Title V – Other Percentage Taxes

SEC. 116. Tax on Persons Exempt from Value-Added Tax (VAT). – Any person whose sales or receipts are exempt under Section 109 (CC) of this Code from the payment of value added tax and who is not a VAT-registered person shall pay a tax equivalent to three percent (3%) of his gross quarterly sales or receipts: Provided, That cooperatives, shall be exempt from the three percent (3%) gross receipts tax herein imposed: Provided, Further, that effective July 1, 2020 until June 30, 2023, the rate shall be one percent (1%). (As amended by RA No. 9337 (May 24, 2005), RA No. 10963 (December 19, 2017), and RA 11534 (March 26, 20201))

(Note: The amendment introduced by the TRAIN Law was vetoed by the President. The Veto message reads:
C. Exemptions from percentage tax of gross sales/receipts not exceeding five hundred thousand pesos (P500,000)

I am constrained to veto the provision which provides for the above under line 12 of Sec. 38 in the enrolled bill, to wit:

“And Beginning January 1, 2019, Self-Employed and Professionals With Total Annual Gross Sales And/Or Fross Receipts Not exceeding Five Hundred Thousand Pesos (P500,000)

The Proposed exemption from percentage tax will result in unnecessary erosion of revenues and would lead to abuse and leakages. The subject taxpayers under this provision are already exempted from the VAT, thus, the lower three percent percentage tax on gross sales or gross receipts is considered as their fair share in contributing to the revenue base of the country.)

SEC. 117.         Percentage Tax on Domestic Carriers and Keepers of Garages. – Cars for rent or hire driven by the lessee; transportation contractors, including persons who transport passengers for hire, and other domestic carriers by land for the transport of passengers (except owners of bancas and owners of animal-drawn two wheeled vehicle), and keepers of garages shall pay a tax equivalent to three percent (3%) of their quarterly gross sales.

The gross sales of common carriers derived from their incoming and outgoing freight shall not be subjected to the local taxes imposed under Republic Act No. 7160, otherwise known as the local Government Code of 1991.

In computing the percentage tax provided in this Section, the following shall be considered the minimum quarterly gross receipts in each particular case:

Jeepney for hire-

• 1.  Manila and other cities P2, 400
• 2.  Provincial        1,200

Public utility bus-

• Not exceeding 30 passengers            P3, 600
• Exceeding 30 but not exceeding 50 passengers        6,000
• Exceeding 50 passengers       7,200

Taxis-

• 1.         Manila and other cities P3, 600
• 2.         Provincial        2,400

Car for hire (with chauffeur)  3,000

Car for hire (without chauffeur) 1,800. (As amended by RA No. 9337 (May 24, 2005)).

SEC. 118.         Percentage Tax on International Carriers. –

(A)       International air carriers doing business in the Philippines on their gross sales derived from transport of cargo from the Philippines to another country shall pay a tax of three percent (3%) of their quarterly gross sales. (As amended by RA No. 10378 (March 7, 2013)).

(B)       International shipping carriers doing business in the Philippines on their gross sales derived from transport of cargo from the Philippines to another country shall pay a tax equivalent to three percent (3%) of their quarterly gross sales.” (As amended by RA No. 10378 (March 7, 2013)).

SEC. 119.         Tax on Franchises. – Any provision of general or special law to the contrary notwithstanding, there shall be levied, assessed and collected in respect to all franchises on radio and/or television broadcasting companies whose annual gross receipts of the preceding year do not exceed  Ten million pesos (P10,000,000), subject to Section 236 of this Code, a tax of three percent (3%) and on gas and water utilities, a tax of two percent (2%) on the gross receipts derived from the business covered by the law granting the franchise: Provided, however, That radio and television broadcasting companies referred to in this Section shall have an option to be registered as a value-added taxpayer and pay the tax due thereon: Provided, further, That once the option is exercised, said option shall be irrevocable.

The grantee shall file the return with, and pay the tax due thereon to the Commissioner or his duly authorized representative, in accordance with the provisions of Section 128 of this Code, and the return shall be subject to audit by the Bureau of Internal Revenue, any provision of any existing law to the contrary notwithstanding. (As amended by RA No. 9337 (May 24, 2005)).

SECTION 120.  Tax on Overseas Dispatch, Message or Conversation Originating from the Philippines. –

(A)       Persons Liable. – There shall be collected upon every overseas dispatch, message or conversation transmitted from the Philippines by telephone, telegraph, telewriter exchange, wireless and other communication equipment services, a tax of ten percent (10%) on the amount paid for such services. 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.

(B)       Exemptions. – The tax imposed by this Section shall not apply to:

• (1)        Government. – Amounts paid for messages transmitted by the Government of the Republic of the Philippines or any of its political subdivisions or instrumentalities;
• (2)        Diplomatic Services. – Amounts paid for messages transmitted by any embassy and consular offices of a foreign government;
• (3)        International Organizations. – Amounts paid for messages transmitted by a public international organization or any of its agencies based in the Philippines enjoying privileges, exemptions and immunities which the Government of the Philippines is committed to recognized pursuant to an international agreement; and
• (4)        News Services. – Amounts paid for messages from any newspaper, press association, radio or television newspaper, broadcasting agency, or newstickers services, to any other newspaper, press association, radio or television newspaper broadcasting agency, or newsticker service or to a bonafide correspondent, which messages deal exclusively with the collection of news items, for, or the dissemination of news item through, public press, radio or television broadcasting or a newsticker service furnishing a general news service similar to that of the public press.

SEC 121.          Tax on Banks and Non-Bank Financial Intermediaries Performing Quasi-Banking Functions. – There shall be collected a tax on gross receipts derived from the sources within the Philippines by all banks and non-bank financial intermediaries 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 years or less   5%
• Maturity period is more than five years 1%

(b)       On dividends and equity shares and 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 Section 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%

Provided, however, That in case the maturity period referred to in paragraph (a) is shortened thru pretermination, then the maturity period shall be reckoned to end as of the date of pretermination for purposes of classifying the transaction and the correct rate of tax shall be applied accordingly.

Provided, finally, That the generally accepted accounting principles as may be prescribed by the Bangko Sentral ng Pilipinas for the bank or nonbank financial intermediary performing quasi-banking functions shall likewise be the basis for the calculation of gross receipts.

Nothing in this Code shall preclude the Commissioner from imposing the same tax herein provided on persons performing similar banking activities. (As amended by RA No. 9238 (Feb 5, 2004), and RA No. 9337 (May 24, 2005)).

SEC. 122.         Tax on Other Non-Bank Financial Intermediaries. – There shall be collected a tax of five percent (5%) on the gross receipts derived by other non-bank financial intermediaries doing business in the Philippines, from interest, commissions, discounts and all other items treated  as gross income under this Code: Provided, That interests, commissions and discounts from lending activities, as well as income from financial leasing, shall be taxed on the basis of remaining maturities of the instruments from which such receipts are derived, in accordance with the following schedule:

• Maturity period is five (5) years or less          5%
• Maturity period is more than five (5) years   1%

Provided, however, That in case the maturity period is shortened thru pretermination, then the maturity period shall be reckoned to end as of the date of pre termination for purposes of classifying the transaction and the correct rate shall be applied accordingly.

Provided, finally, That the generally accepted accounting principles as may be prescribed by the Securities and Exchange Commission for other non-bank financial intermediaries shall likewise be the basis for the calculation of gross receipts

Nothing in this Code shall prelude the Commissioner from imposing the same tax herein provided on persons performing similar financing activities. (As amended by RA No. 9238 (Feb. 5, 2004).

SEC. 123.         Tax on Life Insurance Premiums. – There shall be collected from every person, company or corporation (except purely cooperative companies or associations) doing life insurance business of any sort in the Philippines a tax of two percent (2%) of the total premium collected, whether such premiums are paid in money, notes, credits or any substitute for money; but premiums refunded within six (6) months after payment on account of rejection of risk or returned for other reason to a person insured shall not be included in the taxable receipts; nor shall any tax be paid upon reinsurance by a company that has already paid the tax; nor upon premiums collected or received by any branch of a domestic corporation, firm or association doing business outside the Philippines on account of any life insurance of the insured who is a nonresident, if any tax on such premium is imposed by the foreign country where the branch is established nor upon premiums collected or received on account of any reinsurance, if the insured, in case of personal insurance, resides outside the Philippines, if any tax on such premiums is imposed by the foreign country where the original insurance has been issued or perfected; nor upon that portion of the premiums collected or received by the insurance companies on variable contracts, in excess of the amounts necessary to insure the lives of the variable contract owners.

Cooperative companies or associations are conducted by the members thereof with the money collected from among themselves and solely for their own protection and not for profit. (As amended by RA No. 10001 (February 23, 2010)).

SECTION 124.  Tax on Agents of Foreign Insurance Companies. – Every fire, marine or miscellaneous insurance agent authorized under the insurance Code to procure policies of insurance as he may be previously been legally authorized to transact on risks located in the Philippines for companies not authorized to transact business in the Philippines shall pay a tax equal to twice the tax imposed in Section 123: Provided,  That the provisions of this Section shall not apply to reinsurance: Provided, however, That the provisions of this Section shall not affect the right of an owner of property to apply for and obtain for himself policies in foreign companies in cases where said owner does not make use of the services of any agent, company or corporation residing or doing business in the Philippines. In all cases where owners of property obtain insurance directly with foreign companies, it shall be the duty said owners to report to the Insurance Commissioner and to the Commissioner each case where insurance has been so affected, and shall pay the tax of five percent (5%) on premiums paid, in the manner required by Section 123.

SECTION 125.  Amusement Taxes. – There shall be collected from the proprietor, lessee or operator of cockpits, cabarets, night or day clubs, boxing exhibitions, professional basketball games, Jai-alai and racetracks, a tax equivalent to:

• (a)        eighteen percent (18%) in the case of cockpits;
• (b)       Eighteen percent (18%) in the case of cabarets, night or day clubs;
• (c)        Ten percent (10%) in the case of boxing exhibitions: Provided, however, That the boxing exhibitions wherein World or Oriental Championships in any division is at stake shall be exempt from amusement tax: Provided, further, That at least one of the contenders for World or Oriental Championship is a citizen of the Philippines and said exhibitions are promoted by a citizen/s of the Philippines or by a citizen of the Philippines and said exhibitions are promoted by a citizen/s of the Philippines or by a corporation or association at least sixty percent (60) of the capital of which is owned by such citizens;
• (d)       Fifteen percent (15%) in the case of professional basketball games as envisioned in Presidential Decree No. 871: Provided, however, That the tax herein shall be in lieu of all other percentage taxes of whatever nature and description; and
• (e)        Thirty percent (30%) in the case of Jai-Alai and racetracks of their gross receipts, irrespective of whether or not any amount is charged for admission.

For the purpose of the amusement tax, the term ‘gross receipts’ embraces all the receipts of the proprietor, lessee or operator of the amusement place. Said gross receipts also include income from television, radio and motion picture rights, if any. A person or entity or association conducting any activity subject to the tax herein imposed shall be similarly liable for said tax with respect to such portion of the receipts derived by him or it.

The taxes imposed herein shall be payable at the end of each quarter and it shall be the duty of the proprietor, lessee or operator concerned, as well as any party liable, within twenty (20) days after the end of each quarter, to make a true and complete return of the amount of the gross receipts derived during the preceding quarter and pay the tax due thereon.

SECTION 126.  Tax on Winnings. – Every person who wins in horse races shall pay a tax equivalent to ten percent (10%) of his winnings or ‘dividends’ the tax to be based on the actual amount paid to him for every winning ticket after deducting the cost of the ticket: Provided, That in the case of winnings from double, forecast/quinella and trifecta bets, the tax shall be four percent (4%). In the case of owners of winning race horses, the tax shall be ten percent (10%) of the prizes.

The tax herein prescribed shall be deducted from the ‘dividends corresponding to each winning ticket or the ‘prize’ of each winning race horse owner and withheld by the operator, manager or person in charge of the horse races before paying the dividends or prizes to the persons entitled thereto.

The operator, manager or person in charge of horse races shall, within twenty (20) days from the date the tax was deducted and withheld in accordance with the second paragraph hereof, file a true and correct return with the Commissioner in the manner or form to be prescribed by the Secretary of Finance, and pay within the same period the total amount of tax so deducted and withheld.

SEC. 127.         Tax on Sale, Barter or Exchange of Shares of Stock Listed and Traded through the local Stock Exchange or through Initial Public offering. –

(A)       Tax on Sale, Barter or Exchange of Shares of Stock Listed and Traded through the Local Stock Exchange. – There shall be levied, assessed and collected on every sale, barter, exchange, or other disposition of shares of stock listed and traded through the local stock exchange other than the sale by a dealer in securities, a tax at the rate of six-tenths of one percent (6/10 of 1%) of the gross selling price or gross value in money of the shares of stock sold, bartered, exchanged or otherwise disposed which shall be paid by the seller or transferor. (As amended by RA No. 10963 (December 19, 2017)).

(B)       Tax on Shares of Stock Sold or Exchanged through Initial Public Offering. – There shall be levied, assessed and collected on every sale, barter, exchange or other disposition through initial public offering of shares of stock in closely held corporations, as defined herein, a tax at the rates provided hereunder based on the gross selling price or gross value in money of the shares of stock sold, bartered, exchanged or otherwise disposed in accordance with proportion of shares of stock sold, bartered, exchanged or otherwise disposed to the total outstanding shares of stock after the listing in the local stock exchange:

• Up to twenty-five percent (25%) – 4%
• Over twenty-five percent (25%) – 3%
• Thirty-three and one third percent (33 1/3%) – 2%
• Over thirty-three and one third percent (33 1/3%) – 1%

The tax herein imposed shall be paid by the issuing corporation in primary offering or by the seller in secondary offering.

For purposes of this Section, the term ‘closely held corporation’ means any corporation at least fifty percent (50%) in value of the outstanding capital stock or at least fifty percent (50%) of the total combined voting power of all classes of stock entitled to vote is owned directly or indirectly by or for not more than twenty (20) individuals.

For purposes of determining whether the corporation is a closely held corporation, insofar as such determination is based on stock ownership, the following rules shall be applied:

(1)        Stock Not Owned by Individuals. – Stock owned directly or indirectly by or for a corporation, partnership, estate or trust shall be considered as being owned proportionately by its shareholders, partners or beneficiaries.

(2)        Family and Partnership Ownerships. – An individual shall be considered as owning the stock owned, directly or indirectly, by or for his family, or by for his partner. For purposes of this paragraph, the “family of an individual” includes only his brothers and sisters (whether by whole or half-blood), spouse, ancestors and lineal descendants.

(3)        Option. – If any person has an option to acquire stock, such stock shall be considered as owned by such person. For purposes of this paragraph, an option to acquire such an option and each one of a series of options shall be considered as an option to acquire such stock.

(4)        Constructive Ownership as Actual Ownership. – Stock constructively owned by reason of the application of paragraph (1) or (3) hereof shall, for purposes of applying paragraph (1) or (2), be treated as actually owned by such person; but stock constructively owned by the individual by reason of the application of paragraph (2) hereof shall not be treated as owned by him for purposes of again applying such paragraph in order to make another the constructive owner of such stock.

(C)       Return on Capital Gains Realized from Sale of Shares of Stocks. –

(1)        Return on Capital Gains Realized from Sale of Shares of Stock Listed and Traded in the Local Stock Exchange. – It shall be the duty of every stock broker who affected 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 and to 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 the transactions affected through him during the preceding week and of taxes collected by him and turned over to the Bureau of Internal Revenue.

(2)        Return on Public Offerings of Shares of Stock. – In case of primary offering, the corporate issuer shall file the return and pay the corresponding tax within thirty (30) days from the date of listing of the shares of stock in the local stock exchange. In the case of secondary offering, the provision of Subsection (C) (1) of this Section shall apply as to the time and manner of the payment of the tax.

(D)       Common Provisions. – Any gain derived from the sale, barter, exchange or other disposition of shares of stock under this Section shall be exempt from the tax imposed in Sections 14(C), 27(D)(2), 28(A)(8)(c), and 28(B)(5)(c) of this Code and from the regular individual or corporate income tax. Tax paid under this Section shall not be deductible for income tax purposes.

SECTION 128.  Returns and Payment of Percentage Taxes. –

(A)       Returns of Gross Sales, Receipts or Earnings and Payment of Tax. –

(1)        Persons Liable to Pay Percentage Taxes. – Every person subject to the percentage taxes imposed under this Title shall file a quarterly return of the amount of his gross sales, receipts or earnings and pay the tax due thereon within twenty-five(25) days after the end of each taxable quarter: Provided, That in the case of a person whose VAT registration is cancelled and who becomes liable to the tax imposed in Section 116 of this Code, the tax shall accrue from the date of cancellation and shall be paid in accordance with the provisions of this Section.

(2)        Person Retiring from Business. – Any person retiring from a business subject to percentage tax shall notify the nearest internal revenue officer, file his return and pay the tax due thereon within twenty (20) days after closing his business.

(3)        Determination of Correct Sales or Receipts. – When it is found that a person has failed to issue receipts or invoices, or when no return is filed, or when there is reason to believe that the books of accounts or other records do not correctly reflect the declarations made or to be made in a return required to be filed under the provisions of this Code, the Commissioner, after taking into account the situations or circumstances, or after considering other relevant information may prescribe a minimum amount of such gross receipts, sales and taxable base and such amount so prescribed shall be prima facie correct for purposes of determining the internal revenue tax liabilities of such person. (As amended by RA No. 10963 (December 19, 2017)).

(B)       Where to File. – Except as the Commissioner otherwise permits, every person liable to the percentage tax under this Title may, at his option, file a separate return for each branch or place of business, or a consolidated return for all branches or places of business with the authorized agent bank, Revenue District Officer, Collection Agent or duly authorized Treasurer of the city or municipality where said business or principal place of business is located, as the case may be.

(Manual Encoding Credits: Magdaleno C. Abdon, September 2020)