Casaba Veronica Andrea C.

BSA 5101

Compliance Requirements
Registration for VAT and Non-VAT Taxpayers

 Every person subject to any internal revenue tax (VAT and/or Non-VAT taxpayers) shall register
each one of his place of business or establishment with the appropriate Revenue District Officer
(RDO).
 An annual registration fee in the amount of PhP500 each for every separate or distinct establishment
or place of business, including facility types where sales transactions occur shall be paid upon
registration, and every year thereafter on or before the last day of January. Any person
commencing a business must pay the fee before engaging therein. However, individuals
engaged in business where the gross sales or receipts do not exceed PhP100,000 during any 12-
month period and cooperatives other than electric cooperatives are not required to pay the
registration fee imposed in RR 16-2005.
 A person who maintains a head office, branch or facility shall register with the RDO having
jurisdiction over the head office, branch or facility. The registration fee shall be paid to an
authorized agent bank located within the revenue district, or to the Revenue Collection Officer, or
duly authorized Treasurer of the city or municipality where each place of business or branch is
registered.
 A non-VAT taxpayer whose gross sales or receipts in any 12- month period exceeds the amount
prescribed under Sec. 109(W) of the NIRC for exemption from the VAT shall register as a VAT
taxpayer and pay the annual registration fee mentioned above within ten (10) days after the end of
the last month of that period and shall be liable to the VAT commencing from the first day of the
month following his/her registration.

Vat Registration
Mandatory Registration
a) Any person, entity who, in the course of his trade or business, sells, barters, exchanges, leases
goods or properties and renders services subject to VAT, if the aggregate amount of actual gross
sales or receipts exceed P 3,000,000 (as amended) for the past 12 months (other than those that
are exempt) OR there are reasons to believe that the gross sales or receipts for the next 12 months
will exceed P 3,000,000.
b) Radio and/or television broadcasting companies whose annual gross receipts of the preceding
year exceeds P 10,000,000.
c) A person required to register as VAT taxpayer but failed to register

PENALTY FOR NON-REGISTRATION OF THOSE REQUIRED TO REGISTER AS

VAT?
 He shall be liable to pay the tax as if he were a VAT-registered person but he cannot avail
the benefits of input tax credit for the period he was not properly registered

Optional Registration
The following VAT-exempt or zero-rated transactions may be registered under VAT
not later than 10 days before the beginning of a taxable quarter and shall pay the registration fee
prescribed above:
 Any person who is VAT-exempt under Sec. 4.109-1(B)(1)(V) of RR 16-2005 not required
to register for VAT may, in relation to Section 4.109-2, elect to be VAT registered by
registering with the RDO that has jurisdiction over the head office of that person, and pay
annual registration fees of PhP500 for every separate and distinct establishment.
 Any person who is VAT-registered but enters into a transaction which is exempt from VAT
(mixed transactions) may opt that the VAT apply to his transaction which would have been
exempt under Section 109(l) of the NIRC.
 Franchise grantees of radio and/or television broadcasting whose annual gross receipts of
 the preceding year do not exceed PhP10 million derived from the business covered by the
law granting the franchise may opt for VAT registration. This option, once exercised shall
be irrevocable. (Section 119, Tax Code)
 Any person who is not required to register but opts to register shall not be allowed to cancel
his/her registration for the next three (3) years.

Cancellation of VAT Registration

Instances when a VAT-registered person may cancel his VAT registration:
1. If he makes a written application and can demonstrate to the commissioner’s satisfaction
that his gross sales or receipts for the following 12 months, other than those exempt will
not exceed P 3,000,000 as amended; or
2. If he has ceased to carry on his trade or business, and does not expect to recommence any
trade or business within the next 12 months.
 The cancellation for registration will be effective from the first day of the
following month the cancelation was approved.
3. POWER OF COMMISIONER TO SUSPEND BUSINESS OPERATIONS
 The commissioner of the internal revenue or his authorized representative may
order suspension or closure of business establishment for a period of not less than
5 days for any of the following violations:
i. Failure to issue receipts or invoices
ii. Failure to file vat return
iii. Understatement of taxable sales or receipts by 30% or more of the
correct taxable sales or receipts for the taxable quarter
iv. Failure of any person to register as required under the law
Invoicing Requirements

 All VAT-registered persons who sell, barter or exchange goods, properties or services shall
issue a VAT invoice or receipt indicating therein, among others, the following information:
 A statement that the seller is a VAT-registered person, followed by his taxpayer’s
identification number (TIN);
 Total amount which the purchaser pays or is obligated to pay to the seller with the
indication that such amount includes the VAT: Provided, That:
o The amount of the tax shall be shown as a separate item in the invoice or receipt;
o If the sale is exempt from VAT or zero-rated, the term VAT- exempt or zero-rated
sale shall be written or printed prominently on the invoice or receipt; and
o If the sale involves goods, properties or services some of which are subject to VAT
and some of which are VAT zero-rated or VAT-exempt, the invoice or receipt shall
clearly indicate the breakdown of the total amount of sale between its taxable,
exempt and zero rated components, and the calculation of the VAT on each portion
of the sale: Provided, That the seller may issue separate invoices or receipts for the
taxable, exempt and zero-rated components of the sale.
 The date of transaction, quantity, unit cost and description of the goods or properties or
nature of service; and
 In the case of sales in the amount of PhP1,000 or more where the sale or transfer is made to
a VAT-registered person, the name, business style, if any, address and the TIN of the
purchaser, customer or client.

CONSEQUENCES of issuing an erroneous invoice or official receipt

 If a person who is not a VAT registered person issues an invoice or receipt showing his TIN
followed by the word VAT, the non-VAT person shall be liable to:
i. The percentage taxes applicable to his transactions
ii. The VAT due on the transactions without the benefit of any tax credit; and
iii. A 50% surcharge
 If a VAT registered person issues a VAT invoice or official receipt for a VAT-exempt
transaction but fails to display prominently on the invoice or receipt the term “VAT-
EXEMPT SALE, the issuer shall be liable to VAT

NOTE: In both cases, the VAT shall, if other requisite information required its shown on the
invoice or receipt, be recognized as an input tax credit to the purchaser.
 Casaba Veronica Andrea C.

BSA 5101

Value Added Tax-Exempt Transactions

In General

a. Sale of goods or properties and/or services and the use or lease of properties that is NOT
subject to VAT (output tax) and the seller is not allowed any tax credit of VAT (input tax) on
purchases.
b. The person making the exempt sale of goods, properties or services shall not bill any output tax
to his customers. (RR 16-2005)
c. A non-VAT person making exempt sales shall not be subjected to the 3% percentage tax on the
sales.
OLD NIRC TRAIN LAW
(a) Sale/import of agricultural, marine food products in (a) Sale/import of agricultural, marine food products in original
original state, of livestock and poultry generally used state, of livestock and poultry generally used as or yielding
as or yielding or producing foods for human or producing foods for human consumption; and breeding
consumption; and breeding stock and stock and genetic
genetic materials therefor; materials therefor;
(b) Sale of fertilizers; seeds, seedlings and fingerlings; (b) Sale of fertilizers; seeds, seedlings and fingerlings; fish,
fish, prawn, livestock and poultry feeds, including prawn, livestock and poultry feeds, including ingredients,
ingredients, whether locally whether locally produced or imported,
produced or imported, used in the manufacture of used in the manufacture of finished feeds, except specialty
finished feeds, except specialty feeds; feeds;
(c) Importation of personal and household effects (c) Importation of personal and household effects belonging to
belonging to residents of the Philippines returning residents of the Philippines returning from abroad and
from abroad and non-residents citizens coming to non-residents citizens coming to resettle in the
resettle in the Philippines; Provided, that such goods Philippines; Provided, that such goods are exempt from
are exempt from customs duties customs duties under the Tariff and Customs Code of the
under the Tariff and Customs Code of the Philippines; Philippines;

(d) Importation of professional instruments and
implements, wearing apparel, domestic animals and
personal household effects, except any vehicle,
vessel, aircraft, machinery and other goods for use in
the manufacture and merchandise of any kind in
commercial quantity; belonging to persons coming to
settle in the Philippines, for their own use and not for
sale, barter or exchange, accompanying such persons,
or arriving within 90 days before or after their arrival
upon the production of evidence satisfactory to the
Commissioner, that such persons are actually coming
to settle in the Philippines and that the change of
residence is bonafide;
(d) Importation of professional instruments and implements,
tools of trade, occupation or employment, wearing
apparel, domestic animals, and personal and household
effects belonging to persons coming to settle in the
Philippines or Filipinos or their families and descendants
who are not residents or citizens of other countries, such
parties hereinafter referred to as overseas Filipinos, in
quantities and of class suitable to the profession, rank or
position of the persons importing said items, for their
own use and not for barter or sale, accompanying such
persons, or arriving within a reasonable time:
- Provided, that the Bureau of Customs may upon
production of satisfactory evidence that such persons
are actually coming to settle in the Philippines and
that the goods are brought from their former place of
abode, exempt such goods from payment of duties
and taxes
- Provided further; that vehicles, vessels, aircrafts,
machineries and other similar

(e) Services subject to percentage tax;
(f) Services by agricultural contract growers and
milling for others of palay into rice, corn into grits,
and sugar cane into raw sugar;
(g) Medical, dental, hospital and veterinary services
except those rendered by professionals;
(h) Educational services rendered by private educational (h) Educational services rendered by private educational
institutions, duly accredited by the Department of
Education (DepEd), the Commission on Higher
Education (CHED), the Technical Education and
Skills Development
Authority (TESDA) and those rendered by
government educational institutions;
(i) Services rendered by individuals pursuant to an
employer-employee relationship;
(j) Services rendered by regional or area headquarters (j) Services rendered by regional or area headquarters
established in the Philippines by multinational
corporations which act as supervisory,
communications and coordinating centers for their
affiliates, subsidiaries or branches in the Asia-Pacific
Region and do not
earn or derive income from the Philippines;
(k) Transactions which are exempt under international
agreements to which the Philippines is a signatory or
under special laws, except those
under Presidential Decree No. 529.
(l) Sales by agricultural cooperatives duly registered with
the Cooperative Development Authority to their
members as well as sale of their produce, whether in
its original state or processed form to non-members;
importation of direct farm inputs, machineries and
equipment, including spare parts thereof, to be used
directly and exclusively in the production and/or
processing of their produce;
Sale by agricultural cooperatives to non-members can
only be exempted from VAT if the producer of the
agricultural products sold is the cooperative itself. If
the cooperative is not the producer (e.g. trader), then
only those sales to its members shall be exempted
from VAT. It is to be reiterated, however, that sale or
importation of agricultural food products in their
original state is exempt from VAT irrespective of the
seller and buyer thereof, pursuant to subsequent (a)
hereof;
(m) Gross receipts from lending activities by credit or
multi-purpose cooperatives duly registered with the
Cooperative Development
Authority;
goods for use in manufacture, shall not fall within
this classification and shall therefore be subject to
duties, taxes and other charges;
(e) Services subject to percentage tax;
(f) Services by agricultural contract growers and milling
for others of palay into rice, corn into grits, and sugar cane
into raw sugar;
(g) Medical, dental, hospital and veterinary services
except those rendered by professionals;
institutions, duly accredited by the Department of
Education (DepEd), the Commission on Higher Education
(CHED), the Technical Education and Skills Development
Authority (TESDA) and those rendered by government
educational institutions;
(i) Services rendered by individuals pursuant to an employer-
employee relationship;
established in the Philippines by multinational corporations
which act as supervisory, communications and coordinating
centers for their affiliates, subsidiaries or branches in the
Asia-Pacific Region and do not earn or derive income
from the
Philippines;
(k) Transactions which are exempt under international
agreements to which the Philippines is a signatory or under
special laws, except those under Presidential
Decree No. 529.
(l) Sales by agricultural cooperatives duly registered with the
Cooperative Development Authority to their members as
well as sale of their produce, whether in its original state or
processed form to non-members; importation of direct farm
inputs, machineries and equipment, including spare parts
thereof, to be used directly and exclusively in the
production and/or processing of their produce;
Sale by agricultural cooperatives to non-members can only
be exempted from VAT if the producer of the agricultural
products sold is the cooperative itself. If the cooperative is
not the producer (e.g. trader), then only those sales to its
members shall be exempted from VAT. It is to be
reiterated, however, that sale or importation of agricultural
food products in their original state is exempt from VAT
irrespective of the seller and buyer thereof, pursuant to
subsequent (a) hereof;
(m) Gross receipts from lending activities by credit or multi-
purpose cooperatives duly registered with the Cooperative
Development Authority;
(n) Sales by non-agricultural, non-electric and non- credit
cooperatives duly registered with the Cooperative
Development Authority: Provided, that the share
capital contribution of each member does not exceed
P15,000 and regardless
of the aggregate capital and net surplus ratably
distributed among the members;
(o) Export sale by persons who are not VAT- registered;
(p) The following sale of real properties are exempt from
VAT namely:
1) Sale of real property not primarily held for sale to
customers or held for lease in the ordinary course
of trade or business.
However, even if the real property is not primarily
held for sale to customers or held for lease in the
ordinary course of trade or business but the same
is used in the trade or business of the seller, the
sale thereof shall be subject to VAT being a
transaction incidental to the taxpayer’s main
business.
2) Sale of real property utilized for low-cost housing
(price ceiling per unit of: Level 1 – P450,000 to
P1,700,000; Level 2 – P1,7000,000 to
P3,000,000);
3) Sale of real property utilized for socialized
housing (price ceiling for house and lot –
P400,000); for lot only – P160,000 (40% of the
maximum limit prescribed for house and lot
package);
4) Sale of residential lot valued at P1,919,500 (used
to be P1,500,000 and below) and house and lot
and other residential dwellings valued at
P3,199,200 (used to be P2,500,000 and below)
where the instrument of sale/transfer/disposition
was executed on or after July 1, 2005.
Sale of parking lot in a condominium is a VAT
subject transaction regardless of the selling price.
(n) Sales by non-agricultural, non-electric and non-credit
cooperatives duly registered with the Cooperative
Development Authority: Provided, that the share capital
contribution of each member does not exceed P15,000 and
regardless of the aggregate capital and
net surplus ratably distributed among the members;
(o) Export sale by persons who are not VAT-registered;
(p) The following sale of real properties are exempt from VAT
namely:
1) Sale of real properties not primarily held for sale to
customers or held for lease in the ordinary course of
trade or business.
2) Sale of real properties utilized for low-cost housing as
defined by RA No. 7279, otherwise known as the
"Urban Development and Housing Act of 1992" and
other related laws.
3) Sale of real properties utilized for socialized housing as
defined under RA No. 7279, and other related laws,
such as RA No. 7835 and RA No. 8763, wherein the
price ceiling per unit is P450,000.00 or as may from
time to time be determined by the HUDCC and the
NEDA and other related laws.
4) Sale of residential lot valued at One Million Five
Hundred Thousand Pesos (P1,500,000.00) and
below, or house & lot and other residential dwellings
valued at Two Million Five Hundred Thousand
Pesos (P2,500,000.00) and below, as adjusted in 2011
using the 2010 Consumer Price Index values.
Provided, that beginning January 1, 2021, the
VAT exemption shall only apply to:
a. Sale of real properties not primarily held for sale to
customers or
b. Held for lease in the ordinary course of trade or
business
c. Sale of real properties utilized for socialized
housing as defined by R.A. 7279,
d. Sale of house and lot and other residential
dwellings with selling price of not more than
P2,000,000
Provided further, that every 3 years thereafter, the
amount herein stated shall be adjusted to its present
value using the Consumer Price Index, as published by
the Philippine Statistics Authority.
Sale of parking lot in a condominium is a VAT subject
transaction regardless of the selling price.
(q) Lease of residential units with a monthly rental not (q) Lease of residential unit with monthly rental not exceeding
exceeding P12,800 (used to be P10,000) regardless of
the amount of aggregate rentals received by the lessor
during the year;
(r) Sale, importation, printing or publication of books and (r) Sale, importation, printing or publication of books and any
any newspaper, magazine, review or bulletin which
appears at regular intervals with fixed prices or
subscription and sale which is not devoted principally
to the publication of paid
advertisements;
(s) The transport of passengers by international carriers (s) The transport of passengers by international carriers;
doing business in the Philippines and transport of
cargo by international carriers doing
business in the Philippines (Sec. 2, RR No. 15- 2015)
(not allowed to register for VAT purposes
P15,000;
The foregoing notwithstanding, lease of residential units where
the monthly rental per unit exceeds fifteen thousand Pesos
(P15,000.00), but the aggregate of such rentals of the lessor
during the year do not exceed Three Million Pesos
(P3,000,000.00) shall likewise be exempt from VAT; however,
the same shall be subject to three percent (3%) percentage tax
under Section 116 of the Tax Code.
In cases where a lessor has several residential units for lease,
some are leased out for a monthly rental per unit
of not exceeding P15,000.00 while others are leased out
for more than P15,000.00 per unit, his tax liability will be as
follows:
(1) The gross receipts from rentals not exceeding
P15,000.00 per month per unit shall be exempt from
VAT regardless of the aggregate annual gross
receipts. It is also exempt from the 3% percentage tax.
(2) The gross receipts from rentals exceeding P15,000.00
per month per unit shall be subject to VAT if the
aggregate annual gross receipts from said units only
exceeds P3,000,000.00. Otherwise, the gross receipts
will be subject to the 3% tax imposed under Section
116 of the Tax Code.
The term ‘residential units’ shall refer to apartments
and houses & lots used for residential purposes, and
buildings or parts or units thereof used
solely as dwelling places (e.g., dormitories, rooms and bed
spaces) except motels, motel rooms, hotels and hotel
rooms, lodging houses, inns and pension houses.
The term ‘unit’ shall mean an apartment unit in the
case of apartments, house in the case of residential houses;
per person in the case of
dormitories, boarding houses and bed spaces; and
per room in case of rooms for rent.
newspaper, magazine, review or bulletin which appears at
regular intervals with fixed prices or subscription and sale
which is not devoted principally to the publication of paid
advertisements;
(t) Sale, importation or lease of passenger or cargo vessels (t) Sale, importation or lease of passenger or cargo vessels and
and aircraft, including engine, equipment and spare
parts thereof for domestic or international transport
operations; Provided, however, that the exemption
from VAT on the importation and local purchase of
passenger and/or cargo vessels shall be subject to the
requirements on restriction on vessel importation and
mandatory vessel retirement program of Maritime
Industry Authority (MARINA);
aircraft, including engine, equipment and spare parts
thereof for domestic or international transport operations;
Sale, importation or lease of passenger or cargo vessels and
aircraft, including engine, equipment and spare parts
thereof for domestic or international transport operations;
Provided, however, that the exemption from VAT on the
importation and local purchase of passenger and/or cargo
vessels shall be subject to the requirements on restriction on
vessel importation and mandatory vessel retirement
program of Maritime
Industry Authority (MARINA);

(u) Importation of fuel, goods and supplies by persons (u) Importation of fuel, goods and supplies by persons engaged
engaged in international shipping or air transport in international shipping or air transport operations:
operations: Provided, that the fuel, goods and supplies Provided, that the fuel, goods and supplies shall be used for
shall be used for international shipping or air transport international shipping or air transport operations;
operations; Importation of fuel, goods and supplies by Importation of fuel, goods and supplies by persons engaged
persons engaged in international shipping or air in international shipping or air transport operations:
transport operations: Provided, that the fuel, goods and Provided, that the fuel, goods and supplies shall be used for
supplies shall be used for international shipping international shipping or air transport operations; Provided
or air transport operations; Provided that the said that the
said fuel, goods and supplies shall be used exclusively
fuel, goods and supplies shall be used exclusively or or shall pertain to the transport of goods and/or passengers
shall pertain to the transport of goods and/or from a port in the Philippines directly to a foreign port, or
passengers from a port in the Philippines directly to a vice-versa without docking or stopping at any other port in
foreign port, or vice-versa without docking or the Philippines unless the docking or stopping at any other
stopping at any other port in the Philippines unless the Philippine port is for the purpose of unloading passengers
docking or stopping at any other Philippine port is for and/or cargoes that originated from abroad, or to load
the purpose of unloading passengers and/or cargoes passengers and/or cargoes bound for abroad; Provided
that originated from abroad, or to load passengers further, that if any portion of such fuel, goods or supplies is
and/or cargoes bound for abroad; Provided further, used for purposes other than that mentioned in this
that if any portion of such fuel, goods or supplies is paragraph, such fuel, goods and supplies shall be subject to
used for purposes other than that mentioned in this 12% VAT.
paragraph, such fuel, goods and supplies shall be
subject to 12% VAT.
(v) Services of bank, non-bank financial intermediaries (v) Services of bank, non-bank financial intermediaries
performing quasi-banking functions, and other non- performing quasi-banking functions, and other non- bank
bank financial intermediaries; Such as money financial intermediaries; Such as money changers and
changers and pawnshops, subject to percentage tax pawnshops, subject to percentage tax under Secs. 121 and
under Secs. 121 and 122, respectively, of the Tax 122, respectively, of the Tax Code;
Code;

No provision (w) Sale or lease of goods and services to senior citizens and
persons with disability, as provided under R.A. Nos. 9994
(Expanded Senior Citizens Act of 2010)
and 10754 (An Act Expanding the Benefits and Privileges
of Persons with Disability), respectively.
 No provision
No provision
Used to be zero-rated
No provision
(w)Sale or lease of goods or properties or the performance
of services other than transactions mentioned in the
preceding paragraphs, the annual gross sales and/or
receipts do not exceed the amount of P1,919,500 (used
to be P1,500,000);
Provided, that every three (3) years thereafter, the
amount herein stated shall be adjusted to its present
value using the Consumer Price Index, as published
by NSO. Provided further, that such
adjustment shall be published through revenue
regulations to be issued not later than March 31 of
each year
For the purpose of the threshold P1,919,500 (used to be
P1,500,000), the husband and the wife shall be considered
separate taxpayers. However, the aggregation rule for
each taxpayer shall apply. For instance, if a professional,
aside from the practice of his profession, also derives
revenue from other lines of business which are otherwise
subject to VAT, the same shall be combined for purposes
of determining whether the threshold has been exceeded.
Thus, the VAT-exempt sales shall not be included in
determining the threshold.
A VAT-registered person may, in relation to Sec. 9.236-
1(c) of these regulations, elect that the exemption in
subsection (1) hereof shall not apply to his sales of goods
or properties or services.
Once the election is made, it shall be irrevocable for a
period of three (3) years counter from the quarter when
the election was made.
(x) Transfer of property pursuant to Section 40 (c)(2) of the
NIRC, as amended (merger or consolidation);
(y) Association dues, membership fees, and other
assessment and charges collected by homeowner’s
associations and condominium corporations;
(z) Sale of gold to Bangko Sentral ng Pilipinas;
(aa) Sale of drugs and medicines prescribed for diabetes, high
cholesterol and hypertension beginning January 1, 2019;
The VAT exemption shall apply to the sale by manufacturers,
distributors, wholesalers, and retailers of drugs and
medicines prescribed for the treatment and/or prevention of
diabetes, high- cholesterol, and hypertension starting January 1,
2019.
Food and Drug Administration (FDA) shall identify the list of
VAT-exempt Diabetes, High Cholesterol and Hypertension
Drugs to be posted in the BIR website.
The sale of drugs not included in the list by FDA shall be
subject to VAT. (RR 25-2018)
(bb) Sale or lease of goods or properties or the performance of
services other than transactions mentioned in the
preceding paragraphs, the annual gross sales and/or
receipts do not exceed the amount of P3,000,000
Self-employed individuals and professionals availing the
8% tax on gross sale and/or receipts and other non-
operating income under Sections 24(A)(2)(b) and
24(A)(c)(2)(a) of this Code shall also be exempt from the
payment of twelve percent (12%) VAT.
For the purpose of the threshold P3,000,000, the husband and
the wife shall be considered separate taxpayers. However, the
aggregation rule for each taxpayer shall apply. For instance, if a
professional, aside from the practice of his profession, also
derives revenue from other lines of business which are
otherwise subject to VAT, the same shall be combined for
purposes of determining whether the threshold has been
exceeded. Thus, the VAT-exempt sales shall not be included in
determining the threshold.
A VAT-registered person may, in relation to Sec. 236 (H) of
the 1997 Tax Code, as amended, elect that the exemption in
Sec. 4.109-1(B) hereof shall not apply to his sales of goods or
properties or services.
Once the election is made, it shall be irrevocable for a period of
three (3) years counted from the quarter when the election was
made except for franchise grantees of radio and TV
broadcasting whose annual gross receipts for the preceding
year do not exceed ten million pesos
(P10,000,000) where the option becomes perpetually
irrevocable.
 Other Percentage Taxes
Percentage Tax Tax Base Rate
Sec. 116 – Tax on persons exempt from VAT Gross monthly sales or receipts 3%
under Sec. 109 (BB) (annual gross
sales/receipts do not exceed P3M)
Sec. 117 – Percentage tax on domestic Actual or minimum monthly gross receipts whichever is higher 3%
carriers and keepers of garage (transport of
passengers)
Sec. 118 – Percentage tax on international Gross receipts 3%
carriers
Sec. 119 – Tax on franchise Gross receipts:
Franchises on radio and/or TV broadcasting companies whose
annual gross receipts of the preceding year do exceed 3%
P10,000,000
Franchises on gas and water utilities 2%
Sec. 120 – Tax on overseas dispatch, message
or conversation originating from the Amount paid for such services (by the person who used the 10%
Philippines communication facilities)
Sec. 121 – Tax on banks and non-banks Gross receipts on interest, commissions and discounts from
financial intermediaries performing quasi- lending activities; income from financial leasing:
banking functions Remaining maturity period of instrument is 5 years or less 5%
Remaining maturity period of instrument is more than 5 years 1%
Dividends and equity shares in net income of subsidiaries 0%
Royalties, rentals of property, real or personal, profits from
exchange and all other items treated as gross income under the
Tax Code 7%
Net trading gains within the taxable year on foreign currency,
debt securities, derivative and other similar financial instruments 7%
Sec. 122 – Tax on other non-bank financial Gross receipts derived from interest, commissions, discounts
intermediaries and all other items treated as gross income under the Tax Code 5%
Interests, commissions and discounts from lending activities, as
well as income from financial leasing:
Remaining maturity of instrument is 5 years or less 5%
Remaining maturity of instrument is more than 5 years 1%
Sec. 123 – Tax on life insurance premiums Total premiums collected 2%
Sec. 124 – Tax on agents of foreign insurance Total premiums collected/paid
companies (fire, marine or miscellaneous Generally 4%
insurance) Owners of property obtain insurance directly with foreign 5%
insurance
companies
Sec. 125 -Amusement taxes Gross receipts
Jai-alai and race track 5%
Cockpits, cabarets, night or day clubs 30%
Professional basketball games 18%
Boxing exhibitions 10%
Sec. 126 – Tax on winnings Actual amount paid for every winning ticket after deducting the
cost of the ticket 10%
Winnings from double, forecast/quinella and trifecta bets 4%
Prize of winning race horse owners 10%
Sec. 127 (A) – Tax on sale, barter or
exchange of shares of stock listed and traded 6/10 of
through the local stock exchange Gross selling price or gross value in money 1%
(B) Tax on shares of stock sold or exchanged Gross selling price or gross value in money in accordance with
through public offerings the proportion of shares of stock sold, bartered, exchanged or
otherwise disposed to the total outstanding shares of stock after
listing in the local stock exchange 4%
Up to 25% 2%
Over 25% but not over 33 1/3 % 1%
Over 33 1/3%
 Percentage Tax Detailed

a. Sec. 116 – Tax on Persons Exempt from VAT under Section 109 (BB)
Covered Persons – Any person whose annual sales or receipts do not exceed P3,000,000
(P1,919,500 – OLD) and who are not VAT registered.
Tax Base – Gross monthly sales or receipts
Tax Rate – 3%
Optional VAT Registration – Persons subject to the above tax may apply for registration as VAT-
subject persons not later than ten (10) days before the beginning of the taxable quarter
Cancellation of VAT Registration – Any person exempt from VAT under Sec. 109 (BB) who elects to
register under the VAT system shall not be allowed to cancel his registration for the next three (3)
years.
Non-VAT registered taxpayer exceeded the VAT threshold
A non-VAT registered taxpayer who initially opted to avail of the 8% option but has exceeded the
VAT threshold during the taxable year, shall be subject to 3% Percentage Tax on the first
P3,000,000 of his or her gross sales or gross receipts under Section 116 of the Tax Code, as
amended, without imposition of any penalty if payment is timely made on the following month
when the threshold was breached.

The excess of the threshold shall be subject to VAT prospectively and 8% income tax previously paid
shall be credited to the Income Tax Due under the graduated rates provided in Section 24(A)(2)(a) of
the Tax Code, as amended.
Cooperatives
It shall be exempt from the 3% gross receipts tax.
b. Sec. 117 – Percentage Tax on Domestic Carriers and Keepers of Garage (Common Carrier’s
Tax)
1. Common carrier – Persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water or air, for compensation,
offering their services to the public and shall include transportation contractors.
2. Covered persons:
o Cars for rent or hire driven by the lessee
o Transportation contractors, including who transport passengers
o Other domestic carriers by land for the transport of passengers
o Keepers of garage
3. Persons not subject to common carrier’s tax:
o Owners of banca
o Owners of animal driven two wheeled vehicle
4. Tax base – actual monthly gross receipts or minimum monthly gross receipts whichever is
higher
5. Minimum quarterly receipts:
Jeepney for hire Manila and other cities P65,700 (P2,400
)
Provincial 32,900 (1,200)
Public utility bus Not exceeding 30 passengers P98,600 (P3,600
)
>30 <50 passengers 164,200 (6,000)
>50 passengers 197,100 (7,200)
Taxis Manila and other cities P98,600 (3,600)
Provincial 65,700 (2,400)
Car for hire with chauffeur P82,100 (P3,000
)
Car for hire without chauffeur P49,300 (P1,800
)

6. The gross receipts of common carriers derived from their incoming and outgoing freight
shall not be subject to the local taxes under the Local Government Code of 1991.
7. Transportation contractors and common carriers subject to VAT
• Transportation contractors on their transport of goods and cargoes;
• Persons who transport goods and cargoes for hire;
 • Other domestic carriers by land relative to their transport of goods or cargoes;
• Common carriers by air and sea relative to their transport of passengers,
goods or cargoes from one place in the Philippines to another place in the
Philippines.

c. Sec. 118 – Percentage Tax on International Carrier

1. Covered Persons
a) International air carriers doing business in the Philippines
b) International shipping carriers doing business in the Philippines
2. Tax Base – Gross receipts from the transport of cargo from the Philippine to another country
3. Tax Rate – 3%
4. Gross Receipts – shall include, but shall not be limited to, the total amount of money or its
equivalent representing the contract, freight/cargo fees, mail fees, deposits applied as
payments, advance payments and other service charges and fees actually or constructively
received during the taxable quarter from cargo and/or mail, originating from the Philippines in
a continuous and uninterrupted flight, irrespective of the place of sale or issue and the place of
payment of the passage documents.
5. Exempt from VAT (not allowed to register for VAT purposes)
a) Transport of passengers by international carriers doing business in the Philippines
b) Transport of cargo by international carriers doing business in the Philippines
6. Off-line international carrier having branch/office as a sales agent in the Philippines – Not
subject to the 3% common carrier’s tax on international carriers
d. Sec. 119 – Tax on Franchise
1. Persons covered
a) Franchises on radio and/or television broadcasting companies whose annual gross receipts
of the preceding year does not exceed P10,000,000
b) Franchise on gas and water utilities
2. Tax Base – Gross receipts from the business covered by the law granting the franchise
3. Tax Rates
a) Franchise on gas and water utilities – 2%
b) Franchise on radio and/or TV broadcasting – 3%
c) PAGCOR and licenses and franchisees – 5%
4. Optional VAT Registration
Radio and TV Broadcasting companies whose annual gross receipts of the preceding year does
not exceed P10,000,000 shall have the option to be registered within 10 days before the
beginning of the calendar quarter as VAT taxpayer and pay VAT thereon
Once exercised, it shall not be revoked.
5. Franchise grantees subject to VAT
a) Telephone and telegraph;
b) Radio and/or television broadcasting;
c) Toll road operations;
d) All other franchisees, other those covered by Sec. 119 of the Tax Code, regardless of how
their franchise may have been granted
6. PAGCOR and its licensees and franchisees
PAGCOR and its licenses and franchisees were subjected to VAT but nullified in a Supreme
Court decision (G.R. 172087 dated March 15, 2011). Subject to 5% franchise tax of the gross
revenue or earnings from its operations and licensing of gambling casinos, gaming clubs, and
other similar recreation or amusement places, gaming pools, and other related operations
pursuant to Section 13 (2) of P.D. No. 1869 (Revenue Memorandum Circular No. 33-2013)

Sec. 120 – Tax on Overseas Dispatch, Message or Conversation from the Philippines
1) Persons subject to tax
The tax imposed 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 the quarter.
2) Persons not subject to tax
a) Philippine Government;
b) Diplomatic services;
c) International organizations;
d) News services
3) Tax base – amount paid for the services rendered
4) Rate – 10%
5) Examples of communication facilities
 a) Telephone;
b) Telegraph;
c) Telewriter exchange;
d) Wireless and other communication equipment services
e. Sec. 121 – Tax on Banks and Non-banks Financial Intermediaries Performing Quasi-
Banking Functions
1) Bank – the term “bank” means every banking institution, as defined in Sec. 2 of R.A. No. 337,
as amended, otherwise known as the General Banking Act. A bank may either be a commercial
bank, a thrift bank, a development bank, a rural bank or a specialized bank.
2) Non-bank financial intermediary – the term “non-bank financial intermediary” means a
financial intermediary, as defined in Sec. 2 (D) (c) of R.A. No. 337, as amended, otherwise
known as The General Banking Act, authorized by the Bangko Sentral ng Pilipinas (BSP) to
perform quasi-banking functions.
3) Quasi-banking activities – The term “quasi-banking activities” means borrowing funds from
twenty (20) or more personal or corporate leaders at any time, through the issuance,
endorsement, or acceptance of debt instruments of any kind other than deposits for the
borrower’s own account, through the issuance of certificates of assignment or similar
instruments, with recourse or repurchase agreements for purposes of relending or purchasing
receivables and other similar obligations: Provided, however, That commercial, industrial and
other non-financial companies, which borrow funds through any of these means for the limited
purpose of financing their own needs or the needs of their agents or dealers, shall not be
considered as performing quasi-banking functions.
4) Persons subject to tax – Banks and non-banks financial intermediaries performing quasi-banking
functions
5) Tax Base and tax rates
Tax base Tax Rates
Gross receipts on interest, commission and discounts from lending activities; income from financial
leasing:
Remaining maturity period of instrument is 5 years or less 5%
Remaining maturity period of instrument is more than 5 years 1%
Dividends and equity shares in net income of subsidiaries 0%
Royalties, rentals of property, real or personal, profits from exchange and all other items treated as
gross income under the Tax Code 7%
Net trading gains within the taxable year on foreign currency, debt securities, derivatives and other 7%
similar financial instruments

6) In case maturity is shortened through pre-termination

In case the maturity period is shortened thru pre-termination, the maturity period shall be
reckoned to end as of the date of pre-termination for purposes of classifying the transaction
and applying the correct rate of tax accordingly.
f. Sec. 122 – Tax on Other Non-Bank Financial Intermediaries (Gross Receipts Tax)
1) Persons subject to tax – Non-bank financial intermediaries, such as money charges and pawnshops
2) Tax Base and Tax Rates
Tax base Tax Rates
Gross receipts on interest, commission and discounts from lending activities; income from financial
leasing: 5%
Remaining maturity period of instrument is 5 years or less 1%
Remaining maturity period of instrument is more than 5 years
Interests, commissions and discounts from lending activities, as well as income from financial
leasing: 5%
Remaining maturity of instrument is 5 years or less 1%
Remaining maturity is more than 5 years
3) In case maturity is shortened through pre-termination
The maturity period shall be reckoned to end as of the date of pre-termination for purposes of
classifying the transaction and applying the correct rate of tax accordingly.
g. Sec. 123 – Tax on Life Insurance Premiums
1) Persons subject to tax
Person, company or corporation (except purely cooperative companies or associations) doing
life insurance business of any sort in the Philippines
2) Tax base – Total premiums collected, whether such premiums are paid in money, notes, credits
or any substitute for money
3) Tax Rate – 2%
4) Exemption of life insurance premium
 Five years after the effectivity of R.A. No. 10001 (issued February 23, 2010), no tax on life
insurance shall be collected (This was vetoed by Pres. Gloria Arroyo)
5) Other items subject to the premium tax (RMC No. 49-2010)
a) Premium on Health and Accident Insurance, whether received by a life or non-life insurance
company.
b) Re-issuance fees, reinstatement fees, renewal fees as well as penalties paid to the life
insurance company which are incidental to or in connection with the insurance policy
contracts issued
c) Investment income realized from the investment of funds obtained from others allowed and
approved by the Insurance Commission
6) Items earned by life insurance company subject to VAT or percentage tax as the case may be
(RMC 49-2010)
a) Insurance and reinsurance commissions, whether life or non-life;
b) Management fees;
c) Rental income;
d) Other income earned which can be pursued independently of the insurance business activities
7) The interest income earned by the life insurance companies from investing the premiums
received in marketable securities, bonds and other financial instruments is considered exempt
from further imposition of business tax since the premiums which have been the source of the
funds invested had already subject to the premium tax (RMC No. 49-2010).
8) Persons subject to VAT
a) Non-life insurance companies (except their crop insurance) including surety, fidelity,
indemnity and bonding companies;
b) Pre-need companies;
c) Health Maintenance Organizations (HMOs)
h. Sec. 124 – Tax on Agents of Foreign Insurance Companies
1) Persons subject to tax
Every fire, marine or miscellaneous insurance agent authorized under the Insurance Code to
procure policies of insurance on risks located in the Philippines
2) Tax Base – Total premiums collected
3) Tax rate – 4%
4) Direct insurance with foreign insurance companies
In all cases where owners of property obtain insurance directly with foreign companies, they shall
pay the tax of 5% on premiums paid.
i. Sec. 125 – Amusement Taxes
1. Persons subject to tax
Proprietor, operator or lessee of:
1. Cockpits;
2. Cabarets, night and day clubs;
3. Boxing exhibition;
4. Professional basketball games;
5. Jai-alai and race tracks
2. Tax Base and Tax rates
Tax Base Tax Rates
Jai-alai and race tracks Gross receipts 30%
Cockpits Gross receipts 18%
Cabarets, night and day clubs Gross receipts 18%
Professional basketball games Gross receipts 15%
Boxing exhibitions Gross receipts 10%
Note: The term “cabaret, night and day clubs” includes videoke bars, karaoke bars, karaoke televisions,
karaoke boxes and music lounge.
3. Payment of tax
4. It shall be the duty of the proprietor, lessee or operator concerned, as well as any party liable,
within 20 days after thee end of each quarter to make a true and complete return of the amount of
gross receipts derived during the preceding quarter and pay the tax due thereon.
5. Exempt boxing exhibitions
6. Boxing exhibitions wherein World or Oriental Championships in any division is at stake shall be
exempt from amusement tax provide that at least one of the contenders is a citizen of the
Philippines, and said exhibitions are promoted by citizen/s of the Philippines or by a corporation or
association at least 60% of the capital is owned by such citizens.
7. The 15% tax on professional basketball games shall be in lieu of all other percentage taxes of
whatever nature and description.
 8. The 30% tax in the case of Jai-alai and race tracks of their gross receipts is irrespective of whether
or not any amount is charged for admission.
9. For the purpose of amusement tax, the term “gross receipts” embraces all the receipt of the
proprietor, lessee or operator of the amusement place. Said gross receipt also includes income from
television, radio or motion picture right, if any.
j. Sec. 126 – Tax on Winnings
1) Person subject to tax
a) Every person who wins horse races;
b) Winning from double, forecast/quinella and trifecta bets;
c) Owners of winning race horses
2) Tax base and tax rates
Tax Base Tax Rates
Amount paid for every winning ticket les cost of the 10% (person who wins in horse races)
ticket
Amount paid for every winning ticket less cost of the 4% (double forecast/quinella and trifecta bets)
tickets
Prize 10% (owners of winning race horses
3) Daily double or extra double – an event wherein the bettor selects a number in each of tow
consecutive races and the selection in each race must finish first.
a) Forecast – an even where the bettor selects two (2) numbers in a selected race, and the
selection must finish fist and second in the correct order
b) Double quinella – an even wherein the bettor selects two (2) number in each of the two (2)
selected races, and the selection in each race must finish first and second in either order.
c) Trifecta – an even wherein the bettor selects three (3) numbers in a selected rate and the
selection must finish first, second and third in the correct order
4) Collection of Tax
a) Tax on winnings shall be deducted from the “dividends” corresponding to each winning ticket
or the “prize” of each winning racehorse.
b) Tax on winnings shall be withheld by the operator, manager or person in charge of the horse
races before paying the dividends or prizes
5) Remittance of tax to BIR
a) The operator, manager or person in charge of horse races shall remit the taxes to the BIR
within 20 days from the date the tax was deducted and withheld.
k. Sec. 127 – Tax on Sale, Barter or Exchange of Stock Listed and Traded Through the Local
Stock Exchange
1) Persons subject to tax – seller or transferor of shares of stock
2) Person not subject to tax – dealer in securities
3) Tax base – gross selling price or gross value in money
4) Tax rate – 6/10 of 1% (0.006) effective January 1, 2018 (1/2 of 1% before TRAIN)
5) Collection of tax – it shall be the duty of every stock broker who effected the sale to collect the tax
6) Remittance of tax collected – the tax collected shall be remitted within 5 banking days from the
date of collection
7) The tax on sale, etc. of shares of stock listed and traded through the local stock exchange shall
not be deductible for income tax purposes.
8) Any gain derived from sale, barter, exchange or other disposition of shares of stock under Sec.
127 shall be exempt from capital gains tax and rom regular individual or corporate income tax.

Sec. 127 (B) – Tax on Shares of Stock in Closely Held Corporation Sold or Exchanged
Through Initial Public Offering
1) Persons subject to tax
a) Issuing corporation in initial public offering;
b) Seller in secondary offering
2) Tax base – Gross selling price or gross value in money
3) Tax rates
Shares sold, bartered, exchanged = Up to 25% -4%
--------------------------------------- = Over 25% but not over 33 1/3% -2%
Total outstanding shares = Over 33 1/3% -1%
4) Payment of tax
a) In case of primary offering – The corporate issuer shall file the return and pay the tax
within 30 days from the date of listing of the shares in the local stock exchange.
b) In case of secondary offering – The stock broker shall collect the tax and remit the same to
BIR within 5 banking days from the date of collection
5) The tax paid on initial public offering and secondary offering shall not be deductible for income
tax purposes.
 6) Any gain derived from the sale, barter, exchange or other disposition of shares of stock under
Sec. 127 shall be exempt from capital gains tax and from the regular individual or corporate
income tax.

Returns and Payments of Percentage Taxes

a. Every person subject to percentage taxes imposed shall file a quarterly return of the amount of
his gross sales, receipts, or earning, and pay the tax due thereon within twenty five (25) days
after the end of each taxable quarter.
b. Large taxpayers shall file a consolidated return and pay the tax accordingly.
c. Large taxpayers

1) As to tax payments
Percentage Tax At least 200,000 per quarter
VAT At least 200,000 per quarter
Excise Tax At least 1,000,000 per year
Income Tax At least 1,000,000 per year
DST At least 1,000,000 per year
Withholding Tax At least 1,000,000 annually

2) As to financial condition
Gross sales/receipts - At least P1,000,000,000 per year
Gross purchase - At least P800,000,000 for the preceding year
Net worth - At least P300,000,000 at the close of each calendar or fiscal
year

d. In the case of a person whose VAT registration is cancelled and who becomes liable to the 3%
tax on VAT-exempt persons, the tax shall accrue from the date of cancellation and shall be
paid within 25 days after the end of each taxable quarter.
e. 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 20 days after closing his
business.
f. Any person, natural or juridical, with respect to his/its purchase in the course of trade or
business from non-VAT taxpayers subject to the 3% percentage under Sec. 116 of the Tax
Code shall be subject to a percentage tax withholding at source at a rate of 3% based on the
payee’s (or seller’s) sales/receipts. The withholding shall be done if the taxpayer- payee opts to
remit his percentage tax through withholding by filing “Notice of Availment of the Option to
Pay the Tax Through the Withholding Process”.
g. The Commissioner of Internal Revenue may prescribe a minimum amount of gross receipts under
the following cases
1) When a taxpayer fails to issue receipts or invoices;
2) When no return is filed;
3) 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 return.
h. Place of filing the return and payment of the % tax
1) Authorized agent bank;
2) Revenue District Office/Large Taxpayer District Office/ Large Taxpayer Assistance Division;
3) Collection agent;
4) Duly authorize Treasurer of the city or municipality where the business or principal place
of business is located, as the case may be
i. A person liable to percentage tax (except large taxpayers), 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.