Reported by:

Group 3 – Boja , Edlyn M.

Guevarra, Noemi G.
Paule, Charlene P.
BSA IV- Coronation
What Is Percentage Tax?

-Percentage Tax is a business tax imposed on persons or

entities who sell or lease goods, properties or services in
the course of trade or business whose gross annual sales
or receipts do not exceed P3,000,000 and are not VAT-
registered.
Tax Rate and Base
General - 3% on Gross Sales or Receipts
on sale of products or services
The following are subject to Percentage Tax
1. Persons whose gross annual sales and/or receipts do not
exceed P3,000,000 and who are not VAT-registered persons.

◦ Provided that these are the transactions are not included on

paragraphs A to AA of Section 109 (1) of the Tax Code
2. Domestic carriers and keepers of garages, except
owners of bancas and owners of animal drawn two-
wheeled vehicle.
 3. Operators of international air and shipping
carriers doing business in the Philippines.

Gross Philippine Billings

For international Air carrier- refers to the amount of gross
revenue derived from carriage of persons, excess
baggage, cargo or mail originating from the Philippines in
a continuous and uninterrupted flight, irrespective of the
place of sale or payment of the ticket or passage
document.
For International Shipping- means gross revenue whether
for passenger,cargo, or mail originating from the
Philippines up to final destination, regardless of the place
of sale or payment of freight documents
4. A. Franchise grantees of electric, gas or water
utilities

B. Franchise grantees on gas and water utilities

derived from the business covered by law granting the
franchise.

2%
5. Overseas dispatch, message or
conversation originating from the
Philippines - 10%
Exemptions
1. Government
2. Diplomatic Services
3. International Organizations
4. News Services
Illustration
Quick Telecommunications had the following receipts during the quarter.

Call Origin Call Amount

Destination Collected
Philippines Philippines P 20, 000, 000

Abroad Philippines 8, 000, 000

Philippines Abroad 5, 000, 000

The quarterly overseas communication tax shall be computed as:

Gross receipts from outgoing calls P 5, 000, 000

Multiply by: 10%
Percentage tax due P 500, 000
6. Banks and non-bank financial
intermediaries performing quasi-banking
functions
Tax rates on Bank and Quasi-banks

Source of income or receipt % Tax

Rate
1. Interest income, commissions and discounts
from lending activities, and income from financial
leasing, on the basis of remaining maturities of
instruments from which the receipts were
derived:

a. Maturity period of 5 years or less 5%

b. Maturity period of more than 5 years 1%
 Source of income or receipt % Tax
Rate

2. Dividend and equity shares in the net income 0%

of subsidiaries

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

personal, profits from exchange and all other items

treated as gross income under Section 32 of the NIRC

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

on foreign currency, debt securities, derivatives, and

other similar financial instruments
Illustration 1: Basic Computation
Orion Bank had the following interest receipts during
the month:
1. Interest income from loans maturing within 2 years
P 2, 500, 000
2. Interest income from loans maturing more than 2
years but within 5 years P 1, 000,000
3. Interest income on loans maturing more than 5 years
P 1, 200, 000
4. Processing fees P 300, 000
5. Rent income from foreclosed properties (ROPA)
P200, 000
6. Dividends income P 50, 000
Compute for the gross receipt tax.
 7. Other non-bank financial
intermediaries not performing quasi-
banking functions
 Source of income or receipt % Tax
Rate
1. Interest income, commissions and discounts
from lending activities, and income from financial
leasing, on the basis of remaining maturities of
instruments from which the receipts were derived:
a. Maturity period of 5 years or less 5%
b. Maturity period of more than 5 years 1%
2. From all other items treated as gross income 5%
under the NIRC
Illustration 1: Effective interest method for finance
leases
HIM Finance Corporation imports machineries from
abroad and sell them under a deferred financing
scheme. On February 1, 2014, it sold a machine with an
acquisition cost of P257,71o for P300,000, payable in
monthly installment of P100,000 starting March 1,
2014. The loan earns 8% effective interest.
Illustration 2: Operating lease
Itogon Industrial Bank foreclosed a property in March. It
leased the property to a commercial lessee for a period
of 10 years. The lessee pays P50,000 monthly rental on
the property.
Illustration: Pre-termination of loans
On December 1, 2009, Pinoy Bank loaned P1,000,000 to
a client payable within 10 years. The loan pays 10%
interest payable every December 1 with the first interest
payment due December 1, 2010.

On December 1, 2014, the client pre-terminated the

loan by repaying the principal in full.

The following are the interest income and the gross

receipt taxes paid since the origination of the loan:
Year Remaining Interest Tax Rate Amount
Maturity

2010 9 years P 100,000 1% P 1,000

2011 8 years P 100,000 1% 1,000

2012 7 years P 100,000 1% 1,000

2013 6 years P 100,000 1% 1,000

2014 5 years P 100,000 5% 5,000

Total P 9,000
8. Life insurance premiums. On the
total premiums received by persons
(except purely cooperative companies
or associations) doing life insurance
business of any sort in the Philippines.
–2%
The following shall not be included in the taxable receipts:
1. Premiums refunded within 6 months
2. Reinsurance premiums
3. Premiums from life insurance of non-residents received from
abroad
4. Premiums collected or received on account of any reinsurance,
if the insured, in case of personal insurance resides outside the
Philippines
5. Excess of premiums on variable contracts
Ancillary business activities:
1. Direct Writings/Premiums
2. Management fees, Rental income, Commission income,
Reissuance fees, Renewal fees, Other income fees
3. Investment Income
Illustration:
Sihra Life Insurance Philippines offers life insurance and variable
insurance products. The following relates to its monthly receipts:
Variable life
Life Plans plans
Total premiums P 2,000,000 P 8, 000,000
Less: Insurance charges - 5, 000,000
Credits to client account
balances P - P 3, 000,000
9. Tax on Agents of Foreign Insurance

• Premiums received by fire, marine or miscellaneous

insurance agents under Insurance Code – 10%
• Premiums obtained directly from foreign companies
without the services of insurance agents – 5%
Illustration:
Mang Pandoy insured his building with a foreign insurer. He
paid ₱150,000 premiums during the month.

Mang Pandoy shall report to the Insurance Commission and BIR and
pay ₱7,500 premium tax (150,000*5%).
10. Amusement Taxes

Proprietor, lessee or operator of the following amusement places

shall pay the respective tax rates on their quarterly gross receipts:
• Cockpits, cabarets, night and day clubs, videoke bars, karaoke
bars, karaoke televisions, karaoke boxes, music lounges and
other similar establishments – 18%
• Boxing exhibitions – 10%
• Professional basketball games – 15%
• Jai-alai and racetracks – 30%
Exemptions for boxing exhibitions:
• World or oriental championship
• At least one of the contender is a Filipino citizen
• The promoter is a Filipino citizen or a corporation
60% of which is owned by Filipino citizens
Illustration:
North Dome Inc. operates a coliseum which caters to various athletic and artistic competitions or
events. During the quarter, North Dome reported receipts from the ff. events:
Professional non-titled boxing bouts ₱ 200,000
Philippine championship boxing-bouts 300,000
Professional basketball games 400,000
Amateur basketball games 500,000
Concert of various musical artists 400,000
Total receipts ₱ 1,800,000

Percentage tax is computed as follows:

Professional non-titled boxing bouts ₱200,000
Philippine championship boxing-bouts 300,000
₱500,000 * 10% = 50,000
Professional basketball games 400,000 * 15% = 60,000
₱110,000
11. Winnings
Winnings from the following are subject to the
following amusement taxes:
• Horse race or jai-alai, in general – 10%
• Double,forecast/quinella and trifecta bets – 4%
• Owners of winning race horses – 10%
 Illustration:
Gamby Hippodrome operates a race track. It had the following dividends for winning
tickets during an event:
Total winnings on straight bets (cost of winning tickets, ₱10,000) ₱80,000
Total winnings on daily double, forecast and quinella 40,000
(cost of winning tickets, ₱600)
A winner of trifecta (cost of tickets, ₱200) 30,000
Prize of owner of the winning horses 100,000
Total prizes, winnings or dividends ₱250,000

The following tax must be withheld from these winnings:

Net winnings on daily double, forecast and quinella 39,400
(40,000-600)
Net winnings of trifecta (30,000-200) 29,800
69,200*4% = ₱2,768
Prize of the winning horses ₱100,000

Net winnings on straight bets (80,000-10,000) 70,000

170,000*10% = 17,000

₱ 2,768

17,000

Total percentage tax on winnings ₱ 19,768

12. Sale, barter or exchange of shares of
stocks listed and traded through the local
𝟔
stock exchange – of 1%
𝟏𝟎
Illustration:
Through the trading facilities of the PSE:
Type of Stocks Owner Selling price Cost
Preferred stocks Client ₱3,000,000 ₱2,900,000
Common stocks Client 2,800,000 3,000,000
Stock options Client 400,000 450,000
Common stocks Orion securities 4,000,000 3,000,000

Directly to a buyer:
Common stocks Client 800,000 500,000
Preferred stocks Orion securities 2,000,000 2,100,000
The percentage tax shall be computed as:

Type of stocks Owner Selling price

Preferred stocks Client ₱3,000,000
Common stocks Client 2,800,000
Stock options Client 400,000
Total ₱6,200,000
6
Multiply by: x1%
10
Stock transaction tax: ₱37,200
13. Shares of stocks sold through initial
public offering:

Not over 25% - 4%

1
Over 25% but not exceeding 33 % - 2%
3
1
Over 33 % - 1%
3
Illustration:
Queen corporation is owned by the following shareholders:

Mr. A 25,000 shares

Mr. B 20,000 shares

Ms. C 40,000 shares

Mr. D 10,000 shares

Ms. E 5,000 shares

Total 100,000 shares

Queen corporation conducted an IPO involving 40,000 unissued shares to be sold to

the public at ₱5. Mr. B decided to sell 15,000 of his shares to the public during the
IPO at ₱5.
Proportion of IPO shares:
a.) Primary offer percentage – 40,000 / (100,000+40,000) = 28.57% (2% IPO tax)
b.) Secondary offer percentage – 15,000 / 100,000 = 15% (4% IPO tax)

The IPO tax shall be:

Primary offer percentage (40,000*₱5*2%) = ₱4,000
Secondary offer percentage (15,000* ₱5*4%) = ₱3,000

*The IPO tax of primary offering shall be paid by Queen Corporation, the issuing
corporation, while the IPO tax of the secondary offering shall be paid by Mr. B, the selling
shareholder.
Illustration 2:
Assuming further that after the IPO, Queen Corporation conducted
another block sale of 50,000 of its shares for ₱5 per share. Mr. D also sold
his 10,000 shares after IPO for ₱6.

The subsequent sale of Queen Corporation after the IPO is called the “follow-through
offering”. This is no longer subject to the IPO tax since the tax applies only to the initial
listing of closely held corporations.

The sale of Mr. D of his 10,000 shares after the listing of Queen Corporation in the PSE is
6
subject to of 1% stock transaction tax.
10

6
Mr. D shall pay a percentage tax of ₱360 (10,000*6* x1%)
10