PERCENTAGE TAX

SECTION 116.
Annual gross sales/receipts do not exceed Php3M
• TAX RATE: 3%
IILUSTRATION 1.
Mr. B is a trader. He is not included in the enumeration
of the law on who are not subject to value-added tax.
His gross sales in the preceding year amounted to
exactly P3M. He is subject to 3% Percentage tax.
ILLUSTRATION 2.
Mr. A whose gross annual sales never exceeded P3,000,000 had in a month
gross sales of P100,000, sales returns and allowances of P5,000 and sales
discounts of P2,000. He is not in any of the paragraphs of Section 109 on
VAT exemption. What is his percentage tax?

Gross Sales P100,000

Less: Sales Returns and Allowances P5,000
Sales Discounts 2,000 (7,000)
Sales subject to Percentage Tax P93,000
Percentage Tax at 3% P2,790
ILLUSTRATION 3.
The taxpayer began his business in 20A. He did not register as a VAT
Taxpayer because he anticipated that his gross sales for the year shall not
exceed P3,000,000. He had sales of P2,800,000 and cost of sales P1,400,000
in 20B.

How much is the tax on business in 20B?

ILLUSTRATION 4.
Before the year 20B, A Co. had gross sales never exceeding P3,000,000. It
was not VAT registered.
From January 2 to March 10, 20B, A Co. had the following data (sales and
purchases are VAT exclusive)
Sales P3,000,000
Purchases 1,500,000
From March 11 to December 31, 20B, it had the following data
Sales P9,000,000
Purchases 4,500,000
How much were the taxes paid:
(1) On sales from January 2 to March 10, 20B?
(2) On sales from March 11 to December 31, 20B?
SECTION 117 Common Carrier’s
Tax SECTION 118 International
Carrier’s Tax
SECTION 117
(Domestic Carriers and Keepers of Garages)
ILLUSTRATION 1

Libreng Sakay Company had the following gross receipts for the month:
From transport of passengers P 485,000
From transport of cargo 220,000
From rental of cargo trucks 33,000
From “rent-a-car” to balikbayans 30,000

1. The percentage tax due is:

Percentage tax due
[(P 485,000+30,000) x 3% common carriers tax] 15,45
0
Section 118 (International Carriers)
ILLUSTRATION 1.
Tiny Airlines Inc., a resident foreign corp. has the following
collections for the month of May 2022.

Passengers airfare from China to Philippines P 1,800,000

Passengers airfare from Philippines to China 1,500,000
Airfare for cargoes from China to Philippines 700,000
Airfare for cargoes from Philippines to China 1,300,000

How much is the international carriers tax payable for the month?
Airfare for cargoes from (PH-China)
P 1,300,000 x 3% international carrier tax P
Section 119 (Franchises on Gas and Water, Franchises on Radio
and/ or Television Broadcasting Companies)
ILLUSTRATION 1
CHISMOSA Broadcasting Company, a non-VAT holder of a franchise
to operate a radio and television network reported the following
gross receipt (net of any tax):
Year Gross
Receipt
2021 P 9,000,000
2022 12,000,000

2021 2022
a. P 270,000 P360,000
b. 1,080,000 1,440,000
c. 270,000 1,440,000
d. 1,080,000 360,000
Section 119 (Franchises on Gas and Water, Franchises on Radio
and/ or Television Broadcasting Companies)

SUMMARY RULES APPLICABLE TO RADIO AND/ OR TELEVISION

BROADCASTING COMPANIES
Annual Gross Receipts of the
Preceding Year Business Tax Applicable
-More than P 10 million VAT
-P 10 million and below VAT or OPT
Note: If the taxpayer
opts to pay VAT, it will
be irrevocable.
 SECTION 119
ILLUSTRATION 2.
The A Co. and B Co. are still competitors in radio and TV
broadcasting, one against the government administration and the
other a defender of the government administration. The following
gross receipts of the companies are provided:
GROSS RECEIPTS
Company 20A January 20B
A Co. P4,800,000 P300,000
B Co. P11,000,00 P1,000,000
0
(1) What is the franchise tax for January 20B?
(2) What is the output value added tax?
Section 119 (Franchises on Gas and Water, Franchises on Radio
and/ or Television Broadcasting Companies)

Section 116 vs Section 119

3 years irrevocable Irrevocable forever
- current year -preceding year
SECTION 119
ILLUSTRATION 3.
The Z Co. is a holder of several franchises to operate essential
public utilities. Gross receipts, VAT not included covered by the
franchises were:
For selling electricity P2,000,00
0
For selling water 1,800,000
For operating a stretch of superhighway 2,300,000
Rent of heavy equipment 500,000

(1) How much was the percentage tax?

(2) How much was the output value-added tax?
SECTION 120 (Overseas communication tax) ILLUSTRATION
1.
Globe Telecom Inc, has the following collection for the Month of
April 2022:

- Overseas call originating abroad P 1,120,000

- Overseas call originating in the Philippines 880,000
- Local calls 2,240,000

How much is the overseas communication tax to be remitted by

Globe Telecom for the month?
Answer: P 880,000 x 10/110 P
Section 121-122 (Tax on Banks and Non-Banks intermediaries)

ILLUSTRATION 1.
Piggy Bank has the following data for the 1st Quarter of 2022

Interest income, the remaining maturity P 100,000

of the instrument is 5 years
Rentals (gross of 5% expanded withholding tax) 50,000
Net Trading loss (10,000)

How much is the gross receipts tax on the collections of Piggy

Bank for the 1st Quarter?
Section 121-122 (Tax on Banks and Non-Banks intermediaries)

Answer:
Interest Income (maturity > 5 yrs) P 1,000
(P 100,000 x 1%)
Rental Income (P 50,000 x 7%) 3,500
Gross Receipts tax
Section 123 (Tax on life insurance premiums)
Section 124 (Tax on foreign insurance companies)

ILLUSTRATION 1.
Rose Insurance Co. furnished us its data shown below:
Insurance Premiums collectible P
3,750,000 Breakdown of above premiums:
Life Insurance Premiums 75%
Non-life Insurance Premiums 25%
During the month, life insurance premium collected represents
70% The premiums tax payable is
Life Insurance Premiums
(P 3, 750,000 x 75% x 70%) P
Section 123 (Tax on life insurance premiums)
Section 124 (Tax on foreign insurance companies)

IILUSTRATION 2.
Rica wants to procure fire insurance for his Mansion in
Dasmarinas Village from Kingsley Insurance Co., a non- resident
foreign corp, through its agent in the Philippines Mr. Senile. She
paid premiums in 2014 amounting to P 5 million.
How much is the premiums tax payable on transaction?

Premium payments (P 5,000,000 x 4%) P 200,000

Section 123 (Tax on life insurance premiums)
Section 124 (Tax on foreign insurance companies)

ILLUSTRATION 3.
Rica wants to procure fire insurance for his Mansion in
Dasmarinas Village from Kingsley Insurance Co., a non-resident
foreign corp, through its agent in the Philippines Mr. Senile.
She paid premiums in 2014 amounting to P 5 million. How much
is the premiums tax payable on transaction assuming Rica
obtained it directly from foreign insurance corp?
Answer:
Premium payments (P 5,000,000 x 5%) P
SECTION 125 AMUSEMENT TAXES
SECTION 125 (Amusement Taxes)

ILLUSTRATION 1.
Addict Corp., a cabaret, had the following data during the
month of February:
Net Income during the month P 80,000
Collections during the month:
From services rendered in January 100,000
From services rendered in February 600,000
From services to be performed in March 20,000

How much is the amusement tax for the month?

Answer: (P 100,000 + 600,000 + 20,000) x 18% P 129, 600
SECTION 125 (Amusement Taxes)

ILLUSTRATION 2.
Mr. SP, a citizen of Philippines, is a sports promoter,
promoting sports competitions and events in the
Philippines. He had the following data in a month, any tax
not included:
Gross receipts, professional boxing, with DQ,

P3,000,000 a Filipino, as defending world champion

Gross receipts, international football 1,500,000
Gross receipts, Asian swimming meet 1,000,000
Gross receipts, world chess championship 1,300,000
Gross receipts, Philippine professional basketball
900,000
What is the amusement tax?
SECTION 126 TAX ON WINNINGS
SECTION 126 (Tax on winnings)

A race track bettor won the following bets:

- On double, a bet of P 200 and dividend of P 200 per P 20
ticket.
- On winner (owner of the horse) take all, a bet of P 500 and
a dividend of P 1,000 per P 50 ticket
- One forecast, a bet of P 1,000 and dividend of P100 per P20
ticket

The total percentage tax due from the winnings is:

Section 126 (Tax on winnings)

WINNINGS
- Double ( P 200/P20 per ticket = 10 tickets x P 200) P 2,000
- Ordinary (P 500/P50 per ticket = 10 tickets x P 1,000)
10,000
- Forecast (P 1,000/P20 per ticket = 50 tickets x P 100) 5,000

Double (P 2,000 – 200) x 4% P 72

Ordinary (P 10,000 – 1,000) x 10% 950
Forecast ( P 5,000 – 100) x 4% 160
Total tax on winnings P
 FYI
Double – an event where the bettor selects a number in each of two
consecutive races and the selection in each race must finish first.
Extra Double – an event wherein the bettor selects a number in
each of two selected races and the selection in each race must
finish first.
Forecast – an event wherein the bettor selects two numbers in
a selected race, and the selection must finish first and second in
the correct order.
Double quinella – an event wherein the better selects the
numbers in each of two selected races, and the selection in
each race must first and second in either order.
Trifecta – an event wherein the bettor selects three numbers in a
selected race and the selections must finish first, second and third
in the correct order.