Business Taxes - taxes imposed on onerous transfers such as sale, barter, exchange

and importation.

Onerous - burden

Marginal income earners - individuals whose business do not realize a gross sales
or receipts exceeding
P100,000 in any twelve-month period. They are not subject to business taxes.

Types of business taxes:

1. Value added tax (VAT) - 12%
2. Other Percentage taxes (OPT)
3. Excise taxes - sin tax

VAT - tax on the value added by every seller to the purchase price or cost in the
sale or lease of
goods, property or services in the ordinary course of trade or business, and on
the importation of
goods into the Philippines, whether for personal or business use.

Kinds of VAT:
1. VAT on sales of goods or properties
2. VAT on importation of goods
3. VAT on sale of services
4. VAT on use or lease of properties

Persons Liable:
1. Sale in the course of business - seller
2. Importation - importer
3. Sales of services - service provider
4. Use or lease of properties - lessor

Real property - real property seller, dealer, developer or broker.

Characteristics of VAT:
1. Indirect tax - shifting of the tax to the buyer
2. Consumption-based
3. VAT is imposed on the value added in each stage of production and distribution
process
4. Credit-invoice method VAT

Output VAT - VAT due on sale, lease or exchange of taxable goods or proerties or
services by
any person registered or required to register as VAT taxpayer.

Input VAT - VAT due on or paid by the VAT-registered on purchase or importation of

goods, properties
or services, and also on lease or use of property in the ordinary course of
business.

Basis of VAT:
1. Sales of goods or properties - gross selling price/ gross sales
2. sale of services - gross receipts
3. Importation - Total landed cost
4. Dealers in securities - gross income
5. Use or lease of properties - rent income

Allowed deduction to the gross sales:

1. Sales discount at the time of sales as indicated in the sales invoice
2. Sales returns and allowances - credit memo

Sale of goods and/or services to senior citizens and PWDs: not subject to VAT on
certain goods
and services

VAT Registration:
A. Mandatory registration:
1. If the gross sales or receipts exceeds P3.000,000
2. Radio and television broadcasting companies whose receipts exceed P10,000,000
3. A person required to register as VAT taxapayer but failed to register

VAT threshold of husband and wife: They are considered separate taxpayers.

VAT-exempt sales shall not be included in determining the threshold.

B. Optional Registration:
1. VAT-exempt person or business or those not required to register may opt to
register
2. Franchise grantees of radio and television broadcasting whose gross receipts do
not exceed
P10,000,000.

Any person who elects to register under options registraton shall not allowed to
cancel his
registration for the next three years.

C. Cancellation of registration:
1. If the gross sales or receipts fell below the threshold of P3,000,000 for next
12-month period.
after the required 3-year period.
2. Cease to carry on the business

Power of the Commissioner to suspend business operations:

1. Failure to issue receipts or invoices
2. Failure to file VAT return
3. Understatement of gross sales or gross receipts by 30% or more of the correct
sales or receipts
4. Failure to register as required by law.

Computation of VAT payable:

Output VAT (Sales or receipts x 12%)
Less: Input VAT (Purchases of goods or services x 12%)
Advance VAT payment
VAT payable

Other percentage taxes (OPT) - Tax imposed on sale, barter, exchange or importation
of goods, or sale
of services based on gross sales, value in money of receipts derived by the
manufacturer, producer,
importer or seller measured by certain percentage of the gross selling price or
receipts.

Section 116 of the National Internal Revenue Code:

In general, 3% on business whose gross sales or gross receipts do not exceed
P3,000,000.

Exempted from Business Tax:

1. Cooperatives
2. Self-employed individuals and professionals who availed of 8% tax on gross sales
or receipts,
and whose gross sales or receipts did not exceed P3,000,000.

Self-employed individuals and professionals who did not avail of the 8%:
1. Percentage tax - 3%
2. Income will be subjected to the Graduated Tax Rate

Common carriers of passengers and keepers of garages: 3% tax

1. Cars for rent (rent-a-car business)
2. Cars for hire driven by the lessee
3. Transportation contractors
4. Other domestic carriers by land for transport of passengers
5. keepers of garages

Exempted common carriers: not subject to 3% business tax

1. owners of bancas
2. animal drawn two-wheeled vehicles

International flights or international shipments of domestic carriers by sea or air

shall be subject
to 0% VAT (Zero rated) or VAT exempt.

Zero rated VAT = VAT registered domestic carriers

VAT exempted = non-vat registered domestic carriers

Domestic Common carriers of goods or cargoes = subject to VAT or 3% tax if gross

receipts do not
exceed P3,000,000.

Percentage tax on Franchise of gas and water utilities: 2% tax on gross receipts

PAGCOR on its gaming operation: 5% Franchise tax on Gross Revenue.

Overseas dispatch, message or conversation originating from the Philippines: 10% of

gross receipts

Exempted from the overseas communication Tax of 10%:

1. Government
2. Diplomatic services
3. International organizations
4. News services

Banks and non-bank financial intermediaries performing quasi-banking functions:

Gross receipts derived from:
1. Interest, commission and discounts from lending activities:
a) 5 years or less = 5%
b) more than 5 years = 1%
2. Dividends and equity shares in net income of subsidiaries = 0%
3. Royalties, rentals of property, profits from exchange and others = 7%
4. Net trading gains on foreign currency, debt securities, derivatives and the like
= 7%

Banks = persons or entities engaged in the lending of funds obtained from the
public through the
receipts of deposits or sale of bonds, securities, or obligations of any kind.

Financial intermediaries = persons or entities engaged in lending, investing or

placement of funds
 or evidences of indebtedness or equity deposited with them, acquired by them or
coursed through them
for their account or for the account of others.

Quasi banking activities = borrowing of funds from 20 or more personal or corporate

lenders at any
one time, through the issuance, endorsement,or acceptance of debt instruments of
any kind other
than deposits for the borrower's own account or issuance of particular contracts.

Other non-bank financial intermediaries not performing quasi-banking functions: 5%

on all receipts
except income from lending activities with remaining maturity period is more than
5 years, 1% tax.

Microfinance Non-government Organizations (Microfinance NGOs): 2% tax on gross

receipts

Insurance companies: 2% on premiums collected

Agents of foreign insurance companies: 4% on premium collected
Owner of property paying premium to foreign insurance companies: 5% of premiums
paid

Amusement taxes on gross receipts/sales:

Jai-alai and racetracks = 30%
Cockpits, cabarets, night or day clubs = 18%
Professional basketball games = 15%
Boxing exhibition = 10%

Exempted: Boxing exhibition where World or Oriental championships of any division

are at stake provided
one of the contender is a Filipino and promoted by Filipino or corporation with
at least 60% Filipino
ownership.

Tax on Winnings:
Winning bettor = regular bet = 10% on winning less cost of ticket
Winning bettor = double, forecast/quinella and trifecta bets = 4% on winning less
cost of ticket
Horse owner = 10% of gross winnings

Tax on winnings are withheld by the operator and remitted for the BIR.

Sale, barter, or exchange of shares of stock listed and traded in the local stock
exchange: 6/10 of 1%
of Gross selling price

Shares of stock sold through initial public offering:

up to 25% of total outstanding stocks = 4%
Over 25% of the total outstanding stocks = 2%
over 33 and 1/3% of the total = 1%

Excise taxes = taxes (in addition to the VAT) applied to non-essential goods
manudfactured and produced in the Philippines for
domestic sales or concumption or for any disposition, and goods imported.

Kinds of excise tax:

1. Specific taxes - based on weight, volume, capacity or any other physical unit of
measurement
2. Ad valorem tax - based on selling price or specified value of the goods.