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GENERAL RULES ON OTHER PERCENTAGE TAX● Shall be imposed on sale, barter, exchange, or importation of goods or sale of services based on gross sales. ● If the transaction is already subject to VAT, OPT shall no longer be imposed. ● Nonetheless, Excise Tax may be imposed together with either VAT or OP...

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NOTE: Irrespective of Gross Receipts/Sales or being a VAT-reg., transactions under Sec. 117 to 127 shall still be subjected to Percentage Tax and NOT VAT.

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Percentage Taxes, except STT shall be classified as Operating Expenses. Sale of vatable goods to entities subjected to Percentage Taxes shall still be liable to pay Input VAT.

GENERAL RULES ON OTHER PERCENTAGE TAX Shall be imposed on sale, barter, exchange, or importation of goods or sale of services based on gross sales. If the transaction is already subject to VAT, OPT shall no longer be imposed. Nonetheless, Excise Tax may be imposed together with either VAT or OPT.

BASIS:

Section 116: 3% OPT ON PERSONS EXEMPT FROM VAT Sale of Goods - Gross Sales ● Requisites for Imposition Sale of Services - Gross receipts/Collections 1. Non-vat registered. 2. Annual gross receipts do not exceed the 3,000,000 VAT threshold. ● If the taxpayer is engaged in transactions exempt from VAT, the same shall not be subject to OPT under this Section - regardless of the amount of gross sales. (Exempt from BOTH.) ● To be subject to OPT under Sec. 116, the same must not be subject to OPT under An article/transaction exempt from VAT and not subject to percentage taxes under Sec. 116 to 127 shall likewise be Exempt from Business Tax. ●

Exempt persons 1. Cooperatives. 2. Purely self-employed individuals and professionals availing the 8% tax on gross sales and other operating income in lieu of income taxes and business taxes.

SUMMARY RULES ON SECTION 116 1. Annual gross sales/receipts exceed VAT threshold shall be subject to VAT, whether or not vat registered person. ○ If non-vat registered, shall not be allowed to input tax credit as consequence. 2. Annual gross sales/receipts do not exceed VAT threshold shall generally be subject to 3% OPT under Sec. 116, ○ Opted to register as VAT registered person not later than 10 days before the beginning of the taxable quarter, which is irrevocable for 3 consecutive years. 3. Marriage Couple ○ Treated as separate taxpayers. ○ Aggregate rules for each taxpayer shall apply. 4. Professionals, aside from practice of the profession. ○ Revenue from other lines of business that is subject to VAT shall be combined for the purpose of determining whether it exceeded the VAT threshold. ○ Exempt transactions shall not be included in determining the threshold. 5. Rules on Purely Self-employed and/or Professional (SEP) ○ Not exceed the VAT threshold ■ The choice to be taxed on Graduated rates on Income tax and OPT under Sec. 116 OR 8% on gross sales/receipts and other operating

Percentage Tax

K. Despabiladero

CREATE PROVISION: July 1, 2020 - June 30, 2023: Sec. 116 shall be taxed at 1%. After June 30, 2023: Revert to 3% OPT

income in excess of 250,0000 in lieu of income tax and business tax under Sec. 116. ○ Exceeds VAT threshold ■ 8% option does not apply. ■ Graduated tax rates on Income tax and VAT on business tax. 6. Rules on Mixed-Income Earner ○ Not exceed the VAT threshold ■ The choice to be taxed on Graduated rates OR on 8% option. ■ Graduated Rates applied ● Both on Gross sales/receipts and Compensation Income ● Business tax under Sec. 116 ■ Choose 8% tax option ● Does not apply to compensation income. ○ Excess of 250,000 does not also apply. ● IN LIEU of income tax and business tax under Sec. 116 ○ Exceeds VAT threshold ● 8% option does not apply. ● Tax on Graduated rates and VAT on business tax.

*The provision does not state any changes for Sec. 117-127.

RULES ON OPTION OF SEP TO BE TAXED AT 8% ● Requisites a. Non-vat registered b. Not engaged in business/transactions exempt from VAT c. Not subject to OPT other than Sec. 116 ● 8% tax rate on gross sales/receipts and other operating income in excess of 250,000 in lieu of graduated income tax and business tax ● Option to be taxed at 8% must be clearly signified by the taxpayer on the 1st quarter of the taxable year. In the absence, it is to be presumed that the taxpayer availed graduated rates. ● Election to be taxed at 8% is irrevocable. a. If during taxable year the gross sales/receipts exceed VAT threshold, automatically subject to graduated rates. ■ The income tax credit of quarterly income tax payments under the 8% option shall be allowed. (Quarterly tax payments.) ■ Business tax on: ● 3% OPT on the first 3,000,000 ● Excess, VAT. ■ Percentage tax due shall be collected without penalty if timely paid. SECTION 117: 3% PERCENTAGE TAX ON DOMESTIC CARRIERS AND KEEPERS OF GARAGE ● Applicable only to Domestic Common Carriers. ● 3% CCT shall apply to gross receipts of operators of: ○ Cars for rent or hire driven by the lessee (rent a car) ○ Transportation contractors, including those who transport passengers of hire ○ Other who transport passengers

Percentage Tax

K. Despabiladero

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Keepers of garage Generally, 3% CCT on Domestic Carriers applies to Common Carriers by land for the transport of passengers only and does not apply to: ■ Owners of bancas and Animal drawn two-wheeled vehicles Gross receipts from incoming and outgoing freight shall also be subject to

Tax Base ○

See table for Minimum Quarterly GR

gross receipts or

gross receipts, whichever is higher.

SUMMARY RULES Type of Domestic Common Carriers Land

Transport of

Business Tax

Passengers

3% CCT, regardless of Gross Receipts

Cargo/Goods

VAT or 3% OPT under Sec. 116 if GR does not exceed 3M and non-vat reg.

Air

Passengers, Cargo or Goods

VAT or 3% OPT under Sec. 116 if GR does not exceed 3M and non-vat reg.

Sea

Passengers,. Cargo or Goods

VAT or 3% OPT under Sec. 116 if GR does not exceed 3M and non-vat reg.

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Transport operations of common carriers originating abroad shall not be subject to business taxes. ● International Flights/Shipment of Domestic Common Carriers ○ Zero Rated Services, 0% if vat-registered, otherwise vat exempt. Transportation Network Companies ○ TNCs/Partners with valid "Certificate of Public Convenience" engaged in the transport of passengers is subject to 3% CCT under Sec. 117 ■ Otherwise, subject to VAT or 3% OPT under Sec. 116 International Carriers: 2.5

: 3% COMMON CARRIERS TAX ON INTERNATIONAL CARRIERS Income Tax (GPB) ● Persons Liable: International air and shipping carriers (Resident Foreign Corporation) ● RA 10378 “Act Recognizing the Principle of Reciprocity” OFF-LINE CARRIERS: Not ○ International Air and Shipping carriers shall be subject to 3% CCT on gross subject to GPB and 3% CCT receipts derived from transport of goods/cargoes from PH to other under Sec. 118 countries. Even if 2.5% GPB is not ■ Prior to RA 10378, international carriers are subject to 3% percentage applicable, 3% CCT under taxes on transport of passengers and goods/cargoes. Sec. 118 shall still apply. ○ Transport of passengers by International air/shipping carriers is from Reciprocity does not also (VAT and 3% CCT). Off-line international carrier having sales agent in PH apply in Percentage Taxes. SECTION 119: PERCENTAGE TAX ON FRANCHISE ● Franchise tax on Franchise Grantees

Percentage Tax

Off-line flights are those maintained outside territorial jurisdiction of PH, without touching any port situated in PH.

K. Despabiladero

Franchise Tax under Sec. 119 shall only apply to Radio/ Television & Gas/Water utilities. Franchise tax on PAGCOR is not covered by Tax Code.

FOR GAS AND WATER UTILITIES: Gross receipts MUST be from business covered by the franchise. Receipts that are from other line o business shall be subjected to either 12% VAT or 3% OPT under Sec 116

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Persons Liable ○ Franchise on Gas and Water Utilities ○ Franchise on Radio/Television Broadcasting Companies ● Requisites for Franchise on Radio/Television Broadcasting Companies ○ Non-vat registered ○ Annual gross receipts of the preceding year does (TAKE NOTE: Radio/Television Broadcasting Companies shall have the option to be registered under vat system, provided once exercised, it is irrevocable.) ● Applicable tax on PAGCOR NATIONAL GRID ○ Income from gaming operations CORPORATION: 3% ■ , which shall cover both income tax and business Franchise Tax from tax from gaming operations. transmission operations. ○ Other related Service ■ Corporate income tax SUMMARY RULES ON FRANCHISE TAX Grantor

Type of Franchise

Business Tax

Government

Radio/Tele Broadcasting Co.'s

3% FT 12% VAT if vat-reg or if GR exceeds 10M on prior year

Gas and Utilities

2% FT, regardless of gross receipts

Private Companies

Water

PAGCOR "Gaming Operations"

5% Franchise Tax

Other types

12% VAT OR 3% OPT under Sec. 116 if non-vat reg. and GR does not exceed 3M

All types franchise

of

12% VAT OR 3% OPT under Sec. 116 if non-vat reg. and GR does not exceed 3M

SECTION 120: PERCENTAGE TAX ON OVERSEAS DISPATCH, MESSAGES OR CONVERSATION ORIGINATING FROM PHILIPPINES ● Overseas Communication Tax of 10% ● Requisites ○ There is an dispatch, message or conversation. ○ Originating . ○ Made through telephone, telegraph, telewriter exhange, wireless and other communication equipment. ● Person Liable: of service facility. ● Tax Collector ○ Person rendering the Services ( ) ○ Withheld the amount from customers and remit the same the end of the taxable quarter.

Percentage Tax

K. Despabiladero

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Exempt from OCT DING ○ Diplomatic Services ○ International Organization ○ News Agencies or Services ○ Government Amount to be paid by the 'user' service provider.

The tax shall be withheld by the

SECTION 121: TAX ON BANKS AND NON-BANK FINANCIAL INTERMEDIARIES PERFORMING QUASI-BANKING FUNCTIONS ● Gross Receipts Tax (GRT) SUMMARY RATES UNDER SECTION 121 GROSS RECEIPTS/INCOME DERIVED

TAX RATE

Interest, commissions and discounts from Lending Activities and Financial Leasing with remaining maturity of 5 years or less.

5%

Interest, commissions and discounts from Lending Activities and Financial Leasing with remaining maturity of more than 5 years.

1%

Dividends and Equity shares in Net income of Subsidiaries.

0%

Royalties, rentals of property, profits from exchange and all other items treated as gross income.

7%

Net Trading Gains within the taxable year.

7%

NET TRADING GAINS ● Cumulative total of the net trading gains or loss since the first month of the same taxable year. ● Net Trading Loss is deductible only from net trading gains. SECTION 122: TAX ON OTHER NON-BANK FINANCIAL INTERMEDIARIES NOT PERFORMING QUASI-BANKING FUNCTIONS SUMMARY RATES UNDER SECTION 121 GROSS RECEIPTS/INCOME DERIVED

TAX RATE

Interest, commissions, discounts and all other items treated as gross income

5%

Interest, commissions and discounts from Lending Activities and Financial Leasing with remaining maturity of 5 years or less.

5%

Percentage Tax

K. Despabiladero

Interest, commissions and discounts from Lending Activities and Financial Leasing with remaining maturity of more than 5 years.

1%

TAKE NOTE: BSP is not subject to GRT under Sec. 121 or 122. BSP is not a bank nor non-bank financia institution performing quasi-functions.

1. GRT on Lending Investor ○ Not subject to GRT under Sec. 121 or 122 ○ Subject to 12% VAT ○ includes persons, other than banks, non-bank financial intermediaries not performing quasi-banking functions - who make a practice of and others at interest. GRT on Non-stock Saving and Loan Association (NSSLAs) ○ Classified as Other Non-bank Financial Intermediaries not performing Quasi-banking functions. ○ Hence, subject to GRT under Section 122 3. Microfinance NGOs ○ With duly issued Certificate of Accreditation from the "Council" shall eligible to avail 2% GRT on income from microfinance operations, in lieu of all national taxes. ○ 2% preferential tax rate based only on lending activities and insurance commission.

SECTION 123: TAX ON LIFE INSURANCE PREMIUMS Insurance and reinsurance commissions, whether life or non-life, are subject to VAT. Any fees received independen ● Premium Tax of 2% on from insurance activities shall be likewise subject to VAT. ● Only life insurance is subject to Premiums Tax ● Non-life Insurance shall be subject to 12% VAT EXEMPT FROM INSURANCE PREMIUMS 1. Premiums on account of rejection of risk. 2. Reinsurance premiums where tax has previously been paid. Premiums collected by any branch of a domestic corporation doing business outside the PH on account of any life insurance of non-resident insured - the tax on such premium is imposed by a foreign country where the branch is established. 4. Premiums collected on account of reinsurance, in the case of personal insurance – the insured resides outside PH and any tax on such premiums are imposed by the foreign country where the original insurance is issued. 5. A portion of insurance collected on variable contracts in excess of amounts necessary to insure the lives of variable contract workers. 6. Premiums collected by Purely cooperative companies/association. SECTION 124: TAX ON AGENTS OF FOREIGN INSURANCE COMPANIES ● Persons Liable and Tax Rate Any form of insurance as ○ Fire, marine, or Miscellaneous of Foreign Insurance long as derived as agent Companies From RFC: 12% VAT of foreign insurance ○ based on Life Insurance company. ○ Twice (4%) the rate imposed in Section 123

Percentage Tax

K. Despabiladero

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Rationale ○ NRF Insurance Companies are not authorized to transact business in PH. Thus, the use of agents. Coverage

Tax Base

Tax Rate

Insurance agents are those authorized under the Insurance Code to procure policies of insurance for companies not authorized to transact business in the Philippines

Total Premiums Collected

4%

Owners of property obtaining insurance from NRF Insurance Companies.

Total Premiums Paid

5%

SECTION 125: AMUSEMENT TAX ● Persons Liable ○ Proprietor, lessee, or operator of cockpits, cabarets, night or day clubs, boxing exhibition, professional basketball games, jai-alai and racetracks. ● Tax Base ○ Gross Receipts embraces , including income from television, radio and motion picture rights, if any and irrespective whether or not any amount is charge for admission. Activity

Tax Rate

Jai-alai and Racetracks

30%

Cockpits, cabarets, night or day clubs, videoke bars, karaoke bars, karaoke televisions, karaoke boxes, and music lounges

18%

Professional basketball games

15%

Boxing Exhibition

10%

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Requisites for Exemption on Boxing Exhibition ○ Championship, provided. ■ One of the contenders is a citizen of PH and ■ Promoted by a citizen of PH, or by corporation/association at least 60% of capital is owned by such citizen 15% OPT on Professional Basketball Games is in lieu of all other percentage taxes

SECTION 126: TAX ON WINNINGS ● Person Liable ○ Owners of winning horse AND ○ Bettors in a horse race or jai-alai NET AMOUNT PAID TO WINNERS: Prize/Winnings/ Dividends LESS the applicable tax. (Cost of ticket is not deducted.)

Percentage Tax

K. Despabiladero

Gross Winnings Cost of Ticket Net/Dividends

Coverage Owners of Winning Horse Bettors Ordinary/Regular bet Special winnings (Double, forecast, quinella, trifecta)

XX (XX) XX

Tax Base

Tax Rate

Gross Winnings

10%

Winnings or Dividends Winnings or Dividends

10% 4%

SECTION 127: TAX ON STOCK TRANSACTIONS ● Stock Transaction Tax (STT) ○ Tax on sale, barter, or exchange of shares of stock and through Local Stock Exchange ○ Tax on shares of stock sold/exchange thru IPO of a closely held corporation Tax on sale, barter, or exchange of shares of stock listed and traded through Local Stock Exchange Stockbroker shall be the one to remit the ● Person Liable STT to BIR within 5 banking days from the Shareholder or Investor ○ Individual taxpayer, whether citizen or alien collection of tax to the sellers. ○ Corporate taxpayer, whether domestic or foreign ○ Others such as estate, trust etc. ● Persons not Liable ○ (12% VAT) Selling of shares is their ordinary course of business ○ Investor in a share of stock of mutual fund company ○ All other persons (natural or juridical) that are under investment incentives ● Requisites on STT of 6/10 of 1% (0.006) on Gross Selling Price (TRAIN) ○ Share of stock must be Capital Asset. ○ Any gain or loss is ignored. IRRESPECTIVE OF THE RESULT OF THE TRANSACTION ○ Any gain derived shall be from CGT and regular or corporate income tax. Tax on shares of stock sold/exchange through ● Persons Liable ○ Issuing Corporation (Primary Offering) ○ Shareholders (Secondary Offering) ■ Selling shareholdings to the public at the time of IPO ● Tax Base ○ Gross selling price or gross value in money (fair value) ● Tax rate depends on a certain ratio. ● Ratio is computed based on: ○ Sold shares/Outstanding shares the IPO ■ Ratio of 25% and below: Taxed at 4% ■ Ratio of more than 25% but not more than 33 ⅓%: Taxed at 2% ■ Ratio of more than 33 ⅓%: Taxed at 1% ● Initial Public Offering ○ Public offering of shares of stock made for the first time in LSE

Percentage Tax

K. Despabiladero

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Closely Held Corporation ○ at least 50% of outstanding capital stock is owned directly or indirectly by or for . Follow-on follow-through Offering ○ An offering of shares subsequent to IPO. SUMMARY RULES ON TAX ON STOCK TRANSACTIONS

Person Liable

Issuance

Term Used

Before IPO

Tax Not subject to VAT, OPT, and Income Tax, but subject to

Issuing Corporation During IPO

Primary Offering

OPT: 4%, 2%, 1%

After IPO

Follow-on Follow-through Offering

Not subject to VAT, OPT, and Income Tax, but subject to

Before IPO (Directly to Buyer) Shareholders

CGT of 15%

During IPO

Secondary Offering

OPT: 4%, 2%, 1%

After IPO

Follow-on Follow-through Offering

6/10 of 1% of Gross Selling Price 0.006 STT

PERCENTAGE TAX ON ADVANCE PAYMENT ● Applicable to ○ Sale of raw sugar and refined sugar. ● 3% percentage tax on advance payment based on Gross sales. ● Exempt from Advance Payment ○ Raw cane sugar ○ Cooperatives DEALERS IN SECURITIES ● Sale of Shares of Stock subject is to RETURN AND PAYMENTS OF PERCENTAGE TAXES (BIR FORM 2551Q) Section

Prior to TRAIN Law

116: 3% OPT

Monthly, 20 days end of the month

117: 3% CCT - Domestic

Monthly, 20 days end of the

Percentage Tax

TRAIN Law

K. Despabiladero

month 118: 3% CCT - International

Monthly, 20 days end of the month

119: Franchise Tax

Monthly, 20 days end of the month

120: 10% OCT

Quarterly, 20 days end of the month

121: GRT (Banks/Non-bank)

Monthly, 20 days end of the month

122: GRT (Other Non-bank)

Monthly, 20 days end of the month

123: 2% Premium...