Notes OPT - BUSINESS TAX PDF

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OTHER PERCENTAGE TAXSERVICES SPECIFICALLY SUBJECT TO OPT (Mnemonic: BICAP FLOW) Banks and Non-Bank Intermediaries International Carriers on their transport of cargoes, excess baggage and mails only Common Carriers on their transport of passengers by land and keepers of garage Certain Amusement Place...

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OTHER PERCENTAGE TAX SERVICES SPECIFICALLY SUBJECT TO OPT (Mnemonic: BICAP FLOW) 1. Banks and Non-Bank Intermediaries 2. International Carriers on their transport of cargoes, excess baggage and mails only 3. Common Carriers on their transport of passengers by land and keepers of garage 4. Certain Amusement Places 5. Brokers in effecting sales of stocks through the Philippine Stock Exchange and corporation of shareholders on initial public offering 6. Certain Franchise Grantees 7. Life Insurance Companies and agents of foreign insurance 8. Telephone Companies on overseas communication 9. Jai-alai and cockpit operators on winnings

BANKS AND NON-BANK INTERMEDIARIES A. Banks and Non-bank financial intermediaries performing quasi-banking functions (Gross Receipt Tax) Sources of income or receipt

% of tax rate

1. On interest commissions and discounts from lending activities, income from financial leasing, on the basis of remaining maturities of instruments from which such receipt was derived: a. maturity period is 5 years or less

5%

b. maturity period is more than 5 years

1%

2. On dividends and equity shares in net income of subsidiaries

0%

3. On royalties, rental of properties, real or personal, profits from exchange and all other items treated as gross income under the income tax law

7%

4. On net trading gains on foreign currency, debt instruments, derivatives and other similar financial instruments Monthly Percentage Tax Return – shall be the cumulative total of the net trading gain or loss since the start of the taxable year less the figure already reflected in the previous months of the taxable year. Net Trading Loss – shall be deductible only to the gains from trading on the same category

7%

If the cumulative net loss at the end of the year, the same cannot be carried over as a deduction against the trading gains in the following year.

Gross Income of Banks – include those items of gross income subject to final tax (should be gross amount) B. Tax on Other Non-bank financial intermediaries Sources of income or receipt

% of tax rate

1. On interest commissions and discounts from lending activities, income from financial leasing, on the basis of remaining maturities of instruments from which such receipt was derived: a. maturity period is 5 years or less

5%

b. maturity period is more than 5 years

1%

2. On dividends and equity shares in net income of subsidiaries

0%

3. From all other items treated as gross income under the NIRC

5%

Pre-termination of the Loans – the remaining maturities shall be recounted up to the date of pre-termination and should recompute the gross receipts based on the adjusted pre-termination remaining maturities. It is as if the pre-termination date is the maturity date when the loan was borrowed.

INTERNATIONAL CARRIERS ON THEIR TRANSPORT OF CARGOES, EXCESS BAGGAGE AND MAILS ONLY It shall pay a tax based on the 3% of their quarterly gross receipts derived from the transport of cargoes, baggage, or mails only from the Philippines to another country Types of Carriers Domestic Carriers International Carriers -Passengers -Goods, mails or cargoes

Domestic Operations 12% VAT N/A N/A

International Operations Outgoing Incoming 0% VAT Exempt Exempt 3% OPT

Exempt Exempt

COMMON CARRIERS ON THEIR TRANSPORT OF PASSENGERS BY LAND AND KEEPERS OF GARAGE (Common Carriers Tax) Common Carrier (for OPT purposes) – include cars for rent or hire driven by the lessee, transportation contractors, persons who transport passengers for hire and other domestic land carriers on their transport of passengers, except owners of bancas and owners of animal-drawn two-wheeled vehicles. Mode of Transport By Land By water or sea By air

Passengers 3% OPT (Quaterly) Vatable Vatable

Baggage/Mails/Cargoes Vatable Vatable Vatable

Minimum Presumptive Gross Receipts for Common Carriers and Keepers of Garage Jeepney for Hire: Manila and other cities Provincial Public Utility Bus: Not exceeding 30 passengers Exceeding 30 passengers Exceeding 50 passengers Taxis: Manila and other cities Provincial Car for Hire: With Chauffeur Without Chauffeur

Quarterly

Monthly

P 2,400 1,200

P 800 400

3,600 6,000 7,200

1,200 2,000 2,400

3,600 2,400

1,200 800

3,000 1,800

1,000 600

CERTAIN AMUSEMENT PLACES (Amusement Tax) Proprietor, lessee or operator of the following amusement places shall pay the following respective tax rates on their QUARTERLY gross receipts: Boxing Exhibitions Professional Basketball Games Cockpits, Cabarets, Night or Day Clubs Jai-alai and race tracks

10% 15% 18% 30%

Note: 1. other amusement places are VATABLE, except for cinemas and theatres which is subject to LOCAL amusement tax. 2. Gross Receipts include income from television, radio, and motion picture rights, if any. 3. The tax shall be payable within 20 days after the end of each quarter.

Exemptions on professional boxing Requisites on the exemption 1. World or Oriental Championship 2. At least one of the contenders is a Filipino Citizen 3. The promoter is a Filipino citizen or a corporation 60% of which is owned by Filipino Citizens

BROKERS IN EFFECTING SALES OF STOCKS THROUGH THE PHILIPPINE STOCK EXCHANGE AND CORPORATION OF SHAREHOLDERS ON INITIAL PUBLIC OFFERING A. Tax on sales, barter or exchange of stocks listed and traded through the PSE (Stock Transaction Stock) The sale, barter or exchange, including block sale, of listed stocks through the PSE, other than by dealers in securities, subject to a tax of 60% of 1% based on the gross selling price or gross value in money of the shares of stocks sold. The stock broker shall be remitted within 5 banking days from the date of collection to the BIR.

B. Tax on the shares of stock sold or exchanged through an Initial Public Offering (IPO Tax) *IPO tax is exclusively for closely held corporation who applies to offer the shares in the public for the first time. Proportion of shares sold, bartered or exchanged Up to 25% Over 25% but not over 33 1/3% Over 33 1/3%

Tax Rate 4% 2% 1%

Determination of the proportion of stocks sold in an IPO 1. Primary Offering – unissued shares of the closely-held corporations to be sold in the IPO over total outstanding shares plus unissued shares 2. Secondary Offering – issued shares or shares of existing shareholders who wish to sell their shares in the IPO over total outstanding shares. Summary of Rules on Sales of Stocks Sales made by

Before IPO

Corporate issuer

No Tax

Shareholder investor

CGT

During IPO IPO tax as primary offer IPO tax as secondary offer

After IPO No tax Stock transaction Tax

CERTAIN FRANCHISE GRANTEES (Franchise Tax) Franchise Grantees 1. Radio or television broadcasting companies whose annual gross receipts do not exceed 3M 2. Gas and water utilities

% Tax Rates 3% 2%

LIFE INSURANCE COMPANIES AND AGENTS OF FOREIGN INSURANCE Life Insurance – 2% on the premiums collected, whether such premium is paid in money, notes, credits or any substitute for money. Items NOT included in gross receipts of an insurance company: a. Premium refunded within six months after payment on account of rejection of risk or returned for other reasons to a person insured b. Reinsurance premium paid by a company that has already paid the tax c. Premiums collected or received by any branch of a domestic corporation, firm or association doing business in the Philippines on account of any life insurance of an insured who is a non-resident, if any tax on such premium is imposed by the foreign country where the branch is established d. Reinsurance premiums, if the insured of personal insurance resides outside the Philippines, if any tax on such premium is imposed by the foreign country where the original has been issued or perfected; e. Portion of the premium collected or received by insurance companies on variable contracts in excess of the amount necessary to insure the lives of variable contract owners Summary of tax rules on insurance

Re-insurers 0% Reinsurance premium

Foreign Insurers

5% percentage tax

Agent

Domestic/Residents life Insurers 2% premium tax

Insured 4% premium tax

Direct Premiums Re-insurance Premiums Insurance commissions

Life Insurance 2% premium tax Exempt Vatable

Non-Life Insurance Vatable Exempt Vatable

TELEPHONE COMPANIES ON OVERSEAS COMMUNICATION (Overseas Communication Tax) The overseas dispatch, message or conversation transmitted from the Philippines by telephone, telegraph, telewriter exchange, wireless and other communication equipment services is subject to a 10% percentage tax. Call Origin Philippines Abroad Philippines

Call destination Philippines Philippines Abroad

Business Tax 12% VAT 0% VAT 10% overseas communication tax

Exemptions: The overseas communications tax shall not apply to the outgoing calls of the following: 1. Government 2. Diplomatic Services 3. International Organizations 4. News Services

JAI-ALAI AND COCKPIT OPERATORS ON WINNINGS Winnings from race tracks and jai-alai are subject to the following amusement taxes: Winnings in horse race or jai-alai, in general Winnings from double, forecast/quinella and trifecta bets Owners of winning race horses

10% 4% 10%

Note: Types of race winnings A. Combination bets 1. Double – a bet to select the winners in two specific races 2. Daily double — a bet to forecast the first winning horse on two consecutive races 3. Forecast— a bet to predict the first and second finisher of a 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 6. Trifecta — a bet to predict the first three finishers in a race in exact order B. Straight wagers 1. Win – the selected horse must finish first 2. Place – the selected horse must come first or second 3. Show— the selected horse must come first, second or third

Tax on winnings The pay-out on combination bets is subject to 4% on the net winnings. The pay-out on straight wagers (non-combination bets) is taxable at 10%....