CHAPTER 5 PERCENTAGE TAX 6.

Certain franchise grantees

7. Life insurance companies and agents of foreign
insurance
1. What is Percentage Tax? 8. Telephone companies on overseas
communication
Answer: 9. Jai-alai and cockpit operators on winnings
A percentage tax is a national tax
5. What is Tax on Banks?
measured by a certain percentage of the gross
Answer:
selling price or gross value in money of goods
“Banks” refers to entities engaged in
sold or bartered; or of the gross receipts or
the lending of fund obtained in the form of
earning derived by any person engaged in the
deposits. (RA 8792. The general Banking Law
sale of services. (CIR vs. Solid bank
of 2000) “Banks” includes:
Corporation, G, R. No. 148191, November 25,
a. commercial banks
2003)
b. saving banks
2. What is the Scope of Percentage tax? c. mortgage banks
d. development banks
Coverage Type of % tax Tax rates e. rural banks
Services Specific % tax Various tax rates f. stocks and savings associations
specifically g. branches and agencies of foreign banks
subject to (RA337, The General Act).
percentage tax h. Cooperative banks
Sales of goods or General % tax 3% percentage i. Islamic banks
other services not tax j. and other banks as determined by the
exempted monetary board of the Bangko Sentral
ng Pilipinas (BSP) in the classification
3. Who pays Percentage tax? of banks. (RA 8791)
6. What is Non-bank Financial Intermediaries?
Type of VAT registered Non-VAT Answer:
percentage Tax taxpayers taxpayers “Non-bank financial intermediaries”
Specific YES YES refers to persons or entities whose principal
percentage tax function include lending investing or
placement of funds or evidences of
General NO YES
indebtedness or equity deposited with them,
percentage tax
acquired by them or otherwise coursed through
Non-VAT taxpayers are those who did not exceed
them, either for their own account or for the
the VAT threshold and who did not register as VAT
account of others.
taxpayers.
This includes all entities regularly
engaged in the lending of funds or purchasing
4. What are the Services Specifically subject to
of receivables or other obligations with funds
Percentage Tax? BICAP FLOW
obtained from the public through the issuance,
Answer: endorsement or acceptance or debt instruments
of any kind for their own account, or through
1. Banks and non-bank financial intermediaries the issuance of certificates, or of purchase
2. International carries on their transport of agreements, whether any of these means of
cargoes, excess baggage and mails only (RA obtaining funds from the public is done on a
10378)
regular basis or only occasionally. (Ibid)
3. Common carries on their transport of
passengers by land and keepers of garage
7. What is Quasi-Banking Function?
4. Certain amusement places
Answer:
5. Brokers in effecting sales of stocks through the
Refers to the borrowing of funds from
Philippine Stock Exchange and corporations or
shareholders on initial public offerings twenty (20) or more personal or corporate
lenders at any one time, through the issuance,
 endorsement or acceptance of debt instruments intermediaries not performing quasi-banking
of any kind, other than deposits, for the functions are subject to a separate set of gross
borrower’s own account or through the issuance receipt tax rates.
of certificates of assignment or similar
instruments, with recourse, or repurchase 9. What is Gross Income?
agreements for purposes of relending or Answer:
purchasing receivables or other similar The items of gross income referred to in
obligations. Section 32 of the NIRC. Include only those
Provided, however, that commercial, items of gross income subject to regular
industrial and other non-financial companies, income tax. It can be argued therefore that only
which borrows funds through any of these those items of gross income subject to the
means for the limited purpose of financing their regular tax are includible as “gross receipts”
own needs or the needs if their agents or dealers, for purposes of the percentage tax.
shall be not considered as performing quasi- Under current jurisprudence, however,
banking functions. the term “gross income” of banks was held to
include those items of gross income subject to
Note: Non-banking financial intermediaries performing final tax. Furthermore, it was also held that the
quasi-banking functions re commonly referred to as amount of gross income to be included in gross
“Quasi-banks”. receipts for purposes of the gross receipt tax
shall be the amount of the income, gross of the
final income tax.
8. What are the Tax Rates on Bank and Quasi-banks? 10. What is the Net trading gains within the taxable year
on foreign currencies, debts, securities, derivatives
Source of income or receipt %
and other financial instruments?
Tax
Answer:
rate
The tax clearly applies to the annual net
1. Interest income, commissions and gains from this category. According to RR4-
discounts from lending activities, and 2009, the figure to be reported in the monthly
income from financial leasing, on the percentage tax return shall be cumulative
basis of remaining maturities of total of the net trading gain loss since the start
instruments from which basis of of the taxable year less the figures already
receipts were derived: reflected in the previous months of the taxable
a. Maturity period of five years or 5% year.
less Net trading loss sustained from this
b. Maturity period of more than five 1% category shall be deductible only to the gains
years from trading on the same category. The net
2. Dividend and equity share in the net 0% trading loss shall not be deductible to other
income of subsidiaries categories of receipts.
3. On royalties, rentals of property, real or 7% NOTE: If the bank has a cumulative net loss at the
persona;, profits from exchange and all end of the year, the same cannot be carried over as
other items treated as gross income deduction against trading gains in the following year.
under section 32 of the NIRC
4. On net trading gains within the taxable 7%
11. What is the Exemption from the gross receipt tax?
year on foreign currency, debts
Answer:
securities, derivatives, and other similar
The gross receipt tax imposed on banks
financial instruments
does not apply to the income of or revenue
Note:
realized by the Bangko Sentral ng Pilipinas
1. The percentage tax on banks, quasi-banks and (BSP) from its transactions undertaken in pursuit
other non-bank financial institution is of its legally mandated functions.
commonly known as the “gross receipt tax”
2. The BSP usually makes a periodic publication
of the list of quasi-banks. Non-bank financial
TAX ON OTHER FINANCIAL INTERMEDIARES NOTE: The taxable gross receipt on finance
WITHOUT QUASI-BANKING FUNCTIONS lease shall consist only if interest income excluding
Source of income or receipt % the gross rentals received.
Tax Note:
rate • The interest income is computed as beginning
1. Interest income, commissions and balance of the loan x interest rate.
discounts from lending activities, • The principal reduction is computed as
income from financial leasing, on the collection less interest income.
basis of remaining maturities of • The ending balance is computed as beginning
instruments from which the receipts balance less principal reduction.
were derived:
a. Maturity period is five years or 5% 15. What is Operating Lease?
less
Answer:
b. Maturity period is more than 1%
five years An operation lease is not a sale and does not
2. From all other items treated as gross 5% transfer ownership over the leased property.
income under the NIRC 16. What is Pre-termination of Loans?
Answer:
12. What are the common rules for Banks, Quasi-banks
and Other Financial Institutions? In the care of pre-termination, the maturity
period shall be reckoned to end as of the date of
Answer: pretermination of purposes of classifying the
1. Accounting rules transaction and applying correct rate tax.
2. Finance lease and operating leases NOTE: The additional gross receipt tax due shall
3. Pre-termination of instruments be reflected as separate line item in the Gross Receipt
Tax return covering all transactions of the month in
13. What are the Accounting Rules? which that pre-termination took place.
Answer:
17. What is Withholding of Percentage Tax on Banks?
Under RR4-2009, the basis of the calculation of
gross receipts shall be the generally accepted Answer:
accounting principle (GAAP) prescribed by the:
Effective August 1, 2014, the Bangko Sentral ng
1. Bangko Sentral ng Pilipinas – for banks and Pilipinas (BSP) shall withhold the percentage tax on
quasi-banks banks and non-bank financial institutions on all its
2. Securities and Exchange Commission – for payments to special deposit accounts and reserve
other non-bank financial intermediaries liquidity accounts.
18. What are International Carriers?
Both agencies prescribe the Philippine Financial
Reporting Standards (PFRS) based upon International Answer:
Accounting Standards (IAS) as GAAP.
The term “international carriers” means air or
sea carriers owned by foreign corporation that
14. What is Finance and Operating Lease?
operate in the Philippines and transport passengers
Answer: or cargoes from the Philippines to overseas and vice
versa.
A finance lease (also known as direct financing
lease) is a sale of property whereby the seller earns 19. What are the Two types of International Carriers?
only interest income on the arrangement.
Answer:
1. International air carriers
2. International shipping carriers
20. What is the Percentage Tax on International Carries? or for other airlines or sea carriers covering flights or
voyage originating from Philippines ports or off-line
Answer: flights or voyages. These entities may be subject to
International carriers doing business in the VAT.
Philippines shall pay a tax equivalent to 3% of their
quarterly gross receipts derived from the transport 22. What is the Note on Domestic Carriers?
of cargoes, baggage, or mails from the Philippines to
another country regardless of the place where they Answer:
are actually billed.
Domestic sea or air carriers with
NOTE: Gross receipts shall include, but shall not international operation are vatable on their going
be limited to, the total amount of money its shipment of passengers, excess baggage, cargoes or
equivalent representing the contract. mails. They are actually subject to a zero-rated VAT
on such shipment.
21. What is the Taxation of Gross Receipts on Flight or
Voyages? 23. Table of Comparison: Tax Rules Outgoing Flight or
Answer: Voyage
International
SEA or AIR Carriers owned by
Types of Domestic operation
Domestic Foreign
carriers operation Outgoing Incoming Corporation Corporation
Domestic 12% VAT 0% VAT Exempt PASSENGERS VATABLE EXEMPT
carrier CARGOES/BAGGAGE VATABLE 3%
International S Percentage
carriers Tax
 N/A Exempt Exempt
Passenger
24. What is the Percentage Tax on Domestic Carriers
 Goods,
and Keeps of Garage?
mails
or
Answer:
cargoe
s N/A 3% Exempt
A common carrier is any person, corporation,
firm, or association engaged in the business of carrying
or transporting passengers or goods or both, by land,
Gross Philippine billings P XX water, or air, for compensation, and offering their
services to the public. Subject to percentage tax.
Multiply by: 3%
25. Table Summarizes the Rules on Common Carriers
Percentage tax due P XX
Mode of Passengers Baggage/Mails/Cargoes
Note:
transportation
1. Only outbound fares for cargoes, excess baggage
or mails are included in the tax base. The place By land 3% vatable
of actual billing is ignored. percentage
2. The same tax rules apply to international tax
shipping carriers. By water or sea vatable vatable
By air vatable vatable
The common carrier’s tax herein does not apply to
off-line international carriers having a branch/office or NOTE: It must be recalled that the term “vatable” mean
sales agent in the Philippines which sales passage subject to VAT if the taxpayer is VAT-registered person
documents for compensation or commission to cover or a registrable person. Otherwise, the 3% general
off-line flights or voyage of its principal or head office,
percentage tax applies.
 Under the NIRC, the 3% percentage tax is due 28. What are Exemptions to the Common Carriers Tax?
quarterly upon the gross receipts of common carriers on
their transport of passengers by land. This is called the Answer:
“common carrier’s tax”. In practice, this quarterly tax
is paid is three monthly payments Note: That owners of bancas and animal-drawn
two-wheeled vehicles are exempt from the percentage
26. Minimum presumptive gross receipts for common tax. The law is silent regarding pedicabs but these
carriers and keepers of garage businesses may qualify as “business for mere
subsistence”. Hence, these are also exempt from
business tax
Quarterly Monthly

Jeepney for hire: 29. What are Amusement Taxes?

Manila and other cities P2,400 P800 Answer:

Provincial 1,200 400 Proprietor, lessee or operator of the following
Public utility bus: amusement places shall pay the following respective tax
rates on their quarterly gross receipts:
Not exceeding 30 passengers 3,600 1,200 Places of boxing exhibitions 10%
Exceeding 30 but not 50 6,000 2,000 Places of professional basketball games 15%
Exceeding 50 passengers 7,200 2,400 Cockpits, cabarets, night or day clubs 18%
Taxis: Jai-alai and race tracks 30%
Note: that other operators of amusement places such
Manila and other cities 3,600 1,200 as bowling, alleys, golf courses, and billiards halls are
Provincial 2,400 800 vatable. Cinemas and theaters are not subject to this
national amusement tax because it is exclusively subject
Car for hire:
to local amusement tax.
With chauffeur 3,000 1,000
30. What are the Exempt Receipts on Professional
Without chauffeur 1,800 600
Boxing?
Note: These presumptive gross receipts were set by
the NIRC in1997 and are too low compared to current
Answer:
price levels. The BIR tried to adjust these to the current
price level under RR9-2007, but was the same was The gross receipts from professional boxing are
recommended for suspension under Senator Committee exempt from percentage tax under the following
Report No, 37 (February 11, 2008) since no proper conditions:
consultation were first conducted before its
implementation. 1. World or Oriental Championship
2. At least one of the contenders is a Filipino
citizen
Under RMC 70-2015, transport network companies
3. The promoter is a Filipino citizen or a
like Uber and Grab taxi and their partners and suppliers
corporation 60% of which is owned by Filipino
which are holders of a valid Certificate of Public
citizens.
Convenience may be considered as common carriers
qualified to the 3% percentage tax.
For the purpose of the amusement tax, gross receipts
embrace all receipts of the proprietor, lessee or operator
27. Why Common Carrier exempt from local taxes?
of the amusement places. Said receipts include income
from television, radio, and motion picture rights. If any.
Answer:
A person or entity or association conducting any activity
subject to the tax herein imposed shall be similarly liable
The gross receipts of common carriers derived from
for said tax with respect to such portion of the receipts
their incoming and outgoing freight shall not be subject
by him or it.
to the local taxes under the Local Government Code of
1991.
 The tax shall be payable within 20 days after the Under RR-16-2012, only the sale of stocks which
end of each other quarter. The proprietor, lessee, or meets the 10% minimum public ownership (MPO) in the
operator shall make a true and complete return of the PSE shall be subject to the stock transaction tax.
amount of the gross receipts derived during the However, this rule was rendered useless when the PSE
preceding quarter and pay the tax thereon. moved to suspend the trading of stocks which fall below
the minimum public float. Due to this, no listed
Note: The gross receipts from amateur basketball games companies which are below the MPO is traded.
and concerts are vatable. The receipts and sales from the
bowling alleys are not specifies by the NIRC to be 33. What is Tax on the Shares of Stock Sold or
specifically subject to percentage tax: hence, vatable. Exchanged through an Initial Public Offering
Only the disco operations and all sales or receipts (IPO)?
incidental to it is subject to the amusement tax.
Answer:
31. What are Illegal Cockpits?
The sale, barter, exchange or other disposition
Answer: through initial public offering of shares of stocks in a
closely held corporation is subject to the following tax
Persons who are engaged in the same operations rates based on the gross selling price or gross value in
such as operators of illegal “tupada” cockpit are also money in proportion to the shares sold, bartered or
taxes at 18% of their gross receipts. exchange or otherwise disposed:

32. What is Tax on Sale, Barter or Sale of Shares of Proportion of shares sold, bartered or Tax
Stock Listed and Traded Through the Local Stock exchanged rate
Exchange or Through Initial Public Offering? Up to 25% 4%
Over 25% but bot over 33 1/3% 2%
Answer:
Over 33 1/3% 1%
The sale, barter or exchange, including block This percentage tax is commonly known as the IPO
sale, of listed stocks through the PSE other than by tax: Note: that the IPO tax applies only to the initial
dealers in securities, is subject to a tax of 60% of 1% public offering of a closely held corporation.
based on gross selling price or gross value in money
of the shares of stocks sold. This percentage tax is 34. What is closely held corporation?
commonly known as “stock transaction tax”
Answer:
The same shall be paid by the seller or transferor
and is to be collected by the stock broker who effected Closely held corporation means any corporation
the sale. The stock broker shall remit the tax to the BIR at least 50% in the value of the outstanding capital
within 5 banking days from the date of collection. stock or at least 50% of all classes of stock entitled to
vote is owned directly or indirectly by not more than 20
Note: individuals.
1. The tax applies on listed stocks (domestic or
foreign) sold through the PSE. The tax applies Note: That the IPO tax applies only to IPO of
without regard to the type of stocks sold. Recall
closely held corporations as defined above. Be it noted
also from income taxation that the term “stock”
therefore that the IPO of a corporation which is
includes stock options and warrants.
diversely owned or those whose 50% of capital stock is
2. Since this is not an income tax, the tax applies
without regard to the existence of any gain or owned by more than 20 people is not subject to the IPO
less on the transaction. tax.
3. The stock transaction tax does not apply to
dealers in securities on their sales of stocks 35. What is the determination of the proportion of
inventory. The sale of security dealers from the stocks sold in an IPO?
sales of securities whether through PSE or
directly to buyers and their commission income Answer:
shall be vatable.
 The determination of the proportion of stocks sold
in an IPO depends upon the type of offering:
39. What is VAT-Registration?
1. Primary offering – unissued shares of the
closely held corporation to be sold in the IPO
Answer:
2. Secondary offering – issued shares or shares of
existing shareholders who wish to sell their
Franchise grantees of radio or television
share in the IPO
broadcasting companies are mandatorily required to
register as VAT taxpayer if they exceed the
36. What is Proportion of Share Offering?
P10,000,000 gross receipt threshold. Even if below the
Answer: threshold, they may register as VAT taxpayer. Once the
option is exercised, said option shall be irrevocable. In
Primary offering = primary share + other words, the VAT registration of these entities is
outstanding shares after IPO non-cancellable until the dissolution of their
business.
Secondary offering = secondary shares +
outstanding shares before IPO Note: that there is no similar provision for franchise
grantees of gas and water utilities. Hence, they are
37. Summary of Rules on Sales of Stocks subject to percentage tax even if they exceed the
P10M gross receipts threshold. Also water is a mineral
Answer: and is not an agricultural food product. Local water
districts are exempt from income tax but not to business
Sales made Before During After IPO tax.
by IPO IPO
Corporate No tax IPO tax as No tax 40. What are Vatable Franchises?
issuer primary a) Electricity – electricity generation or
transmission and distribution by electric
after
cooperatives are vatable
Shareholder Capital IPO tax as Stock b) Telecommunication – telecom companies are
investor gains tax secondary transaction vatable, except on their receipts from outgoing
offering tax messages since these are subject to the 10%
Note: This table ignores documentary stamp taxes on overseas communication tax.
sales or issue of stocks. c) Transportation – transport companies are
vatable, exempt receipts of common carriers by
38. What is Tax on Franchise? land on their transport of passengers since these
common subject to the 3% common carriers tax.
Answer: d) Private franchises
41. What is Tax on Life Insurance Premiums?
Generally, franchises are vatable.
Exceptionally however, there are only two types of Answer:
franchise that are specifically subject to percentage taxes
under the NIRC. A person, company or corporation (except
purely cooperative companies or associations) doing life
Franchise grantees % Tax insurance business of any sort in the Philippines is
rates subject to a tax of 2% on the premiums collected,
Radio or television broadcasting companies whether such premium is paid in money. Note: credits
or any substitute for money.
whose annual gross receipt do not exceed
P10,000,000 3%
NOTE: Hence, premiums on the health and
Gas and water utilities 2% accident insurance underwritten by life insurance
NOTE: The percentage tax on these franchise grantees
companies are subject to the premiums tax. However,
is referred to as “franchise tax”.
premiums on health and accident insurance
underwritten by non-life insurance policies are vatable.
 Note:
1. Gross receipts includes collections of cash or
42. What are not included in gross receipts of an money substitutes such as check. Only in the
insurance company: case of life insurance that a promissory note is
a) Premiums refunded within 6 months after exceptionally included as part of gross receipts
payment on account of rejection of risk or for the purposes of computing the premium tax
returned for other reasons 2. Non-life insurance is vatable. The gross receipts
b) Re-insurance premiums of non-life business do not include promissory
c) Premiums from life insurance of non-residents note.
received from abroad by branches of domestic
corporation, firm or association doing business 45. What is Reinsurance Premium?
outside the Philippines.
d) Excess of premiums on variable contracts in Answer:
excess of the amounts necessary to insure the
lives of the variable contract owners Reinsurance premium is exempt from premiums
tax as it is already subjected to premium tax to the
NOTE: Refunded premiums are certainly not receipts , ceding insurance company. The payment of retrocession
hence, these are properly excluded from the tax base. premium to the foreign insurer is subject to the
Premiums on life-insurance of non-residents purchased withholding VAT because this a purchase of reinsurance
abroad constitute an exempt foreign consumption. service from a non-resident. Insurance commission or
Furthermore, the excess of variable contracts over the reinsurance commission whether life or non-life is
life insurance premium represents investments rather vatable.
than premiums.
46. What is Tax on other Receipts of Life Insurance
43. What are the types of Insurance Business? Business?
1. Direct insurance
2. Reinsurers Answer:
3. Retrocessionaires
1. Renewal or re-insurance fee, re-instatement
44. What is Direct insurance? fee and penalties – these are considered
incidental to or connected to insurance policy
Answer: contracts and are akin to premium; hence,
subject to the 2% premiums tax.
A direct insurance business underwrites insurance 2. Management fees, rental income, or other
policy and negotiates them to policyholders through income from unrelated services – these are
insurance agents. To minimize risks, insurers cede or vatable.
assign parts of their insurance premiums to reinsurers 3. Investment income- If investment income is
who shall undertake to assume part of the risks. realized from the investment of premiums
Reinsurers are thus insurers of insurers. earned, it is exempt.
Retrocessionaires are insurers of reinsurers. Note: That the premiums which have the source of
the funds invested had already been subject to 2%
Upon collection of the premiums by direct insurers, premium tax.
the 2% premium tax for life insurance policies or
VAT for the non-life insurance policies applies. When If investment income is realized from the
insurers cede part of these premiums to reinsurers, it investment of funds obtained from others, it is
should not be taxed again. Otherwise, double taxation considered income from quasi-banking; hence, subject
occurs. to the gross receipt tax imposed on non-banking
financial intermediaries.
NOTE: Crop insurance, non-life insurance is
vatable. Non-life insurance includes surety, fidelity, The investment income that cannot be specifically
indemnity, bonding companies, marine, fore and identified as coming from invested premiums or
casualty insurance. borrowed funds shall be apportioned based on total
premiums earned for the month and the liability The overseas dispatch, message or conversation
account balance. transmitted from the Philippines by telephone,
telegraph, telewriter exchange, wireless and other
communication equipment services is subject to a 10%
percentage tax. This percentage tax is commonly
47. Summary of Tax Rules on Insurance referred to as the “overseas communication tax”

The following table summarizes the business tax rules:

Life insurance Non-life
insurance Call Call Business tax
Direct 2% premiums Vatable origin destination
premiums tax Philippine Philippines 12% VAT
Re-insurance Exempt Exempt s
premiums Abroad Philippines 0% VAT
Insurance Vatable Vatable Philippine Abroad 10% overseas
commissions* s communication tax
*covers insurance and reinsurance commissions. RA *subject to zero-rating requirements; if not met,
10001 has a provision that the 2% premiums tax shall be receipt is exempt.
eliminated within five years from its effectivity, however,
this provision was vetoed by the president 51. Exemptions of Overseas Communication

48. What is Tax on Agents of Foreign Insurance? Answer: The overseas communication tax shall not
apply to the outgoing calls of the following:
Answer:
1. Government – including any of its political
Under section 124 of the NIRC, fire, marine or subdivisions or instrumentalities
miscellaneous insurance agents authorized under the 2. Diplomatic services – embassies and consular
Insurance Code to procure policies of insurance on risks offices of foreign governments
located in the Philippines for companies not authorized 3. International organizations – those enjoying
to transact business in the Philippines are subject to a privileges, exemptions and immunities under
tax equal to twice the tax imposed on life insurance international agreements
premiums. 4. News services

NOTE: RA 10001 reduced the tax on life insurance 52. What are the winnings?
premium from 5% to 2%. Therefore, the tax on agents
of foreign insurances is 4% now. Answer: Winnings from race tracks and jai-alai are
subject to the following amusement taxes:
49. What is Direct Insurance from abroad?
Winnings in horse race or jai-alai, in general 10%
Answer: Winning from double, forecast/quinella and 4%
trifecta bets
If property owners obtain insurance directly from Owners of winning race horses 10%
abroad without the services of an insurance agent, the
tax shall be 5% of the premium paid. It shall be the
duty of the owner to report each transaction to the 53. Types of Race Winnings
Insurance Commissioner and to the Commissioner of A. Combination bets
Internal Revenue. 1) Double – a bet to select the winners in
two specific races
50. What is Tax on Overseas Dispatch, Message or 2) Daily double – a bet to forecast the first
Conversation Originating From the Philippines? winning horse on two consecutive races
3) Forecast – a bet to predict the first and
Answer: second finisher or particular race
 4) Exacta or perfecta – a bet to pick the
first two finishers in exact order
5) Quinella – a bet where at least the first
two finishers must be picked in either
order 55. Summary of Specific Percentage Taxes
6) Trifecta – a bet to predict the first three
finishers in a race in exact order
B. Straight wagers
Business or activity Percentage tax Tax rates
1) Win – the elected horse must finish first
2) Place – the selected horse must come Banks and financial Gross receipt tax 5%,1%; 7%
first or second intermediaries
3) Show – the selected horse must come Intermediaries carriers International 3%
first, second or third. carrier’s tax
Common carriers Common carrier’s 3%
54. What is Tax on Winnings? tax
Amusement places Amusement tax 10%, 15%,
Answer: 18%; 30%
Sales of stocks by an Stock transaction 60% x 1%
The pay-out on combination bets is subject to
investors tax
4% on the net winnings. The pay-out on straights
wagers (non-combination bets) is taxable at 10%. Sale of stock during an IPO tax 4%, 2%, 1%
initial public offering
The tax shall be deducted from the “dividend” (IPO)
corresponding to each winning ticket or the “prize” of Franchise Franchise tax 3%
each winning race horse owner and withheld by the Life insurance Premiums tax 2%, 4%, 5%
operator or person in charge of the horse race before Overseas calls Overseas 10%
paying the dividends or prizes to the person entitled communication tax
thereto. The tax shall be paid within 20 days from date it
Amusement betting Winning tax 10%; 4%
is withheld.
56. What is Withholding of Percentage Tax at Source?
Note: These taxes on winnings are separate from
the 30% amusement tax to be paid by the race track on
its own quarterly gross receipts. Answer:
The sale to government agencies, and
The percentage tax on winnings is an additional instrumentalities including government-owned and
amusement tax by nature but is imposed by law on the controlled corporation (GOCC), government agency,
betting. This is in addition to those imposed upon the instrumentality is subject to a withholding tax of 3%
receipts of the operator of the Jai-alai or racetrack. Note at source. The tax taxpayer shall attach BIR Form
that winning from other amusement places or activities 2307 in filling his monthly percentage tax.
such as cockpit, boxing, basketball, billiards, and
bowling competitions are not subject to tax. NOTE: The same procedure is employed for
withholdings made by the BSP on gross receipts of
banks and quasi-banks on their special deposit accounts
or liquidity reserve accounts.

Note: Sales not subject to withholding is being

taxed

57. What is Tax on other Taxable Sales of Non-Vat

Taxpayers?

Answer:
 The imposable percentage tax on table sales or
receipts, other than from services or transactions
specifically subject to percentage tax, of non-VAT
registered persons is 3%.

58. Exemption from Percentage Tax

Answer: The percentage tax does not cover:

1. VAT taxpayers
2. Self-employed and or professionals who opted
to the 8% income tax
3. Cooperatives

59. What is SE/P under 8% Income Tax?

Answer:

Under income taxation, self-employed

individuals and or professionals (SE/P) may pot to be
the 8% income tax which is a bundled tax that covers
both income tax and the percentage tax. As such, they
are no longer subject to 3% percentage as the 8% tax in
lieu of regular income tax and the 3% general tax.

Individuals paying the 8% income tax shall only

file BIR Form 1701A. There is no need to file BIR Form
2551Q.
Note: Also that the option to be taxed at 8% income tax
is not available to self-employed individuals or
professionals if the taxpayer is specifically subject to
percentage tax.

60. What are the Exemption of Cooperative from

Percentage Tax?

Answer: Under the Section 116 of the NIRC of 1997,

cooperatives shall be exempt from the 3% percentage
tax.

This exemption, however, is not absolute.

Sales or receipts of cooperatives outside their registered
activities are still subject to business tax similar to the
business tax treatment or government agencies and
nonprofit institutions.