October 2023

OTHER PERCENTAGE TAXES (“OPT”)

By Atty. C. Llamado

In lieu of the VAT, OPTs are imposed on the following persons/transactions:

1) Section 116: Tax on Persons Exempt from VAT

Persons subject: Persons who engage in VATable sales or leases of properties, or

services in the course of trade or business:
a) Whose gross sales or receipts ≤ ₱3,000,000; AND
b) Are not VAT-registered.

Tax: 3% of quarterly gross sales or receipts (also called gross receipts tax (GRT)).
However, effective July 1, 2020 to June 30, 2023, the rate shall be one percent
(1%). NEW

Persons exempt from the 3% GRT:

a) Self-employed individuals and professionals availing of the 8% tax on gross sales and/or
receipts and other non-operating income;

b) Cooperatives, except:

Duly registered cooperatives which transact business with members and non-members, and
with accumulated reserves and undivided net savings of more than Ten Million Pesos
(₱10,000,000.00) shall be subject to the percentage tax on all sales of goods and/or
services to non-members.

c) Fees, per diems, allowance, and other income received by corporate directors of which they
are not employees.

d) Marginal income earners or individuals who are self-employed and deriving gross
sales/receipts ≤ ₱100,000 during any 12-month period.

V e) Persons who are VAT-registered, regardless of level of sales.

A
T f) Persons whose line of business is non-exempt (from VAT) and are NOT VAT-registered,
but whose gross annual sales or receipts > ₱3,000,000.

2) Section 117: Common Carrier’s Tax

- % tax on domestic carriers and keepers of garages

Persons subject:
a) Lessors of cars for rent or hire driven by the lessee;
b) Transportation contractors including persons who transport passengers for hire; and
c) Other domestic carriers by land for the transport of passengers; and
d) Keepers of garages.

Exempted Persons:
a) Banca owners
b) Owners of animal-drawn two-wheeled vehicles.

1
 October 2023

Tax: 3% of quarterly gross sales or receipts from the transport of passengers, provided the
gross receipts are ≥ minimum levels provided by law. The table below provides the
minimum quarterly receipts:

Domestic Carrier
Jeep for hire:
1) Provincial ₱1,200
2) Manila and other cities ₱2,400
Public Utility Bus:
1) Not exceeding 30 passengers ₱3,600
2) Exceeding 30 but not exceeding 50
passengers ₱6,000
3) Exceeding 50 passengers ₱7,200
Taxis:
1) Provincial ₱2,400
2) Manila and other cities ₱3,600

Car for hire (without chauffeur) ₱1,800

Car for hire (with chauffeur) ₱3,000

3) Section 118: % Tax on International Carriers (Foreign Carriers)

Persons subject:

(a) International air carriers doing business in the Philippines; and

(b) International shipping carriers doing business in the Philippines.

Tax: 3% of quarterly gross receipts from the transport of cargo from the Philippines to
another country

SUMMARY RULES

Land Air Sea

Domestic Passenger OPT 117 VAT VAT
Carriage Cargo VAT VAT VAT
International Passenger Domestic Corp. Domestic Corp.
Carriage 0% VAT, No OPT 0% VAT, No OPT
Foreign Corp.1 Foreign Corp.2
Exempt from VAT Exempt from VAT,
No OPT No OPT
Cargo Domestic Corp. Domestic Corp.
0% VAT, No OPT 0% VAT, No OPT
Foreign Corp. Foreign Corp.
OPT 118 OPT 118

Note: Off-line carriers, which sell tickets (a) covering off-line flights/voyages3 or (b) flights
or voyages of other carriers, are not considered engaged in business as an international
carrier in the Philippines, and therefore are exempt from the OPT under Section 118.

1
Based on reciprocity or treaty.
2
Based on reciprocity or treaty.
3
Off-line flights/voyages refer to flights/voyages outside the Philippines, and which do not touch any port
or point in the Philippines.

2
 October 2023

4) Section 119: Franchise Tax

Persons Subject:

(a) Radio and/or television broadcasting companies whose annual gross receipts of the
preceding year do not exceed Ten Million Pesos (₱10,000,000), and which did not
choose to be registered under the VAT system; and

(b) Gas and water utilities.

Tax:

Franchise OPT
1) Radio or television broadcasting with 3% of gross receipts derived from the
gross annual receipts ≤ ₱10 M business covered by the law granting the
franchise
2) Gas and water utilities 2% of gross receipts derived from the
business covered by the law granting the
franchise

5) Section 120: Overseas Communications Tax

- Tax on overseas dispatch, message, or conversation originating from the Philippines
by telephone, telegraph, telewriter exchange, wireless, and other communication
equipment or service.

Note: Domestic calls are subject to VAT.

Persons Subject: Payor of the service

The payee (person/entity rendering the service) collects and remits the tax
to the BIR within 20 days after the end of each quarter.

Tax: 10% of the amount paid for the service.

Exemptions: The tax shall not apply to amounts paid by:

1) The Government;
2) Embassies or consular offices of a Foreign Government;
3) International organizations pursuant to international agreements;
4) News services: amounts paid for messages from any newspaper, press
association, radio or television newspaper, broadcasting, or newsticker
services to any other newspaper, press association, radio or television
newspaper broadcasting agency, newsticker service, or to a bona fide
correspondent. The messages must deal exclusively with the collection
or dissemination of news items.

3
 October 2023

6) Section 121: Tax on Banks and Non-Bank Financial Intermediaries

Performing Quasi-Banking Functions (“GRT”)

Persons Subject:
a) Banks4; and
b) Non-bank financial intermediaries performing quasi-banking functions.5

Tax:

a) On interest, commissions, discounts from lending activities as

well as income from financial leasing, on the basis of the
remaining maturities of instruments from which such receipts
are derived:

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

2) Maturity period is more than five (5) 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 7%

exchange, and all other items treated as gross income under
Section 32 of the Tax Code

d) On net trading gains within the taxable year on foreign currency, 7%

debt securities, derivatives, and other similar financial
instruments

Note: BSP is not a bank nor a non-bank financial intermediary. In the performance of its
proprietary functions, it shall not be subject to the percentage tax. However, it can
subject to VAT if it engages in any of the transactions under Section 105 of the Tax
Code.

7) Section 122: Tax on Finance Companies

Persons Subject:
(1) Finance companies; and
(2) Other non-bank financial intermediaries not performing quasi-banking functions,
doing business in the Philippines.

4
The term “bank” shall refer to entities engaged in the lending of funds obtained in the form of deposits.
5
The term “non-bank financial intermediaries” shall refer to persons or entities whose principal
functions include the lending, investing, or placement of funds or evidences of indebtedness or equity
deposited with them, acquired by them, or otherwise coursed through them, either for their own account
or for the account of others.

The term “quasi-banking activities” shall refer to the borrowing of funds from twenty (20) or more
personal or corporate lenders at any one time, through the issuance, endorsement, or acceptance of debt
instruments of any kind other than deposits for the borrower’s own account, or through the issuance of
certificates of assignment or similar instruments, with recourse, or of repurchase agreements for
purposes of relending or purchasing receivables and other similar obligations.

4
 October 2023

The term “finance companies” shall refer to corporations except banks, investment houses,
savings and loans associations, insurance companies, cooperatives, and other financial
institutions organized or operating under other special laws, which are primarily organized for
the purpose of extending credit facilities to consumers and to industrial, commercial, or
agricultural enterprises, by direct lending or by discounting or factoring commercial papers
or accounts receivables, or by buying and selling contracts, leases, chattel mortgages, or other
evidences of indebtedness, or by financial leasing of movable as well as immovable properties.

The term “other non-bank financial intermediaries” above shall include pawnshops and non-
stock savings and loan associations.

Tax:

a) On interest, commissions, discounts from lending activities as

well as income from financial leasing, on the basis of the
remaining maturities of instruments from which such receipts
are derived:

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

2) Maturity period is more than five (5) years 1%

b) On gross receipts derived from interest, commissions, 5%

discounts, and all other items treated as gross income under the
Tax Code

8) Section 123: Tax on Life Insurance Premiums (Premium Tax)

Person subject: Any person/entity offering life insurance in the Philippines, except purely
cooperative companies or associations.

Tax: 2% of gross premiums collected.

“Gross premiums” shall include re-issuance fees, reinstatement fees, renewal fees, penalties
paid to the insurance company in connection with the insurance policy, and premiums on
health and accident insurance.

Exemptions: The following premiums are exempt from the premium tax:

(1) Premiums received by purely cooperative companies or associations;

(2) Premiums refunded within six (6) months after payment on account of
rejection of risk, or returned for any other reason to a person insured;

(3) Premiums paid upon reinsurance by a company that has already paid the
tax;

(4) 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 non-resident, if any tax on such
premium is imposed by the foreign country where the branch is established;

5
 October 2023

(5) 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 premium is imposed by the foreign country where the original
insurance has been issued or perfected; and

(6) 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.

(7) Management fees, rental income, or any other income earned by the life
insurance company from services which can be pursued independently of
the insurance business activity;

(8) Investment income earned by the life insurance company from investing the
premiums;

Note: If investment income arises from funds solicited for purposes other
than for the payment of premiums, the same shall be subject to the
GRT under Section 121 of the Tax Code.

9) Section 124: Tax on Agents of Foreign Insurance Companies

Persons Subject:

(1) Every fire, marine, or miscellaneous insurance agent authorized under the Insurance
Code to procure policies of insurance as he may have previously been legally
authorized to transact, on risks located in the Philippines for companies not authorized
to transact business in the Philippines; and

(2) Owners of property who obtain insurance directly with foreign companies.

Tax:

a) For fire, marine, or miscellaneous insurance 4% of total premiums collected

agent
b) For owners of property who obtain 5% of premiums paid
insurance directly with foreign companies

Exemption: Does not apply to reinsurance premiums.

10) Section 125: Amusement Taxes

Persons Subject: Proprietor, lessee, or operator of cockpits, cabarets, night or day clubs,
boxing exhibitions, professional basketball games, jai-alai, and race
tracks.

6
 October 2023

Amusement Place Tax

1) Cockpits 18% of gross receipts

2) Cabarets 18% of gross receipts
3) Night or day clubs 18% of gross receipts
4) Boxing exhibitions 10% of gross receipts
5) Professional basketball games 15% of gross receipts
6) Jai-alai 30% of gross receipts
7) Race tracks 30% of gross receipts

Notes:

(a) Gross receipts include admission charges, rents, and income from television, radio, and
motion picture rights.

(b) If the proprietor, lessee, or operator of the amusement place also operates, at the same
time within the premises, a bar or restaurant, the receipts of the bar or restaurant shall
form part of gross receipts subject to the amusement tax above.

(c) If such bar or restaurant in (b) is operated by a third person, the gross receipts thereof
shall be subject either to VAT or to the 3% OPT under Section 116.

(d) Amusement places include videoke bars, karaoke bars, karaoke televisions, karaoke
boxes, and music lounges.

Exemption: Boxing exhibition where:

(1) The world or oriental title is at stake;
(2) One of the contenders is a Filipino citizen; and
(3) Is promoted by a Filipino citizen, or a by a corporation/association which
is ≥ 60% owned by Filipinos.

11) Section 125-A: Gaming Tax of Offshore Gaming Licensees (“OGLs”)

NEW
Persons Subject: Offshore gaming licensees6

Tax: 5% of the entire gross gaming revenue or receipts, or the agreed pre-determined
minimum monthly gaming revenue or receipts, whichever is higher. Such 5%
gaming tax shall be in lieu of all other direct and indirect internal revenue taxes and
local taxes.7

6
An offshore gaming licensee is an offshore gaming operator, whether organized abroad or in the
Philippines, duly licensed and authorized to conduct offshore gaming operations, including the acceptance
of bets from offshore customers (Sec. 22(II), NIRC).
7
However, PAGCOR or any special economic zone, tourism zone, or freeport authority may impose
regulatory fees which shall not cumulatively exceed 2% of the gross gaming revenue or receipts of all
offshore gaming licensees, or a pre-determined minimum guaranteed fee, whichever is higher (Sec. 125-
A, NIRC).

7
 October 2023

This shall be directly remitted to the BIR not later than the 20th day following the end
of each month.

Notes:

(1) Gross gaming revenue or receipts shall mean gross wagers less payouts.8

(2) Non-gaming revenue. The non-gaming revenues of a duly-licensed offshore gaming

licensee shall be subject to an income tax equivalent to twenty-five percent (25%) of
taxable income. Such non-gaming revenues of OGLs shall also be subject to the VAT
or OPT, whichever is applicable.9

12) Section 126: Winnings (from Horse Races)

Persons subject:
a) Persons who win horse races; and
b) Owners of winning race horses.

Tax:

1) Winnings in horse races Ten percent (10%) of winnings or

"dividends"

2) Winnings from double, Four percent (4%) of winnings or

forecast/quinella, and trifecta bets in "dividends"
horse races

3) Owners of winning race horses Ten percent (10%) of the prizes

Notes:

(a) The tax in (1) and (2) above shall be based on the actual amount paid for every
winning ticket after deducting the cost of the ticket.

(b) The tax shall be withheld by the operator, manager, or person in charge of the
horse races before paying the dividends or prizes.

13) Section 127: Stock Transaction Tax

(a) Sale, Barter, or Exchange of Shares Listed and Traded Through the Local Stock
Exchange (Sec. 127(A), NIRC)

8
PAGCOR or any special economic zone, tourism zone, or freeport authority shall engage the services of
a third-party audit platform that would determine the gross gaming revenues or receipts of offshore
gaming licensees (Sec. 125-A, NIRC).
9
Rev. Reg. No. 20-2021.

8
 October 2023

Persons Subject:

The tax is imposed on the seller or transferor of the shares of stock, whether
individual (citizen or alien), corporation (domestic or foreign), or other taxpayer
such as estates, trust funds, and pension funds.

However, the following are not liable for the tax on such sales, namely:

(a) Dealers in securities;

(b) Investors in shares of stock in a mutual fund company upon redemption of said
shares of stock in a mutual fund;
(c) All other persons, whether natural or juridical, who are specifically exempt
from national internal revenue taxes under existing investment incentives and
other special laws.

Rate and Base of the Tax: (6/10 of 1%) of the gross selling price.

Duty of the Stockbroker:

To withhold the tax and remit the same to an authorized agent bank (AAB) or
Revenue District Office (RDO) where the broker is registered within 5 days
from the date of collection.

(b) Sale or Exchange Through Initial Public Offering (“IPO”) of Shares of Stock in
Closely-Held Corporations (Sec. 127(B), NIRC)10

“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.

Note: For purposes of determining stock ownership, stock shall be considered

owned (a) indirectly thru a corporation, partnership, estate, or trust (b)
directly or indirectly thru family members including the spouse, and (c) thru
options to acquire stock.

Initial Public Offering (“IPO”) – refers to a public offering of shares of stock

made for the first time in the local stock exchange.

Primary offering – refers to the original sale made to the investing public by the
issuer corporation of its unissued shares of stock.

Secondary offering – refers to an offer for sale to the investing public by the
existing shareholders of their securities which is conducted during an IPO, or after
an IPO.

Follow-on/follow-through offering of shares – refers to an offering of shares to

the investing public subsequent to an IPO.
10
This OPT provided under Section 127(B) of the Tax Code has been repealed by Section 6 of R.A. No.
11494. Consequently, every sale, barter, exchange, or other disposition through an IPO of shares of
stock in closely held corporations shall no longer be subject to the tax imposed under said Section 127(B)
upon the effectivity of R.A. No. 11494 (September 15, 2020).

9
 October 2023

Persons Subject
The tax is imposed on:
a) the issuing corporation in a primary offering, or
b) the selling shareholder of the shares in a secondary offering during an IPO.

Note: Any initial public offering and secondary offering of shares of stock issued
by a real estate investment trust (“REIT”) or derivatives thereof shall be
exempt from the stock transaction tax imposed under Section 127 (B) of
the Tax Code.

Rate and Base of the Tax

The tax shall be based:

(a) on the gross selling price or gross value in money of the shares of stock sold

(b) in accordance with the proportion of shares of stock sold to the total outstanding
shares of stock after the listing in the local stock exchange:

Tax Rate
Up to twenty-five percent (25%) 4%

Over twenty-five percent (25%) but not over thirty- 2%

three and one-third percent (33 1/3%)
1%
Over thirty-three and one-third percent (33 1/3%)

Who pays the tax?

(a) In the case of a 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.

(b) In the case of a secondary offering, it shall be the duty of the stockbroker who
effected the sale to collect the tax, and remit the same to the BIR within five (5)
banking days from the date of collection.

Note: The stock transaction tax under Section 127(A) and (B) shall not be deductible for
income tax purposes.

10
 October 2023

FILING AND PAYMENT OF PERCENTAGE TAXES

1) In general, every person subject to OPT shall file a quarterly return (BIR Form No. 2551Q)
showing 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.11

However, the following percentage taxes have filing and payment rules which differ from the
abovementioned rule:

a) Overseas communication tax under Section 120 of the Tax Code – the tax shall be paid to
the person rendering the service, and such person is required to collect and pay the tax within
twenty (20) days after the end of each quarter;

b) Amusement tax under Section 125 of the Tax Code – the tax shall be payable within twenty
(20) days after the end of each quarter;

2) The following taxpayers, however, are required to file the monthly return (BIR Form No.
2551M) in addition to the quarterly return:12

a) Taxpayers whose gross annual sales and/or receipts do not exceed ₱3,000,000, and who
are not VAT-registered taxpayers;
b) Domestic carriers and keepers of garages;
c) Operators of international air and shipping carriers doing business in the Philippines;
d) Franchise grantees of gas or water utilities;
e) Franchise grantees of radio and/or television broadcasting companies whose gross
annual receipts of the preceding year do not exceed ₱10,000,000, and are not VAT-
registered taxpayers;
f) Banks, non-bank financial intermediaries, and finance companies;
g) Life insurance companies; and
h) Agents of foreign insurance companies.
i) Offshore gaming licensees.

BIR Form No. 2551M shall be filed not later than the 20th day following the end of each month.

3) Person Retiring from Business

Any person retiring from a business subject to the 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.13

4) The following percentage taxes have filing and payment rules which differ from the above-
mentioned rules:

11
For eFPS filers, the Quarterly Percentage Tax Returns (BIR Form No. 2551Q) shall be e-filed in a
consolidated return on a staggered basis according to the taxpayer’s industry classification. The
aggregate percentage taxes due shall be e-paid within twenty-five (25) days after the end of each taxable
quarter subject to the pertinent provisions of Section 128(A) of the Tax Code (Rev. Reg. No. 17-2010).
12
Guidelines to BIR Form No. 2551M.
13
Sec. 128(A)(2), NIRC.

11
 October 2023

a) Tax on winnings under Section 126 of the Tax Code – the tax shall be withheld by the
operator, manager, or person in charge of the horse races, and must be remitted to the BIR
within twenty (20) days from the date of withholding;

b) Stock transaction tax under Section 127(A) of the Tax Code – the tax shall be withheld by
the stockbroker who effected the sale, and shall be remitted to the collecting bank or Revenue
District Office where the broker is registered within five (5) banking days from the date of
collection;14

c) Taxpayers who are required to withhold OPT shall withhold and remit taxes on a monthly
basis using BIR Form No. 1600-PT (Remittance Return of OPT Withheld).15 This return
shall be filed and the tax paid on or before the tenth (10th) day of the month following the
month in which withholding was made (see discussion on withholding of OPT below).

d) Advance OPT –

1) Sale of Sugar

A seller of sugar (other than “raw cane sugar”) whose gross annual sales do not exceed
₱3.0 Million and who is not VAT-registered, shall pay a percentage tax equivalent to
3% of gross monthly sales or receipts. In general, such percentage tax shall be paid in
advance by the owner or seller before any warehouse receipt or quedans are issued, or
before the sugar is withdrawn from any sugar refinery or mill.

2) Transport of naturally grown and planted timber products

The advance percentage tax shall be determined by applying the rate of 3% on the
corresponding value per cubic meter of the different species of naturally grown and
planted timber products in accordance with the schedules issued by the BIR;

3) Sale of jewelry, gold, and other metallic minerals to non-resident individuals not
engaged in business in the Philippines and/or non-resident foreign corporations.

Change in Status

(a) In the case of a person whose VAT registration is cancelled, and who becomes liable to the
tax imposed in Section 116 of the Tax Code, the tax shall accrue from the date of
cancellation, and shall be paid in accordance with the provisions of Section 128 of the Tax
Code.

(b) For those who are not VAT-registered and who have chosen to be taxed under the 8%
income tax rate option, but have subsequently become liable to VAT:16

14
BIR Form No. 2552 shall be used in the filing and payment of the stock transaction tax under Section
127(A) of the Tax Code.
15
BIR Advisory No. 013172, February 8, 2018.
16
A non-VAT taxpayer who initially presumed that his gross sales/receipts plus other non-operating
income for the taxable year will not exceed the ₱3,000,000 VAT threshold but has actually exceeded

12
 October 2023

(1) He is required to update his registration immediately within the month following the
month he exceeded the VAT threshold. And he shall be liable to VAT prospectively
starting on the first day of the month following the month when the threshold is
breached.

(2) The taxpayer shall pay the required OPT covering the sales/receipts from the beginning
of the taxable year or commencement of business/practice of profession until the time
the taxpayer becomes liable for VAT. He shall not be imposed any penalty if the OPT
is timely paid on the immediately succeeding month/quarter.17

Where to File Return

Every person liable to the OPT 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.

the same during the taxable year, shall immediately update his registration to reflect the change in tax
profile from non-VAT to VAT taxpayer (RR 8-2018).
17
Thus, there may be an instance when a taxpayer files two (2) business tax returns in a month or quarter –
i.e., OPT and VAT returns (Rev. Reg. No. 8-2018).

13
 October 2023

Withholding of OPT

A) Withholding By the Government

Bureaus, offices, and instrumentalities of the government, including GOCCs as well as

their subsidiaries, provinces, cities, and municipalities making money payments to private
individuals, corporations, partnerships, and/or associations are required to deduct and
withhold the percentage taxes due from the payees on account of such money payments.

No money payments shall be made by any government office or agency, unless the taxes
due thereon shall have been deducted and withheld.

The required return shall be filed and payments made within ten (10) days following the
end of the month the withholding was made or the withholding tax has accrued.

B) Optional Withholding of OPT

Under Sec. 5.128 of Rev. Regs. No. 2-98 (as inserted by Rev. Regs. No. 14-2003), a person
supplying goods or services and are subject to the 3% percentage tax under Section 116 of
the Tax Code has the option to remit his OPT through the withholding and remittance
of the same by the payor.

Such option must be manifested by filing the “Notice of Availment of the Option to Pay the
Tax Through the Withholding Process”, which must be furnished to the payor and the
RDOs of both payor and payee. The option, once chosen, remains as the manner of
remitting the tax unless said option is cancelled by the payee.

The OPT withheld shall be remitted by the payor, using BIR Form No. 1600-PT, to the
appropriate collection agents (authorized agent bank (“AAB”) or revenue collection officer
(“RCO”)) of the BIR.

14