BUSINESS AND

TRANSFER TAXES
INTRODUCTION TO BUSINESS TAXES
 NATURE OF BUSINESS TAX

Relative Consumption Tax National Tax

Privilege Tax Indirect Tax

NATURE OF BUSINESS TAX
Relative consumption tax – tax on the consumption of goods or services and it is
imposable only when the seller is doing business.
Indirect tax – tax is collected from the seller rather from the buyer-consumer.
Privilege tax – it is a tax imposed on the privilege of doing business.
National tax – it is imposed by the national government
TYPES OF BUSINESS TAXES
POINT OF DIFFERENCE VAT PERCENTAGE TAX EXCISE TAX
Timing of Imposition Sale Sale Production/Import
Nature Primary tax Primary tax Additional tax
Subject businesses All business in general All business in general Only producers or
importers of excisable
products
Taxpayers Business only Business only Business or non business
Usual taxpayers Big businesses Small businesses Big or small businesses
Accounting treatment Liability Expense Asset or Liability
PROCEDURES OF BUSINESS
TAXATION
1. Evaluate if the sales activity qualifies as a business
2. Identify the taxable person
3. Determine the activity type
4. Classify the sales or receipts.
5. Determine taxpayer registration type.
6. Determine if the goods or service offered is excisable
 PROCEDURES OF BUSINESS
TAXATION
Evaluate if the NO Exempt from
sales activity business tax Determine Determine if
qualifies as a Registration subject to excise
business Must register for Type tax
YES business tax

VAT NON-VAT
Individual
Identify the
taxable person Exempt Excisable Not Excisable
Juridical
Classify sales or Specific Percentage
receipts Tax
Goods
Determine the Vatable
activity type
Receipts
What is a business?
- refers to the habitual engagement in a commercial activity involving the sale of goods or
services for a profit

HABITUAL EXEMPTION Privilege stores

Regularity in transaction
ENGAGEMENT (RR 16-2013)

Government Agencies
and Instrumentalities
Non-profit orgs &
associations
Employment
COMMERCIAL EXEMPTION
Sale of goods or services for a
ACTIVITY Directorship in a
profit
corporation
Business for mere
subsistence
What is a business?
- refers to the habitual engagement in a commercial activity involving the sale of goods or
services for a profit

HABITUAL EXEMPTION Privilege stores

Regularity in transaction
ENGAGEMENT (RR 16-2013)

**Privilege stores are stalls or outlets not permanently fixed to the ground which are put up
during special events such as festivals and fiestas hence they are not considered as business due
to their limited activity
 What is a business?
- refers to the habitual engagement in a commercial activity involving the sale of goods or
services for a profit
COMMERCIAL
ACTIVITY

Government Agencies Non-profit orgs & Employment Directorship in a Business for mere
and Instrumentalities associations corporation subsistence
Charges and fees There is an absence in Benefits derived from RMC 77-2008 does not Those who are
imposed by the the intention of employer-employee classify director’s fees, engaged in business
government are not making a profit relationship is not per diems and but do not exceed
for profit subject to business tax allowances in a P100,000 sales or
but only to income tax directorship in a receipts per year.
corporation as a
business.
Who are business taxpayers?
- Includes any individual, trust, estate, partnership, corporation, joint venture, cooperative or
association.
RULES:
1. Each person, natural or juridical, is a taxable person for purposes of business taxation
2. Husband and wife are separate taxpayers
3. A parent company is a separate taxable person with its subsidiary company and each subsidiary
company is a taxable person
4. Home office and branch offices of the same business are one, not separate taxable person.
5. Proprietorship is not a juridical entity. Its sales and receipts is subject to business tax to the
individual proprietor. Multiple proprietorship businesses of the same individual is taxable to that
individual as the taxpayer.
 BUSINESS TAXPAYERS
VAT Taxpayers Non-VAT Taxpayers

12% 3%

Sale of services or lease

Sale of goods or of properties
Tax Base
Gross Selling Price Gross Receipts
Sale of Goods or Properties
- Refers to all tangible and intangible objects which are capable of pecuniary estimation which
shall include, among others
1. Real properties held primarily for sale to customers, held for lease or is used in the ordinary
course of trade or business.
2. The right or the privilege to use a patent, copyright, design or model, plan, secret formula or
process, goodwill, trademark, trade brand or other similar properties or rights.
3. The right or privilege to use in the Philippines any industrial, commercial or specific scientific
equipment.
4. The right or privilege to use motion picture films, films tapes and discs; and
5. Radio, television, satellite transmission and cable television time.
Sale or Exchange of services
- Performance of all kinds of services in the Philippines for others for a fee, remuneration or
consideration, whether in kind or in cash, including those performed or rendered by the following:
Construction and service contractors
Stock, real estate, commercial, customs and immigration brokers
Lessors of property, whether personal or real
Persons engaged in warehousing services
Lessors or distributors of cinematographic films
Persons engaged in milling, processing, manufacturing or repacking of goods or others
Proprietors, operators or keepers of hotels, motels and rest houses, pension houses, inns, resorts,
theaters and movie houses
Sale or Exchange of services
Proprietors or operators of restaurants, refreshments parlors, cafes and other eating places,
including clubs and caterers
Dealers in securities
Lending investors
Transportation contractors in their transport of passengers, goods or cargoes from one place in the
Philippines to another place in the Philippines
Common carriers by air and sea relative to their transport of passengers goods or cargoes for hire
and other domestic common carriers by land relative to their transport of goods or cargoes
Sales to electricity by generation, transmission and or distribution companies
Franchise grantees of electric utilities, telephone and telegraph, radio and or television
broadcasting and all other franchise grantees
Sale or Exchange of services
Non-life insurance including surety, indemnity and bonding companies
Similar services regardless of whether or not the performance thereof calls for the exercise or
use of the physical and mental faculties
The lease or use of or the right or privilege to use any copyright, patent, design or model, plan,
secret formula or process, goodwill, trademark, trade brand or other like property or right
The lease or the use of, or the right to use any industrial, commercial or scientific equipment
The supply of scientific, technical, industrial or commercial knowledge or information
The supply of any assistance ancillary and subsidiary to and is furnished as a means of enabling
the application of enjoyment of any such property, or right or any such knowledge or
information
Sale or Exchange of services
The supply of services by a nonresident person or his employee in connection with the use of
property or rights belonging to, or the installation or operation of any brand, machinery or other
apparatus purchased from such non-resident person.
The supply of technical advice, assistance or services rendered in connection with technical
management or administration of any scientific industrial or commercial undertaking, venture,
project or scheme.
The lease of motion picture films, tapes and discs
The lease or the use of or the right to use radio, television, satellite transmission and cable
television time.
 Sale of services or lease
Sale of goods of properties
Tax Base
Gross Selling Price Gross Receipts
Total amount of money or its equivalent Refers to the total amounts of money or its
which the purchaser pays or is obligated to equivalent representing the contract price,
pay to the seller in consideration of the sale, compensation, service fee, rental or royalty,
barter or exchange of goods or properties. including the amount charged for materials
supplied with the services and deposits as
*Allowable deductions to GSP payments of services, rendered and
1. Discounts granted and determined at the advanced payments actually or
time of sale, which is expressly indicated in constructively received during the taxable
the invoice. period for the services performed or to be
2. Sales returns and allowances for which a performed for another person, excluding VAT
proper credit or refund was made during the
month or quarter to the buyer on sales
What is the treatment for withholding
taxes?
A lessor received P9,500 from a lessee net of 5% withholding tax evidenced by BIR Form 2307.
How much is the gross receipts?

Answer: The Gross Receipts shall be the P10,000 computed as P9,500 / 95%

Note: Amount withheld shall form part of gross receipts because these are in constructive
possession and not subject to any reservation, the withholding agent is merely a conduit in the
collection process.
Business with Mixed Activities
- engaged in both sales of goods or properties and sales of services.

Sale of Goods Sale of Services

Exempt Sales Exempt Sales Exempt Sales
Receipts specifically - BICAP FLOW
subject to % tax
Vatable Sales Vatable Sales Vatable Receipts
 Business with Mixed Activities
Agricultural or marine food products
Health services of hospitals
Sale of certain Educational services of schools
basic necessities Housing or residential properties within price limits

Sales by cooperatives to members

Exempt Sales or Sales exempt by law,
treaty or contracts Sales or lease of aircraft or vessels
Receipts
Sales or printing of books, magazines and newspapers

Casual sales by non- Sales of persons not regularly engaged in trade or

business sellers business
Services rendered under employer-employee
relationship
Export sales of non-VAT Services rendered by a Regional Area Headquarters of
a multinational company
registered persons
 Business with Mixed Activities
Receipts from Services Subject to Specific Percentage Taxes
Banks and non-bank financial intermediaries performing quasi-
B banking functions and other non-bank financial intermediaries
without quasi banking functions
F Franchise grantees of television or radio and gas or water

International carriers on their outgoing transport of cargoes, Life insurance companies and agents of foreign insurance
I baggage or mails L companies

Franchise grantees of telephone or telegraph on Overseas

C Domestic Common carriers on their transport of passengers on
land and keepers of garage O dispatch, message or conversation originating from the
Philippines

A Certain Amusement places

W Winnings on jai-alai and race tracks

Philippine Stocks Exchange (PSE) on the sale, barter or exchange

P of shares by investors or corporations conducting initial public
offering
**Rates ranges from 0.60% to 30%
Business with Mixed Activities
VAT Registered Non-VAT Registered

12% 3%
1. Gross sales or receipts
exceeded P3,000,000.
2. There are reasonable grounds
that the gross sales or receipts
will exceed P3,000,000
3. Optional VAT registration

General Threshold: P3,000,000

Except: Franchise grantees
P10,000,000