What is 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 and/or receipts do not exceed P1,919,500 and who are not VAT-registered.
The diagram below shows whether a business should be subjected to VAT or or PERCENTAGE TAX
Is the Business VAT – VAT – Registered Registered ?
YE
NO
*Gross receipts or sales subject to 10% output VAT and a benefit of input VAT on
Does the annual gross receipts r eceipts
Gross receipts or sales subject to 10% *output VAT but no benefit of input VAT on urchases.
Explanation: Could not claim Input VAT credit because it is not registered under VAT system.
Gross receipts or sales subject to 3% percentage tax and no *in ut tax all allowe owed. d.
Percentage Tax on Sales and Receipts of Non-VAT Registered Business
1. Sale or lease of goods or properties or the performance of services Sale or lease of *goods or properties or the performance of services of non-VAT registered *persons, other than the transactions mentioned in paragraphs (A) to (U) of Section 109(1) of the Tax Code, the gross annual sales and or receipts of which does not exceed the amount of One Million Nine Hundred Nineteen Thousand Five Hundred (₧1,919,500). = 3%
2. Domestic carriers and keepers of garages On gross receipts of operators of cars for rent or hire driven by the lessee; transportation contractors, including those who transport passengers for hire; and other domestic carriers by land for transport of passengers (except owners of bancas and animal-drawn two wheeled vehicle) ; and keepers of garages. = 3% The gross receipts of common carriers derived from their incoming and outgoing freight shall not be subjected to the local taxes imposed under R.A. 7610 (Local Government Code 0f 1991). In computing the percentage tax the following shall be considered the minimum gross receipts: QUARTERLY MONTHLY Jeepney for Hire: 1. Manila and other Cities P 65,700 P 21,900 2. Provincial 32,900 10, 967
Public Utility Bus: 1. Not Exceeding 30 passengers 2. Exceeding 30 but not exceeding 50 passengers 3. Exceeding 50 passengers Taxis: 1. Manila and other Cities 2. Provincial Car for Hire: 1. With Chauffeur 2. Without Chauffeur
98, 600
32, 867
164, 200 197, 100
54, 733 65, 700
98, 600 65,700
32, 867 21,900
82, 100 49,300
27, 367 16, 434
EXAMPLE: 1.) Mr. Dela Pena is a jeepney operator with three(3) jeepney units operating at Midsayap, Cotabato. During the second quarter of the current taxable year, the gross receipts are as follows: April P 28,000 May 30,000 June 26,000
Computation: Actual Gross Receipts (P 28,000 + 30,000 + 26,000)
= P 84,000
Statutory Minimum Requirement (P 32,900 x 3 )
= P 98,700
Percentage Tax (P 98,700 x 3%)
= P 2,961
1.) Biyahe Pilipinas Bus is a common carrier by land. During the month of April 2011,it has the following gross receipts: Transport of Passengers P1,500,000 Transport of Cargoes 750,000 Excess Baggage 250,000 1. How much is the CCT(Common Carriers Tax)? 2. How much is the value-added tax? Solution: Percentage Tax on Transport of Value-added Tax on Excess Passengers Baggage P 1,500,000 P250,000 x 3% x 10% P45,000 is the CCT P25,000 is the VAT Note: The transports of cargo, by land, air or water are VAT Taxable.
3.) International Carriers On gross receipts of International air carriers and international shipping carriers doing business in the Philippines = 3%
EXAMPLE: 1.)Elegant Air Cargo, an international air receipts during the second quarter: Origin Singapore Philippines Philippines
and shipping carrier has the following gross Destination Australia China Iran( transshipments from Iran to Turkey 30%)
Computation: Gross Receipts Philippines to China Philippines to Iran (P 700,000 x 70%) Total Philippine Gross Receipts Multiplied by Common carrier tax
P 1,200,000 490,000 1,690,000 3% P 50,700
4.) Franchises
Franchise – is a right and privilege acquired by special grants from the public through the legislature which imposes on the grantee as a consideration, a duty to the public to see that they are properly used. On gross receipts of all franchises on radio and/ or television broadcasting companies whose annual gross receipts of the preceding year do not exceed P10,000,000. = 3% On gross receipts of franchises on gas and water utilities derived from the business covered by the law granting the franchise. = 2%
EXAMPLES: 1.) Tra Poe is a grantee of several franchises. Her gross receipts for the year included the following: From water distribution P 1,500,000 From other franchises 2,000,000 P 3,500,000 Total receipts Computation: Percentage tax receipts from water distribution (₧1,500,000 x 2%) = VAT on other franchises (₧2,000,000 x 10%) = TOTAL BUSINESS TAX PAYABLE
P30,000
200,000 P230,000
2.) Radio QRST, a non-VAT entity, reported the following receipts for broadcasting services: P 8,000,000 Year 1 Year 2 12,000,000 Computation: Percentage Tax for year 1 (₧8,000,000 x 3%) VAT on receipts for year 2 (₧12,000,000 x 10%)
=
P
240,000
=
P
1,200,000
5.) Overseas Dispatch, Message or Conversation Originating from the Philippines On the amount collected upon every overseas dispatch, message or conversation transmitted from the Philippines by telephone, telegraph, telewriter exchange, wireless and other communication equipment services is 10%. The 10% percentage tax is the expense of the caller to be withheld by the service provider. The tax imposed in this Section 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.
EXAMPLE: 1.) Tela-Pono Company , a franchise grantee of telephone services reported the following receipts for the quarter. Receipts from overseas calls P 3,000,000 Receipts from domestic calls 2,000,000 Total receipts P 5,000,000 Tela-Pono is liable to remit to the BIR the following :
Percentage tax on overseas calls (P3,000,000 x 10%)
P
VAT on domestic calls (P2,000,000 x 12%) TOTAL business tax payable
240,000 P 540,000
300,000
6.) Banks and non-bank financial intermediaries performing quasi-banking functions There shall be collected on gross receipts from sources within the Philippines by all banks and non-bank financial intermediaries performing quasi-banking functions in accordance with the following schedule: a) 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 : Maturity period is five (5) years or less = 5% Maturity period is more than five (5) years = 1% b) On dividends and equity shares in 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 the Code = 7% d) On net trading gains within t he taxable year on foreign currency, debt securities, derivatives and other similar financial instruments = 7%
7.) Other non-bank financial intermediaries not performing quasi-banking functions. a. From interest , commissions discounts and all other items treated as gross income under the Code = 5%
b. 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: i. Maturity period is five (5) year or less = 5% ii. Maturity period is more than five (5) years = 1%
8.) Insurance Companies As a rule governing life insurance premium, a percentage tax of 5% of the total premium collected shall be imposed on collection from every person, except in the following: a) The life insurance premium is refunded within six (6) months; and b) Premiums collected outside the Philippines from nonresident person
EXAMPLE: Deli Cado acquired a life insurance policy of ₧5,000,000 from a domestic insurance company. Her annual insurance premium is ₧5,000. payable semi-annually at ₧2,500 on June and December. How much would be the percentage tax on the premium collected in December? The percentage tax on the premium collected in December would be ₧125, computed as follows: December Collection Multiplied by Percentage tax on premium for December
2,500 5% P 125
P
9.) Agents of foreign insurance companies
10 % on premiums received by every fire, marine, or miscellaneous insurance on legally authorized under the Insurance Code to procure policies of insurance on risk located in the Philippines for companies not authorized to transact business in the Philippines except on reinsurance premium. 5 % on premium payments obtained directly with foreign companies where the owner of the property does not make use of the services of any agent, company or residing or doing business in the Philippines, in which case, it shall be duty of said owners to report to the Insurance Commissioner and to the BIR Commissioner each case where the insurance has been effected.
EXAMPLES:
On January 2 of the current taxable year, Mr. Mission, a taxpayer, is planning to insure his property to a foreign insurance company. The taxpayer is evaluating the two alternatives: 1) Insuring the property directly to the foreign insurance company or 2) Insuring to the foreign insurance company through its authorized agent. In case Mr. Mission will insure directly with the foreign insurance company, he will pay a premium of P230,000. However, in the event Mr. Mission will insure his property through the authorized agent, he will pay a premium of P240,000. Required : Determine the following under both alternative a) Amount of percentage tax; b) Total cost on the part of Mr. Mission ANSWER A The amount of percentage tax on both alternatives is computed as follows: Alternative 1 : INSURED DIRECTLY with the foreign insurance company Total premium paid Multiplied by Percentage tax payable
P 230,000 5% P 11,500
Alternative 2 : INSURED THROUGH AUTHORIZED AGENT Total premium paid Multiplied by Percentage tax payable
P 240,000 10% P 24,000
ANSWER B The total cost on the part of Mr. Mission appears as follows under both alternatives: Alternative 1 : INSURED DIRECTLY with the foreign insurance company Total premium paid ADD : Percentage tax to be paid Total cost on the part of Mr. Mission
P 230,000 11,500 P 241,500
Alternative 2 : INSURED THROUGH AUTHORIZED AGENT Total premium and total cost of Mr. Mission P 240,000
10.) Amusements
Gross payments received by proprietor, lessee, or operator of cockpits, cabarets, night and day clubs, videoke bars, karaoke bars, karaoke televisions, karaoke boxes, music lounges and other similar establishments, boxing exhibitions, professional basketball games, jaialai and racetracks. 18% - cockpits 18% - cabarets, night and day clubs, videoke bars, karaoke bars, karaoke televisions, karaoke boxes, music lounges and other similar establishments. 10% - boxing exhibitions except those wherein World or Oriental Championship in any division is at stake and at lease one of the contenders is a citizen of the Philippines and promoted by a citizen/s of the Philippines or by corporation or association at least 60% of the capital of which is owned by such citizen. 15% - professional basketball games as envisioned in Presidential Decree 871. 30% - jai-alai and racetracks irrespective of whether or not any amount is charged for admission.
EXAMPLES 1.)
Mr. Cabriles operates the Midsayap Great Cockpit. The following data relate to its operation during the current taxable year period: Gross receipts on the following: Entrance fee P 35,000 Sale of soft and hard drinks 90,000 Sale of cigarettes and other food items 65,000 Purchases of items sold in the cockpit: from VAT taxpayers, inclusive of VAT 56,000 from Non-VAT taxpayers 20,000
Computation P 35,000 + 90,000 + 65,000 Amusement Tax Payable
=
P 190,000 x 18% P 34,200
11.) Winnings
10% - horse races, the basis of 10% tax on winnings or “dividends” is the actual amount paid to him for every winning ticket after deducting the cost of the ticket. 4% - double, forecast /quinella and trifecta bets.
10% - owners of winning race horses.
EXAMPLES: 1.)
On March 12 of the current taxable period, Mr. V. Cruz spent his day at the horse track. He bought a ticket of P500 and placed his bet on the race horse “Karakaraka” owned by Mr. S. Tomas. The race horse won and the price money for the ticket was P25,000 and that of the winning horse was P300,000. Required : Compute the business tax liability of: a.) Mr. V. Cruz; and b.) Mr. S. Tomas
ANSWER A : Tax liability of Mr. V. Cruz Prize money won LESS: Cost of the ticket NET Multiplied by percentage tax rate Amusement Tax to be Withheld by the owner of the race track
P 25,000 500 P 25,000 10% P 2,450
ANSWER B : Tax liability of Mr. S. Tomas Prize money won Multiplied by percentage tax rate Amusement tax to be withheld by the owner of the race track
P 300,000 10% P 30,000
12.) Sale of share of stock
½ of 1% or 0.5% - Sale, barter or exchange of shares of stock listed and traded through the local stock exchange.
EXAMPLE: On March 1 of the current taxable year, Mr. O. David bought shares of stocks through his stock broker from publicly listed companies at the Philippine Stock Exchange which are as follows: From Midnight Company P 400,000 From Twilight Company P 420,000 Two months later, he sold 5,000 shares of Midnight Company for P 325,000 and 2,000 shares of Twilight Company for P180,000. Q: What is the stock transaction tax liability of Mr. David?
ANSWER On Midnight Company (P325,000 x 0.5%) On Twilight Company ( P 180,000 x 0.5%) Total Stock Transaction
= = =
P 1,625 900 P 2,525
13.) Shares of stock sold or exchanged through Initial Public Offerings at the following prescribed rates: Not over 25% Over 25% but not exceeding 33 1/3% Over 33 1/3%
4% 2% 1%
EXAMPLE: 1.) Dairy Company, a closely held corporation, has an authorized capital stock of 5,000,000 shares with par value of P100. Before it goes into a publicly listed company, the outstanding shares of stock were 3,000,000 shares. During the initial public offering, Dairy Company sold 1,000,000 shares of stock at P130 per share. Required : Determine the stock transaction tax of Dairy Company Gross Selling Price (1,000,000 shares at P130 per share) Multiplied by Percentage tax rate (1/4 = 25%; hence, tax rate to be used is 4%) Percentage tax
P130,000,000 4% P 5,200,000
Advance Percentage Tax On ‘Tiangges’
A „Privilege Store‟ (TIANGGES) refers to a stall or outlets which is: o Not registered with the BIR Not permanently fixed to the ground and is o Normally set up in the places like shopping malls, hospitals, office o buildings, hotels, village or subdivision, churches and other public places for the purpose of selling and variety of goods/services for short duration of time or special events.
Returns on Capital Gains from Sale of Shares of Stocks o It shall be the duty of every stock broker who effected the sale subject to the tax imposed herein to collect the tax and remit the same to the Bureau of Internal Revenue within five(5) banking days from the date of collection thereof
o
And submit on Mondays of each week to the secretary of the stock exchange, of which he is a member, a true and complete return which shall contain a declaration of all transaction effected through him during the proceeding week and of taxes collected by him and turned over to the Bureau of Internal Revenue.
Public Offerings of Shares of Stock In case of primary offering, the corporate issuer shall file the return and o pay the corresponding tax within thirty(30) days from the date of listening of the shares of stock is the Local Stock Exchange. In the case of secondary offering, the provision of subsection(CX1) of this o section of the Tax Code shall apply as to the time and manner of the payment of the tax.
Exemption From Percentage Tax
Business by an individual whose receipts do not exceed P100,000 during any 12month period principally for livelihood or subsistence and not in the field of business. Individual Taxpayers shall register but EXEMPT in paying of registration fee and percentages taxes.
Returns and Payment of Percentage Taxes
For non-large tax payers Percentage tax shall be filed within 20 days To those non-large tax payers who availed of filing & payment system through EFPS shall be 5 days later than its deadline set. For large tax payers Shall file a consolidated return, pay the aggregate due taxes within 10 days after end of each month To those who availed who availed for percentage tax & paying the taxes due through EFPS shall be 5 days later than the set deadline. Any person retiring from a business subject to percentage tax shall notify the nearest internal revenue officer, file his return & pay the tax due within 20 days after closing his business. The commissioner may prescribe some other time intervals for filing the return for a particular class or classes of taxpayers after considering the following: → Volume of Sales → Financial Condition
→ Adequate Measures of Security → Other relevant information The commissioner permits every person liable to percentage tax, shall have an option where as to file a separate return for each branch or place of business or a consolidated return for all branches of places with authorized agents.
Withholding of Percentage Taxes
Percentage taxes on gross money payments to the following are subject to withholding at the various rates: 1. Domestic carriers and keepers of garages. On gross payments to operators of cars for rent or hire driven by the lessee; transportation contractors, including those who transport passengers for hire; and other domestic carriers by land for transportation of passengers ( except owners of animal-drawn two wheeled vehicle); and keepers of garages.
2. International carriers. a. On gross payments to international air carriers doing business in the Philippines. -3% b. On gross payments to international shipping carriers doing business in the Philippines. -3% 3. Franchises. a. On gross payments to all franchises on radio and /or television broadcasting companies whose annual gross receipts of the preceding year do not exceed P10,000.00.-3% b. On gross payments to franchise on gas and water utilities.-2% 4. Banks and non-bank financial intermediaries performing quasi-banking functions a. On interest, commissions and discounts from lending activities as well as income from financial leasing, on the basis of remaining maturities of instrument =s from which such receipts are derived: Maturity period is five (5) years or less . . . . . . . . . . . 5% Maturity period is more than five (5) years . . . . . . . . 1% b. On dividends and equity shares in 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 underSection 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% 5. Other non-bank financial intermediaries not performing quasi- banking functions
a. From interest, commissions, discounts and all other items treated as gross income under the Code . .. . . . . . .5% b. 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. Maturity period is five (5) years or less . . . . . . 5% Maturity period is more than five (5) years . . .1% 6. Life insurance premiums. On the total premiums paid to persons doing life insurance business of any sort in the Philippines. 5% (now at 2% based on R.A.10001). 7. Agents of foreign insurance companies. a. On premiums paid to every fire, marine, or miscellaneous insurance agent legally authorized under the Insurance Code to procure policies of insurance on risk located in the Philippines for companies not authorized to transact business in the Philippines except on reinsurance premium. 10% b. On premium payments obtained directly with foreign companies where the owner of the property does not make use of the services of any agent, company or corporation residing or doing business in the Philippines, in which case, it shall be the duty of said owners to report to the Insurance Commissioner and to the BIR Commissioner each case where the insurance has been so affected. 5 % 8. Amusements. On gross payments to the proprietor, lessee, or operator of cockpits, cabarets, night and day clubs, videoke bars, karaoke bars, karaoke televisions, karaoke boxes, music lounges and other similar establishments, boxing exhibitions, professional basketball games, Jai-alai and racetracks at the rates herein prescribed: a. Cockpits. – 18% b. Cabarets, night and day clubs, videoke bars, karaoke bars, karaoke televisions, karaoke boxes, music lounges and other similar establishments (RMO 78-2010).-18% c. Boxing exhibitions except those wherein World or Oriental Championship in any division is at sake and at lease one of the contenders is a citizen of the Philippines and promoted by a citizen/s of the Philippines or by a corporation or association at least 60% of the capital of which is owned by such citizens. -10% d. Professional basketball games as envisioned in Presidential Decree 871. -15% e. Jai-ailai and racetracks irrespective of whether or not any amount is charged for admission. -30% 9. Sale, barter or exchange of shares of stock listed and traded through the local stock exchange. On the gross selling price or gross value in money derived on every sale, barter or other disposition of shares of stock listed and traded through the local stock exchange other than the sale by a dealer in securities. ½ of 1%
10. Shares of stock sold or exchanged through initial public offering. On the gross selling price or gross value in money derived on every sale , barter , exchange or other disposition through initial public offering of shares of stock in closely held corporations in accordance with the proportion of such shares to the total outstanding shares of stock after the listing on the local stock exchange at the rates herein prescribed: a. Not over 25% b. Over 25% but not exceeding 33 1/3% c. Over 33 1/3%
4% 2% 1%
Returns and Payments Of Taxes Withheld
No money payments shall be made by any government office or agency unless the taxes due thereon shall have been deducted and withheld. Taxes deducted and withheld shall be covered by the Monthly Return of Internal Revenue Taxes withheld on Government Money Payments in duplicate to be filed and the tax to be paid to the Authorized Agent Bank located within the Revenue District Office (RDO) having Jurisdiction over the place where the government office is locted. In places where there are no authorized agent bank, the return shall be filed directly with the Revenue District Officer, Collection Officer or the duly authorized Treasurer if the City or municipality where the government office is located except in cases where the Commissioner otherwise permits. The required return shall be filed and payments made within ten(10) days following the end of the month the withholding was made.
Remittance of Withholding Tax Tax Covered
Percentage Tax
Number of Payors
Form to be used be Payor in remitting tax
Effect on Tax PayerPayee
Form required to be furnished to Payor
One
-BIR Form 1600 (monthly remittance return of VAT and other percentage taxes withheld)
- Tax withheld by the payor shall be treated as a final tax by the payee.
-Payor issues BIR Form 2306 (certificate of final tax withheld at source March 2003 version) to the payee within 10 days following the end of the month the withholding was made.
-The filing of BIR Form 1600 by the sole payor serves as a substituted percentage tax return of the payee. -For sellers of services whose gross receipts have been subjected to the withholding tax,
they shall be exempted from the obligation. Several
-BIR Form 1600 (monthly remittance return of VAT and other percentage taxes withheld)
-Tax withheld by the payor shall be treated as creditable tax by the payee. -Taxpayer-payee still needs to file percentage tax return (BIR Form 2551M)
- Payor issues BIR Form 2307 (certificate of creditable tax withheld at source March 2003 version) to the payee.
-For sellers of services whose gross receipts have been subjected to the withholding tax, they shall be exempted from the obligation.
LIABILITY OF DESIGNATED OFFICERS Additions to the Tax Punishable Acts or Omissions a.) Fails or causes the failure to deduct and withhold any interval revenue tax covered by these regulations b.) Fails or causes the failure to remit the taxes deducted and withheld within the time prescribed therein; c.) Fails or causes the failure to file the return or issue certificate required.
N.B.
* Each Powerpoint presentation is individually created by the members of this group.(sent via mail) * Edited and compiled by : Guntiñas, Evy Lee Celistine L.
