Businesses and
Transactions
Subject to
Percentage Tax
Percentage Tax Description
Percentage Tax is a business tax imposed on
persons, entities, or transactions specified under
Sections 116 to 127 of the National Internal Revenue
Code of 1997 (also known as Tax Code), as amended,
and as required under special laws.
It is imposed on the business entities not subject to
value-added tax when the gross sales or receipts of
the preceding taxable period are less than
₱3,000,000.
Problem 1:
Land Company, a taxpayer subject to percentage tax, had
the following data for the second quarter of the year:
Cash received from customers
Receivables from customers
Cash expenses incurred
₱800,000
450,000
520,000
How much are the gross receipts subject to percentage tax?
Businesses subject to Percentage Tax
1.Business with gross annual sales of not
₱3,000,000 are subject to 3% percentage tax.
more
than
2. The following businesses are also subject to percentage tax:
(a.) domestic carriers and keepers of garages;
(b.) international air/shipping carriers doing business in the
Philippines;
(c.) franchise grantees;
(d.) overseas communication from the Philippines;
(e.) banks and non-banks financial intermediaries;
(f.) other non-bank financial intermediaries;
(g.) life insurance companies
(h.) agents of foreign insurance companies;
(i.) amusement places; and
(j.) tax on winnings.
Quarterly Percentage Tax Rates Table
Quarterly Percentage Tax Rates Table
Quarterly Percentage Tax Rates Table
Quarterly Percentage Tax Rates Table
Quarterly Percentage Tax Rates Table
Quarterly Percentage Tax Rates Table
Problem 2: Domestic carriers and keepers of garages
Comfort Transport Company, a domestic common carrier,
has a fleet of vehicles used to transport passengers and
cargoes from Midsayap to Davao City. For February, the
company had gross receipts of ₱500,000 from transporting
passengers and ₱180,000 from transporting cargoes.
What is the tax liability of the company?
Solution:
Value-Added Tax (₱180,000 x 12%)
Common carrier tax (₱500,000 x 3%)
Total business tax liability
₱21,600
₱15,000
₱36,600
Problem 3: International air/shipping carriers doing
business in the Philippines
Elegant Air Transport, an international air carrier, showed the
following gross receipts during the second quarter of the taxable year:
Point of Origin
Singapore
Philippines
Philippines
Point of Destination
Australia
China
Iran
Gross Receipts
₱900,000
1,200,000
700,000
Thirty percent (30%) of the shipments from the Philippines to Iran
were later shipped from Iran to Turkey (transshipment).
Required: Determine the percentage tax due.
Solution:
Gross receipts
From Philippines to China
₱1,200,000
From Philippines to Iran (₱700,000 * 70%)
490,000
Total
₱1,690,000
Multiplied by
3%
Common carrier tax
₱
50,700
Problem 4: Franchise grantees
Atlas Company, a business franchisee, reported the following gross
receipts:
Year 2022
₱9,000,000
Year 2023
₱11,000,000
Required: Determine the business tax liability of the taxpayer for
years 2022 and 2023 assuming the business is a franchisee holder
of:
1. Radio and/or television
2. Gas and water utilities
Solution:
Answer 1: Radio and/or television
Year 2022: Percentage tax (₱9,000,000 x 3%)
Year 2023: VAT (₱11,000,000 x 12%)
₱270,000
₱1,320,000
Answer 2: Gas and water utilities
Year 2022: Percentage tax (₱9,000,000 x 2%)
Year 2023: Percentage tax (₱11,000,000 x 2%)
₱180,000
₱220,000
Problem 5: Overseas communication from the
Philippines
During the current taxable quarter, Quick
Telecommunication Company presented the following data
on its gross receipts:
Call Origin
Call Destination
Amount collected
Philippines
Philippines
₱6,000,000
Philippines
Abroad
₱5,000,000
Determine the business tax liability of the company.
Solution:
Domestic calls (₱6,000,000 x 12%)
Overseas calls (₱5,000,000 x 10%)
Total business tax
₱720,000
₱500,000
₱1,220,000
Problem 6: Banks and non-banks financial
intermediaries
Orion Bank had the following interest receipts during the
month:
Source of Income
Total Amount
Interest income from loans maturing within 2 years
₱2,500,000
Interest income from loans maturing more than 2 years but
within 5 years
₱1,000,000
Interest income on loans maturing more than 5 years
₱1,200,000
Processing fees
₱300,000
Rent income from foreclosed properties
₱200,000
Dividends income
₱50,000
Solution:
The gross receipt tax of the bank shall be computed as follows:
Interest on short term loans:
Up to 2 year loans
More than 2-5 year loans
Total
Tax Rates
%Tax
₱2,500,000
1,000,000
₱3,500,000
5%
₱175,000
Interest on long-term loans:
More than 5 year maturity ₱1,200,000
1%
12,000
0%
0
7%
35,000
₱222,000
Dividends
₱
50,000
Other items of gross income:
Processing fees
₱ 300,000
Rent Income
200,000
Total
₱ 500,000
Gross receipt tax
Problem 7: Life insurance companies
Great Insurance Company, a life and non-life insurance company, had the
following gross receipts for June of the current taxable year:
Fire and accident insurance:
Cash payment received
₱300,000
Payments received through credit cards
250,000
Life insurance:
Cash received
Post-dated check received as
payment of premium
Determine the business tax liability.
400,000
200,000
Solution:
Non-life insurance - VAT (₱550,000 x 12%)
Life insurance - Percentage tax (₱600,000 x 2%)
Total business taxes
₱66,000
12,000
₱78,000
Problem 8: Agents of Foreign Insurance
Mang Pandoy insured his buildings with a foreign insurer. He
paid ₱150,000 premiums during the month.
Determine the premium tax.
Problem 9: Amusement places
Jake is an operator of a disco (cabaret) and bowling alleys. During
a particular quarter, it reported the following:
Gate receipts
Sales of foods and beverages
Cabaret
₱200,000
800,000
Determine the total amusement tax.
Bowling alleys
₱200,000
150,000
Solution:
Gate receipts
Sales of foods and beverages
Total receipts from cabaret business
Multiply: Amusement tax rates
Amusement tax
₱200,000
800,000
₱1,000,000
18%
₱ 180,000
Problem 10: Tax on winnings
On March 12 of the current taxable period, Mr. V. Cruz spent his
day at the horse track. He bought a ticket of ₱500 and placed his
bet on the race horse “Shining Star” owned by Mr. S. Tomas. The
race horse won and the price money for the ticket was ₱25,000
and that of the winning horse was ₱300,000.
Required: Compute the business tax liability of:
1. Mr. V. Cruz; and
2. Mr. S. Tomas
Solution:
Answer 1: Tax liability of Mr. V. Cruz will be:
Prize money won
₱25,000
Less: Cost of the ticket
500
Net
₱24,500
Multiplied by percentage tax rate
10%
Amusement tax to be withheld by
the owner of the race track
₱ 2,450
Answer 2: Tax liability of Mr. S. Tomas is completed as:
Prize money won
₱300,000
Multiplied by percentage tax rate
10%
Amusement tax to be withheld by
the owner of the race track
₱ 30,000
EXEMPTION FROM PERCENTAGE TAX
The percentage tax does not cover:
1. VAT taxpayers
2. Self-employed and or professionals who opted to the 8%
income tax
3. Cooperatives
Thank
You!