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.
 The scope of Percentage Tax
Percentage Tax covers:

1. Services specifically subject to percentage tax

2. All other sales of goods, services or lease of properties other than

exempt sales, provided that the seller:

a. did not exceed the VAT threshold, and

b. is non-VAT registered
 Services specifically subject to percentage tax
1. Common Carriers on their transport of passengers by land and
keepers of garage.
2. International Carriers on their transport of cargoes, excess baggage
and mails only.
3. Certain Frachise grantees.
4. Telephone companies on overseas communication
5. Banks and non-bank financial intermediaries
6. Life insurance companies
7. Agents of foreign insurance companies
8. Certain amusement places
9. Jai Alai and cockpit operators on winnings
10. Brokers in effecting sales of stocks through the Philippine stock
exchange and corporations or shareholders on initial public offerings
VAT is considered indirect tax while Percentage Tax is direct tax.

As an indirect tax, Value Added Tax (VAT) can be passed on to the

customer. It can be added to the selling price or service fee collected
from customer. Computation: Selling Price or Service Fee x VAT Rate

Example: Service Fee P10,000 + VAT P1,200 = Total Collected

P11,200

On the other hand, as a direct tax, Percentage Tax (NON-VAT) is

shouldered by the taxypayer and cannot be passed on to customers.
Selling Price or Service will equal the Total Amount Collected.

Example: Service Fee P10,000 = Total Collected P10,000

Characteristics of Percentage Tax
1. It is imposed on business transactions

2. It follows the consumption/destination principles

3. Direct Tax

4. Privilege Tax

5. Ad Valorem Tax

An ad valorem tax is a tax that is based on the assessed value of a property, product, or service.
The most common ad valorem tax examples include property taxes on real estate, sales tax on
consumer goods, and VAT on the value added to a final product or service.
Marginal Income Earners (MIE)
MIE are subject to income taxes but exempt from payment of
business taxes.

Individuals are considered an MIE if they are:

1. Not deriving compensation from employment (unemployed)

2. Not a licensed professional, consultant, artist, sales agent,
broker, and other similarly situated, including all others whose
income have been subjected to withholding taxes, and
3. Whose activities are principally for subsistence or livelihood
that do not realize gross sales exceeding P100,000 in any 12 -
month period.
Marginal Income Earners (MIE)
MIE may include the following:

1. Sari-sari store owners

2. Agricultural growers/producers, and farmers/fishermen selling

directly to ultimate consumers

3. Carinderia owners

4. Dirvers/operators of single unit tricycle

Generally, Percentage Taxes are based on gross receipts.

The term “gross receipts” means cash actually or

constructively received.

Receivables, although income thereon is earned already,

are not yet taxable.

There are no deductions from gross receipts to arrive at

the taxable gross receipts, except, returns and allowances
and discounts.

The Taxpayer is the seller of the goods or service (with

exceptions)
The Taxpayer of the 3% Percentage Tax:

a. A taxpayer who is exempt from value-added tax

because his gross sales or receipts in the preceding
year did not exceed the threshold of 3 Million Pesos
and not exempt under any other paragraph of the same
section.

b. A taxpayer who did not avail of Optional VAT

Registration.
Illustration 1:

Mr. A whose gross annual sales never exceeded the statutory threshold
had, in a taxable month, gross sales of P100,000, sales return and
allowances of P5,000 and sales discounts of P2,000. The Percentage
Tax is:

Gross Sales P100,000

Less:
Sales Return and Allowances P5,000
Sales Discounts 2,000 7,000
Sales subject to percentage tax P 93,000
Percentage Tax at 3% P 2,790
======
Illustration 2:

Mr. B is a trader. His gross sales in the preceding year amounted to

P3,000,000. His gross annual sales in the preceding year did not
exceed the threshold.

He is subject to the three percent (3%) percentage tax

P3,000,000 X 3% = P90,000
Illustration 3:

Mr. C sells agricultural food products. In 2017, his gross sales amounted
to P440,000. For the first month of 2018 his gross sales amounted to
P100,000. What business tax would he pay in 2018?

None, He is not subject to value-added tax because he is exempt under

paragraph (a) of Section 109 of the National Internal Revenue Code.

He is not subject also to the 3% percentage tax because his exemption

is not under paragraph (s) of the same section.
Illustration 4:

Mr. D had a gross sales of P3,000,000 in 2017. In the first month of

2018, his gross sales amounted to P200,000, any tax not included, with
purchases from VAT-registered supplies at 50% of the selling price, VAT
not included.

For 2018, Mr. D was subject to the 3% percentage tax or P6,000

(P200,000 X 3%).

Gross receipts of P3,000,000 in 2017 did not exceed the threshold

amount.
OPTIONAL VAT Registration

When the gross sales or receipts of the preceding year did not exceed
three million pesos (P3,000,000), to determine whether it is better to be
VAT-registered of remain subject to the 3% percentage tax, one must not
look only at, and compare, the percentages – the 3% and the 12% (net
sales or receipts). One has to look into the net effect of all the business
taxes that converge on the operations.
OPTIONAL VAT Registration
Illustration 5:
Sales P200,000 OPTIONAL VAT Registration
Purchases from VAT Registered persons 100,000 Illustration 5:
Expenses paid to VAT Registered persons 60,000 Sales P200,000
Purchases from VAT
Registered persons 100,000
If VAT Registered: Expenses paid to VAT
Registered persons 60,000
Output Taxes (P200,000 x 12%) P24,000
Less: Input Taxes – If NOT VAT Registered:

On purchases (P100,000 X 12%) P12,000 Percentage Tax (P200,000 x 3%) P 6,000

On expenses (P60,000 X 12%) 7,200 19,200 Total Tax Payments:
Value-Added Tax Payable P 4,800 VAT paid on purchases P12,000
VAT paid on expenses 7,200
Percentage Tax Payable 6,000
Total Tax Payments:
VAT paid on purchases P12,000 Total Tax Paid P25,200
======
VAT paid on expenses 7,200
VAT payable 4,800

Total Tax Paid P24,000

Return and Payment of the 3% Percentage Tax
A monthly percentage tax return must be filed and the tax paid within 20
days after the end of the month.

The taxpayer, with several branches or place of business, but all subject
to the percentage tax, may file separate return for each branch or place
of business, or a consolidated return for all.

Illustration 6:
How much is the percentage tax of
A taxpayer had on record, in his books of accounts, the May
following:
May 2 Purchases from a VAT supplier, of goods to be Sale of May 15 P30,000
sold, P50,000, VAT of P60,000 not included Sale of May 26 10,000
May 12 Purchases from a Non-VAT supplier, of goods Total Sales of the Month P40,000
to be sold, P90,000
May 15 Sale of P30,000
May 20 Payment of the April percentage tax Percentage Tax at 3% of P40,000 P 1,200
May 26 Sale of P10,000 ======
Problems:
1. The taxpayer began his business in 2018. He did not register as a
VAT taxpayer because he did not anticipate that his gross sales for
the year will exceed the threshold amount for VAT. He had sales of
P1,000,000 and cost of sales of P400,000 in 2018.

How much was his tax on his business for the year?

2. Mr. A had gross sales never exceeding the statutory of three million
pesos (P3,000,000). Mr. A did not opt to be VAT registered. In a month,
he had the following data:
Sales P150,000
Purchases from VAT Registered suppliers,
VAT not included 75,000

How much taxes did he pay for the month?

Problems:
3. Mr. A anticipates that his gross sales in a year will not exceed P3,000,000. He is
deciding on whether to register as a VAT taxpayer of not. He forecasts that in
the year 2018, he will have the following data:
Sales P1,500,000
Purchases of goods to be sold:
From VAT taxpayers, VAT not included 800,000
From Non-VAT taxpayers 100,000
Miscellaneous expenses to be paid:
From VAT taxpayers, VAT not included 50,000
From non-VAT taxpayers 20,000
VAT

How much will be the total business taxes if:

a. He opts not to be a VAT Registered
b. He opts to be a VAT Registered
Problems:
4. Mr. A whose gross annual sales never exceeded the statutory
threshold had, in a taxable month, gross sales of P2,000,000, sales
return and allowances of P50,000 and sales discounts of P20,000. How
much is the Percentage Tax:

5. Mr. A had gross sales never exceeding the statutory of three million
pesos (P3,000,000). Mr. A did not opt to be VAT registered. In a
month, he had the following data:
Sales P2,500,000
Purchases from VAT Registered suppliers,
VAT not included 850,000

How much taxes did he pay for the month?

Section 116 - Tax on Person Exempt from VAT a.k.a. Other Percentage
Tax (OPT)

Non-VAT registerd persons who do not exceed the P3,000,000 VAT

threshold shall pay a percentage tax based on their gross sales. Note that
VAT-exempt transactions are also exempt from OPT. Hence, if a taxpayer
is engaged in the selling of vegetables they are not liable for VAT and OPT
even if they are above the P3,000,000 VAT threshold.

The following persons are NOT subject to Percentage Tax under

Section 116:

1. VAT registered taxpayers

2. Pure Compensation Income Earners
3. Self-employed or mixed individual income earners using the 8% tax
4. Transactions exempt from VAT
5. Transactions subject to percentage tax other than Section 116
Sample Case: 1

During the second quarter of 2022, a non-VAT taxpayer engaged in the

sale of services has the following data:

Accounts Receivable, beginning of the quarter P 500,000

Revenue during the quarter 1,000,000
Accounts Receivable, end of the quarter 750,000
Purchase of supplies, total invoice amount 112,000

How much is the Percentage Tax due for the quarter?

Sample Case: 1

During the second quarter of 2022, a non-VAT taxpayer engaged in the

sale of services has the following data:

Accounts Receivable, beginning of the quarter P 500,000

Revenue during the quarter 1,000,000
Accounts Receivable, end of the quarter 750,000
Purchase of supplies, total invoice amount 112,000

How much is the Percentage Tax due for the quarter?

Accounts Receivable (Beginning) P 500,000

Revenue during the year 1,000,000
Accounts Receivable (Ending) 750,000
Total Gross Sales of the quarter P 750,000
Percentage Tax Due (P750,000 X 1%) P 7,500
========
Sample Case: 2

During the second quarter of 2022, a non-VAT taxpayer engaged in the

sale of services has the following data:

Accounts Receivable, beginning of the quarter P 500,000

Revenue during the quarter 1,000,000
Accounts Receivable, end of the quarter 750,000
Purchase of supplies, total invoice amount 112,000

Using the same data, compute for the percentage tax in the year 2024.
Sample Case: 2

During the second quarter of 2022, a non-VAT taxpayer engaged in the

sale of services has the following data:

Accounts Receivable, beginning of the quarter P 500,000

Revenue during the quarter 1,000,000
Accounts Receivable, end of the quarter 750,000
Purchase of supplies, total invoice amount 112,000

How much is the Percentage Tax due for the quarter?

Accounts Receivable (Beginning) P 500,000

Revenue during the year 1,000,000
Accounts Receivable (Ending) 750,000
Total Gross Sales of the quarter P 750,000
Percentage Tax Due (P750,000 X 3%) P 22,500
========
Sample Case: 3

Mini-Mart is a VAT-registered convenience store located in the Boracay

Island. During 2024, they have total gross sales of P2,750,000 and
purchases of P1,500,000. Compute for the total business tax for the year.
Sample Case: 3

Mini-Mart is a VAT-registered convenience store located in the Boracay

Island. During 2024, they have total gross sales of P2,750,000 and
purchases of P1,500,000. Compute for the total business tax for the year.

Output VAT ( P2,750,000 X 12%) P 330,000

Less: Input VAT (P1,500,000 X 12%) 180,000
Value-Added Tax Due 150,000
========
Sample Case: 4

In 2023, Lee Van owns several commercial spaces that is being rented out
for a rate of P14,000 per month. One of his tenants paid P27,000 and the
excess represents an advance rent payment for the next month.

Determine the percentage tax due.

Sample Case: 4

In 2023, Lee Van owns several commercial spaces that is being rented out
for a rate of P14,000 per month. One of his tenants paid P27,000 and the
excess represents an advance rent payment for the next month.

Determine the percentage tax due.

Gross Receipts P 27,000

Percentage Tax Rate 3%
Tax Due P 810
========
Section 117 - Percentage Tax on Domestic Carriers

The gross sales of domestic carriers from their transport of passengers by

land is subject to a 3% common carrier tax (CCT). It is described as a tax
on the business of transportation.

Covered Persons:

1. Cars for rent or hire driven by a lessee

2. Transportation Contractors
3. Persons who transport passengers for hire
4. Other domestic carriers by land for the transport of passengers
5. Keepers of garages

Exempt:
1. Owners of bancas (boat)
2. Owners of animal-drawn two wheeled vehicle
Section 117 - Percentage Tax on Domestic Carriers

??? Are school buses and passenger buses rented for special trips subject
to the 3% under Section 117?

YES, school buses and passenger buses rented for special trips, such as
excursions and the likes are not subject to VAT but to the 3% common
carrier’s tax

??? Are trycycles exempt from business taxes???

Yes. The trycycle owners/operators/drivers are classified as Marginal

Income Earners (MIE) whose aggregate gross sales not exceed P100,000
during any 12-month period. They are still required to register with the BIR,
but they are exempt from paying VAT, or Percentage Tax
Sample Case: 5

Broom Corp. is an operator of a fleet of taxis that roams around Baguio City.
During the 3rd quarter of 2024, they reported gross sales of P391,000 from
transport of passengers and P85,000 from advertising.

How much is the total percentage tax due?

Sample Case: 5

Broom Corp. is an operator of a fleet of taxis that roams around Baguio City.
During the 3rd quarter of 2024, they reported gross sales of P391,000 from
transport of passengers and P85,000 from advertising.

How much is the total percentage tax due?

Tax on transport of passengers (P391,000 X 3%) P 11,730

Tax on advertising (P85,000 X 3%) 2,550
Total Percentage Tax Due P 14,280
========
Sample Case: 6

Ahunin Corp., a VAT Registered person is engaged in domestic

transportation and logistics services by sea. They reported the following
gross sales for the month:

Transport of passengers (sea) P 751,000

Transport of cargo (sea) 428,000
Sale of Food and Drinks in the vessel 109,000
Rental Income of spaces inside the vessel
leased out to concessionaires 175,000

How much is the Tax Due?

Sample Case: 6

Ahunin Corp., a VAT Registered person is engaged in domestic

transportation and logistics services by sea. They reported the following
gross sales for the month:

Transport of passengers (sea) P 751,000

Transport of cargo (sea) 428,000
Sale of Food and Drinks in the vessel 109,000
Rental Income of spaces inside the vessel
leased out to concessionaires 175,000
Total P1,463,000
VAT Rate 12%__

Output VAT P 175,560

========
Section 118 - Percentage Tax on International Carriers

International Air and Shipping carriers doing business in the Philippines

shall pay a 3% percentage tax on their gross sales derived from the
transport of cargo from the Philippines to another country.

Covered Persons:

1. International Air Carriers - a foreign airline doing business in the

Philippines with landing rights in the Philippines to perform international air
transportation services/activities or flight operations.

2. International Shipping Carriers - a foreign shipping corporation doing

business in the Philippines, having touched or intention of touching any
Philippine port to perform international sea transportation services/activities
from the Philippines to anywhere in the world or vice versa.
Section 118 - Percentage Tax on International Carriers

Tax Base:

The tax shallnapply to the quarterly gross sales from the transport of cargo
from the Philippines to another country. Gross sales shall include, but shall
not be limited to:

1. Freight/Cargo fees
2. Mail Fees
3. Other service charges and fees

The place of sale or issue and the place of payment of the service is
irrelevant, what is important is that cargo/mail originated from the
Philippines to a place abroad.
 Section 118 - Percentage Tax on International Carriers

Particular International Carrier Domestic Carrier

PH to PH
- Passengers 3% CCT (land) 3% CCT (land)
12% VAT (air and sea) 12% VAT (air and sea)

- Goods and Cargo 12% VAT 12% VAT

PH to Abroad
- Passengers VAT Exempt 0% VAT
- Goods and Cargo 3% Percentage Tax 0% VAT

Abroad to PH VAT Exempt VAT Exempt

 Section 119 - Tax on Franchise

A franchise is a special privilege to engage in certain acts that is

conferred by the legislature or an individual or a corporation.

Particular Tax Rate Tax Base

Radio/Television broadcasting

- Do not exceed P10M 3%

Gross Sales
- Exceed P10M 12% VAT

Gross sales from business

Gas and Water Utilities 2% Percentage Tax covered by the franchise
Radio and/or television broadcasting companies
All franchises on radio and / or television broadcasting companies
whose annual gross sales of the preceding year do not exceed
P10,000,000 shall pay a 3% tax. When the company exceeds the
P10M threshold, they are required to register as a VAT taxpayer within
30 days from the end of the year of the taxable year.

Radio and television broadcasting companies also have an

option to be registered as a value-added taxpayer even if they
did not exceed the P10 M threshold. But once the option is
exercised, it is irrevocable.
Sample Case: 7

Radio Jako is a non-VAT registered entity. They reported the folloing

during the following years:

Radio Rental
Advertising Income Other Sales Total___

Year 1 P4,000,000 P1,200,000 P 300,000 P5,500,000

Year 2 7,500,000 2,600,000 850,000 10,950,000

Year 3 11,000,000 3,300,000 1,300,000 15,600,000

How much is the total business tax due for each year?
Sample Case: 7

Radio Jako is a non-VAT registered entity. They reported the folloing during
the following years:

Radio Rental
Advertising Income Other Sales Total___
Year 1 P4,000,000 P1,200,000 P 300,000 P5,500,000
Year 2 7,500,000 2,600,000 850,000 10,950,000
Year 3 11,000,000 3,300,000 1,300,000 15,600,000

How much is the total business tax due for each year?

Year 1 = P5,500,000 X 3% Franchise Tax = P165,000

Year 2 = P10,950,000 X 3% Franchise Tax = P328,500
Year 3 = P15,600,000 X 12% VAT = P1,872,000
Section 119 - Tax on Franchise

Gas and Water Utilities:

A tax of two percent (2%) on the gross sales derived from the business
covered by the law granting the franchise on gas, and water utilities
Sample Case: 8

Sakit Ulo Corporation is a grantee of several franchises. Their gross sales

during the year included the following:

From water franchise P7,000,000

From electric francise 9,000,000
From gas franchise 12,000,000
From other franchises 7,500,000

How much is the Franchise Tax from the year?

Sample Case: 8

Sakit Ulo Corporation is a grantee of several franchises. Their gross sales

during the year included the following:

From water franchise P7,000,000

From electric francise 9,000,000
From gas franchise 12,000,000
From other franchises 7,500,000

How much is the Franchise Tax from the year?

From water franchise P7,000,000

From gas franchise 12,000,000
Total P19,000,000
Franchise Tax Rate 2%__
Franchise Tax Due P 380,000
=========
Section 120 - Tax on overseas communication

On every overseas dispatch, message or conversation transmitted from the

Philippines by telephone, telegraph, telewriter exchange, wireless and
other communication equipment service, a tax of 10% on the amount billed
for such service.

The tax shall be paid by the service provider to the BIR within 20 days after
the end of each quarter.

Tax Rate:
Call Direction Business Tax Rate
PH calling Abroad (Outbound) 10% Overseas Communication Tax

Abroad Calling PH (Inbound) 0% VAT

PH calling PH (Domestic) 12% VAT

Section 120 - Tax on overseas communication

Calls made by the following are exempt from the 10% tax:

1. Government - messages transmitted by the government or any of

its political subdivisions or instrumentalities

2. Diplomatic Services - messages transmitted by any embassy and

consular offices of a foreign government

3. International Organizations - messages transmitted by a public

international organization under international agreement

4. News Services
Section 121 - Gross Receipt Tax (GRT) on Banks
and Quasi-Banks

There shall be collected tax on gross receipts derived from sources within
the Philippines by all banks and non-bank financial intermediaries
performing quasi-banking functions in accordance with the following
schedule:
Interest, commissions, and discounts from lending activities as well as income from
leasing, on the basis of remaining maturities of instruments:
a 1. If maturity period is 5 years or below 5%
2. If maturity period is more than 5 years 1%
Dividends and equity shares and net income of subsidiaries
b 0%
Royalties, rentals of property, real or personal, profits from exchange and all other
c items treated as gross income
7%

Net trading gains within the taxable year of foreign currency, debt securities,
d derivatives, and other similar financial instruments
7%
Sample Case: 9

ABC Bank has the following during the month:

Interest income from instruments of maturity

of less than 5 years P150,000
Rental receipts 40,000
Trading Grains 22,000
Trading losses (32,000)

How much is the Gross Receipt Tax from the month?

Sample Case: 9

ABC Bank has the following during the month:

Interest income from instruments of maturity

of less than 5 years P150,000
Rental receipts 40,000
Trading Grains 22,000
Trading losses (32,000)

How much is the Gross Receipt Tax from the month?

Interest Income P150,000

GRT Rate 5% P7,500

Rentals P 40,000
GRT Rate 4% 2,800

Total P10,300
======
Section 122 - Non-Bank Financial Intermediaries

Gross receipts of non-bank financial intermediaries not performing quasi-

banking functions shall be subject to the following GRT rates:

Interest, commissions, and discounts from lending activities as well as income from
leasing, on the basis of remaining maturities of instruments:
a 1. If maturity period is 5 years or below 5%
2. If maturity period is more than 5 years 1%
b From interest, commissions, discounts, and all other items treated as gross income 5%

The tax covers an investment house, investment company, fiancing company,

securities dealer/broker, lending investors, pawnshop, money broker, fund
manager, cooperative, insurance company, non-stock savings and loan
association and building and loan association.
Sample Case: 10

ABC Bank has the following during the month:XYZ Pawnshop realized the
following gross receipts during the month:

Interest income:
Short-term loans P200,000
Long-term loans 180,000
Penalties for late payment of loans
(25% pertains to long-term loans) 50,000
Service Fees on loans (30% pertains
to long-term loans) 60,000
Rental Income 80,000

How much is the Gross Receipt Tax from the month?

Sample Case: 10

ABC Bank has the following during the month:XYZ Pawnshop realized the
following gross receipts during the month:

Solution:

Interest Income P200,000 P180,000

Loan Penalties 50,000 -----
Service Fees on Loans 42,000 18,000
Rental Income 80,000 ------
Total P372,000 P198,000
GRT Rate 5% 1%___
GRT Due P 18,600 P 1,980
======== ==========
Section 123 - TAX ON LIFE INSURANCE PREMIUMS

Life Insurance Non - Life Insurance

Other Income Investment Income
Premiums Premiums

2% OPT 12% VAT 12% VAT It depends

Taxpayers engaged in the life insurance business in the Philippines, except

purely cooperative companies or associations, is subject to the 2% Premium
Tax (PT) based on the total premiums collected. Example of life insurances:

1. Health Insurance 3. Death Insurance

2. Accident Insurance 4. Group Life Insurance
Section 123 - TAX ON LIFE INSURANCE PREMIUMS

NON-LIFE INSURANCE

A non-life insurance company is one which solicits insurance on the security of

property such as marine, fire and casualty insurance companies; surety, fidelity,
indemnity, and bonding companies.

The gross receipts and total premiums collected of non-life insurance

companies is subject to VAT. However, premiums received from health and
accident insurance contract underwritten by the non-life insurance companies,
inasmuch as the same partakes the nature of a life insurance policy, is subject
to the 2% premium tax.
 Section 123 - TAX ON LIFE INSURANCE PREMIUMS

Life Non-Life

1. General rate on traditional products

2% PT 12% VAT

2. Premiums on Health and Accident Insurance 2% PT 2% PT

3. Reinsurance Premiums Exempt Exempt

4. Reinsurance Commissions 12% VAT 12% VAT

5. Management Fees, rentals, and other charges 12% VAT 12% VAT

6. Other Income Earned in connection to insurance

2% PT 12% VAT
business
7. Investment Income from:
A. Invested Insurance Premium Exempt GRT
B. Other Sources 2% GRT
Section 123 - TAX ON LIFE INSURANCE PREMIUMS
Sample Case: 11

Tayan Insurance corporation, VAT registered, is engaged in selling various

insurance products. During the quarter, they have the following data:

Life Non-Life
Premium Received P260,000 P310,000
Reinsurance Premiums 70,000 120,000
Reinsurance Fees 21,000 24,000
Late Payment Penalty 10,000 13,000
Renewal Fees 40,000 50,000
Insurance Commissions 50,000 40,000

Tayan received P100,000 gross receipts from advertising income. How

much is the total business taxes to be paid.
Section 123 - TAX ON LIFE INSURANCE PREMIUMS
SOLUTION:

Life Non-Life
2% PT 12% VAT
Premium Received P260,000 P310,000
Reinsurance Premiums Exempt Exempt
Reinsurance Fees 21,000 24,000
Late Payment Penalty 10,000 13,000
Renewal Fees 40,000 50,000
Insurance Commissions (50K + 45K) 95,000
Advertising Income 100,000
_________ _________
Total P331,000 P592,000
Tax Rate 2% 12%__

Tax Due P6,620 P71,040

Section 124 - TAX ON AGENTS OF FOREIGN
INSURANCE COMPANIES

FOREIGN INSURANCE COMPANY

Premium from Fire, Marine or Miscellaneous

Insurance

Collected Directly
Collected by Agents
from Property Owners

4% OPT 5% OPT
Section 124 - TAX ON AGENTS OF FOREIGN
INSURANCE COMPANIES

Fire, marine or miscellaneous insurance agents authorized under the Insurance

Code to procure policies of life insurance on risks located in the Philippines for
companies not authorized to transact business in the Philippines are subject
to a percentage tax of 4%.

If property owners obtain insurance directly abroad without the services of an

insurance agent, the tax shall be 5% of the Premium paid.
Section 124 - TAX ON AGENTS OF FOREIGN
INSURANCE COMPANIES
Sample Case: 12

Ginko bought some insurance plans for his factory in Laguna, He availed of the following:

INSURANCE Particular Premium Paid

Fire Insurance From a domestic insurance

P30,000
company
Flood Insurance Paid to an insurance agent of an
25,000
RFC
Earthquake Insurance Paid to an insurance agent of an
37,000
NRFC insruance company
Other Property Insurance Paid directly from insurance
41,000
company abroad

How much is the total Percentage Tax Due?

Section 124 - TAX ON AGENTS OF FOREIGN
INSURANCE COMPANIES
SOLUTION:
4% OPT 5% OPT 12% VAT
Fire Insurance Domestic P30,000
insurance
company
Flood Insurance Insurance agent 25,000
of an RFC
Earthquake Insurance agent
Insurance of an NRFC
insruance 37,000
company
Other Property Insurance 41,000
Insurance company abroad
TOTAL 37,000 41,000 51,000
TAX RATE 4% 5% 12%
TAX DUE P1,480 P2,050 P6,600
Section 125 - AMUSEMENT TAXES

Gross receipts from the following activities are subject to Percentage Tax:

Amusement Activity Tax Rate

Jai-alai and Race Tracts 30%
Cabaret, night, or day clubs 18%
Cockpits 18%
Professional Basketball game 15%
Boxing Exhibition 10%

For purposes of amusement taxrs, gross receipts shall include:

1. All receipts of the proprietor, lessee, or operator of the amusement place (i.e. rental
income, sale of food and other articles) and;
2. Income from television, radio and motion picture rights, if any.
Section 125 - AMUSEMENT TAXES

Exemption:
Boxing exhibition in any division whether for World or Oriental
Championship is exempt from amusement tax if the following conditions
are met:

1. One of the contenders is a Philippine Citizen; and

2. Promoter of the boxing exhibition is a Filipino Citizen or a

corporation/association with at least 60% of its capital is owned by a
Filipino citizen.