to the remaining balance and
for the remaining years. (Secs. 1 and 2, RA 10001)

Sec. 124, supra.

Tax is equal to twice the tax imposed in Sec. 123, supra.

 Sec. 125, supra.
The term ‘gross receipts’ embraces all the receipts of the proprietor, lessee or operator
of the amusement place. Said gross receipts also include income from television, radio and
motion picture rights, if any. In the case of jai-alai and race tracks, the tax shall be based on
gross receipts irrespective of whether or not any amount is charged for admission.

Cockpits, cabarets, night or day clubs229 18%

Boxing exhibitions230 10%

Professional basketball games 15%

Jai-alai and race tracks 30%

K. TAX ON WINNINGS

On “dividends” or winnings in horse races 10%

On winnings from double, forecast/quinella 4%

and trifecta bets in horse races

On the prize of owners of winning race horses 10%

With the advent of modern interactive entertainment, along with recorded music (and/or
music video) using a microphone and public address system, the proprietors/lessees or
operators of cabarets, night or day clubs have pursued a new form of lounge and club
entertainment. Thus, the “terms” night and day clubs and cabarets have become passé.
Amusement places which offer the same pleasurable diversion entertainment and function
now include videoke bars, karaoke bars, karaoke television, karaoke boxes and music lounges.
As such, the proprietors, lessees or operators of the aforementioned establishments are
deemed subject to the 18% amusement tax and not to the 12% VAT on gross receipts. (RMC
18-2010)

Boxing exhibitions wherein World or Oriental Championships in any division is at stake

shall be exempt from amusement tax if at least one of the contenders for World or Oriental
Championships is a citizen of the Philippines and said exhibitions are promoted by a citizen/s
of the Philippines or by a corporation or association at least sixty percent of the capital of
which is owned by such citizens.

TAX ON SALE OF SHARES OF STOCKS LISTED AND TRADED THROUGH THE

LOCAL STOCK EXCHANGE OR THROUGH INITIAL PUBLIC OFFERINGS232

On every sale, barter or exchange of shares of stock233 listed and traded through the local
stock exchange234 (other than the sale by a dealer in securities235) – ½ of 1% of the
gross selling price236 or gross value in money237 of the shares of stock sold, bartered,
exchanged or otherwise disposed which shall be paid by the seller or transferor.

Sec. 127, supra.

“Shares of stock” shall include shares of stock of a corporation; warrants and/or options
to purchase shares of stock; as well as units of participation in a partnership (except general
professional partnerships), joint stock companies, joint accounts, joint ventures taxable as
corporations, associations, and recreation or amusement clubs (such as golf, polo or similar
clubs); and mutual fund certificates. [Sec. 2 (c), RR 6-2008]

“Local stock exchange” refers to any domestic organization, association, or group of

persons, whether incorporated or unincorporated, licensed or unlicensed, which constitutes,
maintains, or provides a market place or facilities for bringing together purchasers and sellers
of stocks, and includes the market place and the market facilities maintained by such
exchange. [Sec. 2 (g), RR 6-2008]

“Dealer in securities” means a merchant of stocks or securities, whether an individual,

partnership or corporation, with an established place of business, regularly engaged in the
purchase of securities and the resale thereof to customers; that is one, who as merchant buys
securities and re-sells them to customers with a view to the gains and profits that may be
derived therefrom. [Sec. 2 (b), RR 6-2008]

“Gross selling price” refers to the total amount of money or its equivalent which the
purchaser pays the seller as consideration for the shares of stock. [Sec. 2 (h), RR 6-2008]
 237“Gross value in money” means the “fair market value”. In the case of shares traded
thru the stock exchange, “fair market value” shall consist of the actual selling price at which
the transaction was executed in the trading system and/or facilities of the Local Stock
Exchange. [Sec. 2 (i), RR 6-2008]

Every stock broker238 who effected the sale shall collect the tax and remit the
same to the Bureau of Internal Revenue within 5 banking days from the date of
collection thereof. The said stockbroker is also required to submit on Mondays of each
week to the secretary of the stock exchange, of which he/she is a member, a true and
complete return which shall contain a declaration of all the transactions effected
through him/her during the preceding week and of taxes collected by him/her, and
turned over to the Bureau of Internal Revenue.

On every sale, barter, exchange or other disposition through initial public offering239 of
shares of stock in closely-held corporations240, a tax based on the gross selling price
or gross value in money of the shares of stock sold, bartered, exchanged or otherwise
disposed of in accordance with the following schedule:

Proportion of shares of stock disposed of to total outstanding shares of stock

after the listing in the local stock exchange:

Rate of Tax

Up to 25% 4%

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

Over 33 1/3% 1%

“Stockbroker” includes all persons whose business is, for other brokers, to negotiate
purchases or sales of stocks, or engaged in the business of effecting transactions in securities
for the account of others but does not include a bank or underwriters for one or more
investment companies as defined in the Investment Company Act. [Sec. 2 (f), RR 6-2008]

“Initial public offering (IPO)” refers to public offering of shares of stock made for the
first time in the Local Stock Exchange. [Sec. 2 (j), RR 6-2008]

“Closely-held Corporation” means corporation at least 50% in value of the outstanding

capital stock or at least 50% of the total combined voting power of all classes of stock entitled
to vote is owned directly or indirectly by or for not more than 20 individuals. [Sec. 2 (q), RR
6-2008]

The tax shall be paid by the issuing corporation in primary offering241 or by

the seller in secondary offering242.

Any gain derived from the disposition of shares of stock subject to the
aforementioned tax shall be exempt from the tax imposed under Sec. 24(C), Sec.
27(D)(2), Sec. 28(A)(8)(c) and Sec. 28(B)(5)(c) and from the regular individual or
corporate income tax. The tax paid shall not be deductible for income tax purposes.

“Primary offering” refers to the original sale made to the investing public by the issuer
corporation of its unissued Shares of Stock. [Sec. 2 (k), RR 6-2008]

“Secondary offering” refers to an offer for sale to the investing public by the existing
shareholders of their securities which is conducted during an IPO or a follow-on/follow-
through offering. [Sec. 2 (l), RR 6-2008]