What is Business

What is Business?
Business OR in the course of trade or

business means. . .
the regular conduct or pursuit of a commercial or

economic activity, including transactions
incidental thereto, by any person or
government entity
Business taxes are excise taxes imposed on onerous transfers of
goods, property or services done in the normal course of business.
These are sometimes referred to as transaction taxes.
These are also taxes on production/importation of “sin”

products.
Requisites of business to be subjected to
business tax:
1. The activity should be a commercial or economic
activity, but with exceptions like:
(not an economic activity, but there is a business tax)
A commercial or economic activity is

an activity where the purpose is
PROFIT or INCOME.
atty. cleo d. sabado-andrada, cpa, mba

business tax:
1. The activity should be a commercial or economic
activity, but with exceptions like:
(not an economic activity,
but there is a business tax)
A. An importation of goods for personal use is subject to

the value-added-tax. VAT is a business tax.
B. An overseas communication, even if not related to
business, is subject to the percentage tax called
Overseas Communications Tax. Percentage tax
is a business tax.
business tax:
2. There should be regularity in the activity, but

with exceptions like:
(not a regular activity, but there is business tax)
A regular activity is an activity involving

more than one isolated transaction. It
requires repetition and continuity of
action.

business tax:
2. There should be regularity in the activity, but

with exceptions like:
(not a regular activity,
but there is business tax)
A. Services rendered in the Philippines by non-

resident foreign persons shall be considered as
being rendered in the course of trade or business;
B. Isolated transactions may be subjected to VAT or
percentage tax.
THREE (3) MAJOR BUSINESS TAXES
IN THE NATIONAL INTERNAL REVENUE CODE
Value-Added Tax
Percentage Tax or
General Consumption Tax
Excise Tax

Excise tax is on the production or
importation of “sin” products,
while
Value Added Tax (VAT) and/or Other
Percentage Taxes (OPT) are on the
transfer of goods or services in the
conduct of business.
A value-added tax is an indirect tax imposed
on the gross selling price or gross receipt
derived from sale, barter or exchange of
goods, properties and services, or the lease
of goods and properties in the course of trade
or business, and on importations
(Sec. 105 to 108).
BAR QUESTION/S
State whether the following transactions are:
a.VAT Exempt
b.VAT at 10% (now 12%)
c.Subject to VAT at 0%?
1998 BAR Exam

BAR QUESTION/S
State whether the following transactions are: a) VAT Exempt ; b) VAT at
10%; (now 12%) c) Subject to VAT at 0%?
1.Sale of fresh vegetables by Aling Ining at the Pamilihang

Bayan ng Trece Martirez.
2.Services rendered by Jake’s Construction Company, a
contractor to the World Health Organization in the renovation
of its offices in Manila.
3.Sale of tractors and other agricultural implements by
Bungkal Incorporated to local farmers.
4.Sale of RTW by Cely’s Boutique, a Filipino Dress designer,
in her dress shop and other outlets.
5.Fees for lodging paid by students to Bahay-Bahayan
Dormitory, a private entity operating a student dormitory
(monhtly fee P1,500)
1998 BAR Exam
BUSINESSES THAT ARE EXEMPTED
FROM VAT OR PERCENTAGE TAXES
(regardless of annual gross sales or receipts)
As provided for by Section 109 of the NIRC
A. Sale or importation of AGRICULTURAL and MARINE

FOOD products in their ORIGINAL STATE, livestock and
poultry of a kind generally used as, or yielding or
producing foods for human consumption; and breeding
stock and genetic materials therefore;
Products classified under this paragraph shall be considered in their
original state even if they have undergone the simple processes or
preparation or preservation for the market, such as freezing, drying,
salting, broiling, roasting, smoking or stripping. Polished and/or husked
rice, corn grits, raw cane sugar and molasses, and ordinary salt and
copra shall be considered in their original state.
B. Sale or importation of fertilizers, seeds, seedlings

and fingerlings, fish, prawn, livestock and poultry
feeds, including ingredients, whether locally
produced or imported, used in the manufacture of
finished feeds, except: specialty feeds for race
horses, fighting cocks, aquarium fish, zoo animals
and other animals generally considered as pets.

C. Importation of personal and household effects

belonging to the residents of the Philippines returning
from abroad and non resident citizens coming to
resettle in the Philippines; provided that such goods
are exempt from customs duties under the Tariff and
Customs Code of the Philippines;

D. Importation of professional instruments and implements,
wearing apparel, domestic animals, and personal household
effects (except any vehicle, vessel, aircraft, machinery, other
goods for use in the manufacture and merchandise of any kind
of commercial quantity) belonging to persons coming to settle in
the Philippines, for their own use and not for sale, barter,
exchange, accompanying such persons, or arriving within ninety
(90) days before or after their arrival, upon production of
evidence of satisfactory to the Commissioner, that such persons
are actually coming to settle in the Philippines, and that the
change of residence is bona fide.

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 sugar.

G. Medical, dental, hospital and veterinary services,

except those rendered by professionals;
H. Educational services rendered by private

educational institutions, duly accredited by the
DepEd, CHED, 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

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 products, whether in its
original state or processed form, to non members; their
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;

M. Gross receipts from lending activities by credit

or multi-purpose cooperatives duly registered with
the Cooperative Development Authority whose
lending operation is limited to their members;

N. Sales of 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;
Export sales by persons who are not VAT registered;
O. Export sales by persons who are not VAT registered;
P. Sale of real property not primarily held for sale to

customers or held for lease in the ordinary course of
trade or business or real property utilized for low-cost
and socialized housing as defined by R.A. 7279,
otherwise known as the Urban Development and
Housing Act of 1992, and other related laws, residential
lot valued at P 1,919,500.00 and below, house and lot
and other residential dwellings valued at P3,199,200.00
REVENUE REGULATION NO. 3-2012
dated February 20, 2012.
EFFECTIVITY OF TRESHOLD
AMOUNTS FOR SALE OF
RESIDENTIAL LOT, SALE OF HOUSE
AND LOT, LEASE OF RESIDENTIAL
UNIT AND SALE OR LEASE OF
GOODS OR PROPERTIES OR
PERFORMANCE OF SERVICES
COVERED BY SECTION 109 (p), (q)
and (v) of the Tax code of 1997, as
amended.
EFFECTIVITY: JANUARY 1, 2012
A s provided for by Section 109 of the NIRC
Q. Lease of residential unit with a monthly rental not

exceeding P12,800
R. Sale, importation, printing or publication of books

and any newspaper, magazine, review or bulletin which
appears at regular intervals with fixed prices for
subscription and sale and which is not devoted
principally to the publication of paid advertisements;

S. Sale, importation or lease of passenger or cargo

vessels and aircraft, including engine, equipment and
spare parts thereof for domestic or international
transport operations;
T. Importation of fuel, goods and supplies by persons

engaged in international shipping or air transport
operations;
U. Services of banks, non bank financial intermediaries

performing quasi-judicial functions, and other non-bank
financial intermediaries;
V. Sale or lease of goods or properties or the
performance of services other than the transactions in
the preceding paragraphs, the gross annual sales and/or
receipts do not exceed the amount of P1,919,500.00-
(EXEMPT from VAT but subject to 3% percentage
tax.)
Not later than January 31, 2009 and every three (3) years
after, the amount of P1,500,000.00 shall be adjusted o its
present value using the Consumer Price Index as published
by the National Statistics Office.
REVENUE REGULATION NO. 3-2012
dated February 20, 2012.
EFFECTIVITY OF TRESHOLD
AMOUNTS FOR SALE OF
RESIDENTIAL LOT, SALE OF HOUSE
AND LOT, LEASE OF RESIDENTIAL
UNIT AND SALE OR LEASE OF
GOODS OR PROPERTIES OR
PERFORMANCE OF SERVICES
COVERED BY SECTION 109 (p), (q)
and (v) of the Tax code of 1997, as
amended.
EFFECTIVITY: JANUARY 1, 2012
Using the Consumer Price Index as published by the
NSO, the threshold amounts has been adjusted as
follows :
Amount in Pesos
(2005) ADJUSTED
TRESHOLD
Sale of Residential Lot 1,500,000 1,919,500
Sale of Residential House and Lot 2,500,000 3,199,200

Lease of Residential Unit 10,000 12,800
Sale or Lease
Properties of Goods or
or Performance of 1,500,000 1,919,500
Services (VAT Threshold)
BAR QUESTION/S
a.VAT Exempt
1998 BAR Exam

BAR QUESTION/S
10% (now 12%) ; c) Subject to VAT at 0%?

1998 BAR Exam
RULES IN BUSINESS TAXES
Businesses NOT expressly mentioned in

letter A to U of Section 109 of NIRC which have
gross sales not exceeding One Million Five Hundred
Thousand Pesos (P1,919,500.00) shall be:
- exempt from the value added tax, BUT. . . . . .

- subject to the 3% percentage tax, EXCEPT if:
i. a different percentage tax applies
ii. taxpayer opted to be a value-added
tax payer.

Manufacturers or importers who are subject to

the excise taxes also pays either:
Value Added tax; or
The 3% percentage tax

( if the sales did not exceed P1,919,500.00)

Excise Taxes are imposed on:
1. Manufacturers or
2. Importers of any of the following categories of
goods or articles:
-Distilled spirits - Automobiles

-Wines - Manufactured fuel oils
-Fermented liquors - Mineral Products
-Tobacco products - Non-essential goods
-Cigars - Cigarettes
THREE (3) MAJOR BUSINESS TAXES
IN THE NATIONAL INTERNAL REVENUE CODE
Value-Added Tax
Percentage Tax or
General Consumption Tax
Excise Tax

A value-added tax is an indirect tax imposed
on the gross selling price or gross receipt
derived from sale, barter or exchange of
goods, properties and services, or the lease
of goods and properties in the course of trade
or business, and on importations
(Sec. 105 to 108).
BAR QUESTION/S
What are the characteristics of the Value –Added Tax?
1996 BAR Exam

NATURE AND CHARACTERISTICS
OF THE VALUE ADDED TAX
1.Value added tax is a tax on consumption
2. Levied on the sale, barter exchange or lease

of goods or properties and services in the
Philippines and the importation of goods into the
Philippines.
3. Seller is the one statutorily liable for the

payment of tax, but the amount of tax may be
shifted or passed on to the buyer, transferee or lessee
of the goods or properties or services.
Implementing the Tax Privileges
Provisions of Republic Act No. 9994,
Otherwise Know as the “Expanded
Senior Citizens Act of 2010”, and
Prescribing the Guidelines for the
Availment Thereof

Income tax exemption of Senior Citizens:
1)The valued-added tax exemption privileges granted to
VAT-registered taxpayers selling goods and services
identified in the Act to Senior Citizens;
2)The tax privileges granted to establishments giving
discount on their sale of goods and services to Senior
Citizens;
3)The tax implication of taking care and supporting
senior citizens by their benefactors; and
4)The tax privileges granted to private entities who
engage Senior Citizens as their employees.

Will not extend to
20% final withholding tax on interest income
7.5% final withholding tax on interest income
Final withholding tax-Long Term Investments

•Four years to less than five years – 5%
•Three years to less than four years – 12%; and
•Less than three years – 20%
Capital gains tax

6% final withholding tax

Availment of Income Tax Exemption of Senior
Citizens. –
A Senior who is a minimum wage earner, or
whose taxable income during the year does not
exceed his personal exemptions, will be exempt
from income tax upon compliance.

A Benefactor of a Senior Citizen shall be entitled to claim
the basic personal exemption of fifty thousand pesos
(P50,000.00)
Will not entitle (P25,000.00)
Additional Deduction from Gross Income of Private

Establishments for Compensation Paid to Senior
Citizens – Private establishments employing Senior
Citizens shall be entitled to additional deduction from their
gross income equivalent to fifteen percent (15%) of the
total amount paid as salaries and wages to Senior Citizens
subject to the provisions.

Circularizing Sections 4 and 5 of Republic
Act No. 9994, An Act Granting Additional
Benefits and Privileges to Senior Citizens,
Further Amending Republic Act No. 7432, as
amended, otherwise known as “An Act to
Maximize the Contribution of Senior Citizens
to Nation Building, Grant Benefits and
Special Privileges and For Other Purposes”

SEC. 4. Privileges for the Senior Citizens
The senior citizens shall be entitled to the

following:
(a) The grant of twenty percent (20%) discount

and exemption from the value-added tax
(VAT), if applicable, on the sale of the
following goods and services from all
establishments, for the exclusive used and
enjoyment or availment of the senior citizens
(1) on the purchase of medicines, including the
purchase of influenza and pnuemococcal
vaccines, and such other essential medical
supplies, accessories and equipment to be
determined by the Department of Health
(DOH)

(2) on the professional fees of attending
physician/s in all private hospitals, medical
facilities, outpatient clinics and home health
care services;
(3) on the professional fees of licensed

professional health providing home health care
services as endorsed by private hospitals or
employed through home health care
employment agencies;

(2) on medical and dental services,
diagnostic and laboratory fees in all
private hospitals, medical facilities,
outpatient clinics, and home health care
services;
(5) in actual fare for land transportation travel in
public utility buses (PUBs), public utility
jeepneys (PUJs), taxis, Asian utility vehicles
(AUVs), shuttle services and public railways,
including Light Rail Transit (LRT), Mass Rail
Transit (MRT), and Philippine National
Railways (PNR);
(6) in actual transportation fare for domestic air
transport services and sea shipping vessels and
the like, based on the actual fare and advanced
booking;
(5) On the utilization of services in hotels
and similar lodging establishments,
restaurants and recreation centers;
(6) On admission fees charged by theaters,

cinema houses and concert halls, concert
halls, leisure and amusement; and
(9) on funeral and burial services for the death of
senior citizens;
(b) exemption from the payment of individual

income taxes of senior citizens who are
considered to be minimum wage earners in
accordance with Republic Act No. 9504;
(c) the grant of a minimum of five percent (5%) discount
relative to the monthly utilization of water and
electricity supplied by the public utilities: Provided,
That the individual meters for the foregoing utilities
are registered in the name of the senior citizen
residing therein: Provided, further, That the monthly
consumption does not exceed one hundred kilowatt
hours (100 kWh) of electricity and thirty cubic meters
(30m3) of water: That the privilege is granted per
household regardless of the number of senior citizens
residing therein.
BAR QUESTION/S
Who are liable for the payment of Value-Added Tax?
1996 BAR Exam

Who are subject to the value-added tax?
Any person who:
A. sells, barters or exchanges goods or

properties in the course of trade or business; or
B. sells services in the course of trade or

business; or
C. imports goods, whether or not in the course of

trade or business
Registration of Business
Every taxpayer subject to the Value Added Tax

must register with the Bureau of Internal Revenue as a
VAT taxpayer.
Pay the Annual registration fee of P 500.00 for
every separate and distinct establishment, including
facility types (sales outlet, places of production,
warehouses and storage places) where the business is
conducted.
For VAT exempt persons, they must also

register as a non-VAT taxpayers.

Registration for Value Added Tax
MANDATORY REGISTRATION
Section 236 (G)
OPTIONAL REGISTRATION
Section 236 (H)

MANDATORY REGISTRATION
When the business gross sales or receipts for

the past 12 months, other than those exempt
under Section 109 of NIRC letter A to U,
HAVE EXCEEDED P 1,500,000.00.
When there are reasonable grounds to believe

that his gross sales or receipts for the next 12
months will exceed P 1,500,000.00.

OPTIONAL REGISTRATION
Any person who is not required to register as a

VAT taxpayer because his sales in a 12 month
period do not, shall not exceed
P1,919,500,00, may register for the Value
Added Tax.

Invoices and Receipts
A taxpayer who is in business should have

his invoices and receipts registered with the
BIR.
If the taxpayer is a VAT taxpayer, the

invoices and receipts shall clearly show that
he is a VAT taxpayer.

 Any person intending to engage in business
shall determine whether he has to register his
business as VAT or non-VAT.
 His registration for VAT business becomes
compulsory when his expected annual gross
sales or receipts exceed P1,919,500,000.
(R.A. 9337 and RR No. 3-2012)
 A VAT-registered business is subject to 12%
business tax while a non-VAT business is
generally subject to 3% business tax on gross
receipts/sales.
But….
Persons whose taxable transactions

do not exceed P1,919,500, per year
may register as non-VAT person
or
may elect under certain conditions to
register as VAT-registered person,
which shall be irrevocable for 3
years. (R. A. 9337)
BAR QUESTION/S
What is the basis of the Value-Added Tax on

taxable sales of real property?
1996 BAR Exam

BAR QUESTION/S
a.VAT Exempt
1998 BAR Exam

BAR QUESTION/S
10% (now 12%) ; c) Subject to VAT at 0%?

1998 BAR Exam
VALUE-ADDED TAX ON SALE OF
GOODS and PROPERTIES
Section 106(1)[a to e]
TAX
GROSS SELLING PRICE
BASE
Section 106(1)[par. 2]

TAX RATES
A. Twelve percent (12%)

of the gross selling price;

TAX RATES
B. Zero percent (0%) of the gross

selling price if:
a. Export Sale (Section 106[2]{a})

TAX RATES

selling price if:
b. Foreign Currency Denominated
Sale (Section 106[2]{b})
sale to non residents of goods (except automobiles and
non essential goods subject to excise taxes) assembled
and manufactured in the Philippines, for delivery to residents
in the Philippines, and paid in acceptable foreign currency
and accounted for in accordance with the rules and
regulations of the BSP.
GOODS and PROPETIES
TAX RATES
B. Zero percent (0%) of the gross selling

price if:
c. Sales to persons or entities whose
exemption under special laws or international
agreements to which the Philippines is a
signatory effectively subjects to zero rate.
(Section 106[2]{c})
Sale to SBMA and Clark Development , IRRI and ADB.

GOODS and PROPETIES
TAX TAX RATES

BASE
GROSS SELLING 12% OR 0%
PRICE
VAT Output/Output Tax

Section 110 (A)[3]{b, 3rd paragraph)

Output tax (Output VAT) is the value-added tax
due on the sale or lease of taxable goods or
properties or services by any registered
person or any person required to register
under Sec. 236.
The amount is reduced by input tax (if any) to
arrive at the net VAT payable.
If there is no creditable input tax, the entire
amount of the output tax becomes the VAT
payable.
BAR QUESTION/S
Under the Value-Added Tax (VAT), the tax is

imposed on sales, barter, or exchange of goods and
services. The VAT is also imposed on certain
transactions “deemed sales”. What are these so-
called transactions “deemed sales”?
1997 BAR Exam

GOODS and PROPETIES
TRANSACTIONS DEEMED SLE
1. Consumption of Inventory
Goods originally intended for sale, but used

or consumed for personal use by the
taxpayer is considered deemed sales.
(Sec. 106 B (1), NIRC)

GOODS and PROPETIES
2. Distribution to Stockholders
Transfer of inventory to shareholders as

share in the profits of a VAT-registered
person is considered as transactions
deemed sale.
(Sec. 106 B (2), NIRC)
GOODS and PROPETIES
3. Distribution to Creditors
Transfers of inventory in payment of debts

constitute transactions deemed sale.
(Sec. 106B, NIRC)

GOODS and PROPETIES
4. Consignment of Goods
Consignment of goods is considered

transaction deemed sales if actual sale is
not made within 60 days following the date
such goods were consigned.
GOODS and PROPETIES
5. Retirement from Business
The merchandise inventory left at the

retirement of business is deemed sold for
VAT purposes
VALUE-ADDED TAX ON IMPORTATION OF
GOODS
all importation of goods in the

Philippines are subject to VAT, even if
such goods are not intended to be
sold or used for business activities,
. . . except those mentioned under

Section 109 of NIRC.

GOODS
TAX BASE and TAX RATE
Section 107A, NIRC
value used by the Bureau of
Custom in determining the tariff and
custom duties, plus custom duties and excise
12%
taxes, if any, and other charges, paid by the
importer prior to the release of such goods
from the custody of the BOC.

GOODS
Transfer of Goods by Tax-Exempt Persons

(In cases of Tax-Free Importation)
Sale or exchange of tax-free goods to non-

exempt person in the Philippines is taxable
with Internal Revenue Taxes against the
purchaser, transferee or recipient who
shall be considered as importer thereof.
(Sec. 107B, NIRC)

VALUE-ADDED TAX ON SALE OF SERVICES and
USE/LEASE OF PROPERTIES
Requirements for Value-Added Taxability

of Service Transactions
•The service must be performed or is to be performed in

the course of business in the Philippines.
•The service is rendered for valuable consideration

actually or constructively received.
•The service rendered is not exempt from VAT under

the Tax Code, other special laws or international
agreement.
Section 108(A)
TAX
GROSS RECEIPTS
BASE
Section 108(A) [last par.]

TAX RATES
A. Twelve percent (12%)

of the gross receipts;

TAX RATES

receipts on the following sale or
exchange of services:
(Section 108)[B]{1 to 7} of the NIRC

all kinds of services performed in the

Philippines are subject to VAT at rate of
12%, except those which are classified
and qualified as Zero-rated or VAT-
exempt transactions.
(Sec.108, NIRC)

Common Carriers by Air and Sea
Common carriers by air and sea relative to the

transport of passengers and cargoes within the
Philippines is subject to 12% VAT.
But in Section 108(B)(6), as added by R.A. No.

9337---transport of passengers and cargo by air
or sea vessels from the Philippines to a foreign
country shall be subject to zero (0%) rate.
VAT on Professional Fees
As a rule, earnings from a practice of

profession (including services rendered by
doctors of medicine and lawyers) will be
subject to a 12% VAT if:
•The professional is a VAT-registered person, or
•Not VAT-registered but his total gross receipts
exceed P1,919,500 per year. (R. A. 9337)
TAX TAX RATES

BASE
GROSS 12% OR 0%
RECEIPTS


TAX CREDITS
CREDITABLE INPUT TAX or VAT INPUT

Section 110(A)
Section 110 (A)[3]{b, 2nd paragraph)

Input tax (Input VAT) is the value-added tax
due paid by a VAT-registered person in
the course of his trade or business on
importation of goods or local purchases of
goods or services, including lease or use of
property from VAT-registered person.
If paid by the VAT registered person in the
conduct of his business, it is allowed as
tax credit against his output VAT.
If paid by non-VAT person, it is part of his

expense (capitalized if pertaining to capital
goods).
If the input tax exceeds the output tax,
the excess shall be carried over to
the succeeding quarter or quarters.
TAX CREDITS
WHAT ARE THE INPUT TAXES?
Input Taxes are the value added taxes paid on

local purchases and importation of goods FOR:
1. sale
2. conversion into or intended to form part of a
finished product for sale, including packaging
materials

TAX CREDITS
Input Taxes are the value added taxes paid on

local purchases and importation of goods FOR:
3. use as supplies
4. use in trade or business, for which
depreciation or amortization is allowed for
income tax purposes, except automobiles,
aircrafts and yachts.
TAX CREDITS

And, input taxes also includes value added taxes
paid on the following:
5. purchases of real property;

6. purchases of services
7. Presumptive Input Input Tax
8. Transitional Input Tax

TAX
BASE TAX RATES
VALUE PAID on
PURCHASES and 12%
IMPORTATION of
GOODS
VAT Input/Input Tax

Section 110 (A)[3]{b, 2nd paragraph)

TAX CREDITS
What is a presumptive Input Tax?
Persons or firms engaged in processing

sardines, mackerel, and milk, and in manufacturing
refined sugar and cooking oil, and packed noodle-
based instant meals, shall be allowed a
PRESUMPTIVE INPUT TAX, equivalent to four
percent (4%) of the goods value in money of their
purchases of PRIMARY AGRICULTURAL
PRODUCTS which are used as inputs to their
production.
TAX CREDITS
What is a transitional input tax?
A taxpayer not subject to the value added tax

BECOMES SUBJECT to the value added tax because:
-the gross sales of the preceding year exceeded

P1,500,000.00 or
- the taxpayer being exempt from the VAT system, he was

qualified, and opted to be, registered under the value added
tax system.
TAX CREDITS
What is a transitional input tax?
Then, he shall be allowed an input tax on

his inventory on the transition date, of goods,
materials and supplies equivalent to two (2%) of
the inventory value, OR the value added tax
actually paid on it, WHICHEVER IS HIGHER,
excluding goods that are VAT exempt.
The inventory on the transition date should
be reported to the Bureau of Internal Revenue.
TAX CREDITS
THE VALUE ADDED TAX IN

THE SALES INVOICE
As a general rule, the VALUE-ADDED TAX

should be shown as a separate item in the sales
invoice. If the invoice shows only a total, the
value added tax component on the total shown in
the invoice is determined by multiplying the total
by the fraction of 12/112.

TAX CREDITS
THE VALUE ADDED TAX IN THE SALES INVOICE
Example: If the total invoice is amounting to

P 120,000.00, vat included.
So, the VALUE ADDED TAX is computed as:
120,000 x 12/112 P 12,857.14

NET AMOUNT (120,000-12,857.14) P107,142.86
TOTAL AMOUNT IN THE INVOICE P120,000.00

TAX CREDITS

Mr. DEE LAH TAH purchases sardines from fishermen and
processes them into canned sardines called “ BUBOY
SARDINES”. Going to processing in a certain taxable period
were the following purchases, value added tax not included:
Fish from fishermen P 100,000.00
Tin Cans P 20,000.00
Tomato paste in cans P 5,000.00
Olive oil in plastic bottles P 2,500,00
Pepper from farmers P 1,800.00
Paper labels from printers P 500.00
Sales during the period, value added tax not included,
amounted to P400,000.00.
TAX CREDITS
Determine the VAT Output or Output Tax.

Determine the VAT Input or Input Tax.
Output Tax (400,000 x 12%) P 48,000.00

Input Taxes:
Fish from fishermen ( 100,000.00 x 0%) P0
Tin Cans ( 20,000.00 x 12%) P 2,400.00
Tomato paste in cans ( 5,000.00 x 12%) P 600.00
Olive oil in plastic bottles ( 2,500,00 x 12%) P 300.00
Pepper from farmers ( 1,800.00 x 4%) P 72.00
Paper labels from printers ( 500.00 x 12%) P 60.00
TOTAL INPUT TAXES P 3,432.00

TAX CREDITS
RULES in VALUE ADDED TAX

An Input VAT is usually creditable against an
Output VAT if the related goods or service
from which it arises are used in the conduct
of business.
At the end of any taxable period, if the
Output VAT exceeds the Input VAT, only
such excess amount is payable by the
taxpayer to the BIR.
Section 110 (B)
TAX CREDITS
VAT formula:

Less : VAT Input/Input Tax
VAT Payable to the BIR
Section 110 (B)

TAX CREDITS
Output Tax (400,000 x 12%) P 48,000.00

Input Taxes:
Fish from fishermen ( 100,000.00 x 0%) P0
Tin Cans ( 20,000.00 x 12%) P 2,400.00
Tomato paste in cans ( 5,000.00 x 12%) P 600.00
Olive oil in plastic bottles( 2,500,00 x 12%) P 300.00
Pepper from farmers ( 1,800.00 x 4%) P 72.00
Paper labels from printers( 500.00 x 12%) P 60.00
TOTAL INPUT TAXES P 3,432.00
VAT PAYABLE P 44,568.00

TAX CREDITS
Section 110 (C)
If the Input VAT, inclusive of input tax carried over from
the previous quarter(s) exceeds the Output VAT, the
excess Input VAT shall be carried over to the
succeeding quarter or quarters.
Output VAT from sales P100,000
Less: Input VAT from:
Purchases P60,000
Carry-over from last quarter 50,000 P110,000
Excess Input VAT (P10,000)

Note: The excess input VAT can be claimed as a VAT credit
in the succeeding quarters.
TAX CREDITS
Any Input VAT attributable to the zero-rated sales by a

VAT-registered person may, at his option and WITHIN
TWO (2) YEARS, after the close of the taxable quarter
when the sales were made, be refunded or applied
for a tax credit certificate which may be used in the
payment of internal revenue taxes, EXCEPT
transitional input tax, to the extent that such input tax
has not been applied against output tax.
Section 112 (A)

Under RR No. 5-2000 July 29, 2011, it says
that:
“ALL TAX CREDIT CERTIFICATES

(TCC’S) ISSUED BY THE BIR SHALL NOT
BE ALLOWED TO BE TRANSFERRED OR
ASSIGNED TO ANY PERSON.”
1.EXECUTIVE ORDER NO. 68: “MONETIZATION
PROGRAM OF OUTSTANDING VALUE-ADDED TAX (VAT)
TAX CREDIT CERTIFICATES (TCCs)
In order to give qualified VAT-registered taxpayers

the cash equivalent of their outstanding TCCs.
For revalidated and unexpired TCCs issued in the years

2002 and 2003, THE MONETIZATION WILL BE FROM
JULY 17, 2012 TO SEPTEMBER 1, 2012.
For revalidated and unexpired TCCs issued in the years

2004 to April 11, 2012, THE MONETIZATION WILL BE
FROM JULY 17, 2012 TO OCTOBER 17, 2012.
TAX CREDITS
Cancellation of registration as a VAT taxpayer
The registration of any person as a value added taxpayer

may be cancelled if:
•He makes a written application and can demonstrate to the
Commisioner’s satisfaction that his gross sales for the
following 12 months will not exceed P1,500,000.00.
•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.
Section 236 (F)

TAX CREDITS
Cancellation of registration as a VAT taxpayer
WITHIN TWO (2) YEARS FROM THE DATE OF

CANCELLATION, apply for issuance of a tax credit certificate
for any UNUSED INPUT TAX which may be used in payment
of his other internal revenue taxes.
BIR will grant a refund or issue tax credit certificate

within 120 days from submission of complete documents
in support of the application.
Section 112 (B)(C)

TAX CREDITS
MONTHLY DECLARATION AND QUARTERLY RETURN
Within the twenty five (25) days after the end of

the quarter, there shall be a Quarterly VAT return.
Payment of VAT shall be on a monthly basis. Filing
anf payment shall be made to an authorized agent
bank, Revenue Collection Officer or duly authorized
city or municpal Treasurer in he Philippines located
within the Revenue District where the taxpayer is
registered.
Section 114 (A)(B)
TAX CREDITS
WITHHOLDING OF VALUE-ADDED TAX
The Government , or any of its political subdivisions,
instrumentalities or agencies, including GOCC’s, shall,
before making payment on account of its purchase of goods
from sellers who are subject to the value-added tax, deduct
and withhold a final value-added tax at the rate of 5% of
the gross payment, to be remitted within ten (10) days
following the end of the month the withholding was made.
But for lease or use of properties or property rights to non-
resident owners shall be subject to 12% withholding tax
a the time of payment.
Section 114 (C)
TAX CREDITS
The Commissioner of Internal Revenue has the

power to suspend the business operations of
taxpayer in the following cases:
1.Failure to issue receipts or invoices;

2.Failure to file VAT return
3.Understatement of taxable receipts or sales by
30% or more of his correct taxable sale or receipts
for the taxable quarter.
Section 115
DIAZ v. Secretary of Finance
G.R. No. 193007 promulgated July 19, 2011
TOLL FEES ARE SUBJECT TO VALUE-
ADDED TAX (VAT)
The Court held that the law imposes VAT on all
kind of services rendered in the Philippines for a fee.
When a tollway operator takes a toll fee from a
motorist, the fee is in effect for the latter’s use of the
tollway facilities over which the operator enjoys
private propriety rights that its contract and the law
recognize.
Tollway operators also come under specific
class described in Sec. 108 of the NIRC of 1997 as
“all other franchise grantees” that are subject to
VAT.
Under Sections 116 to 127 of the NIRC
the percentage taxes are:
a.3% percentage tax on persons exempt from the

value added tax because their gross annual
sales do not exceed one million five hundred
thousand pesos (P1,500,000.00), and who are not
required to pay a percentage tax under
any of (b) to (l) , below;

b. Tax on domestic carriers;

c. ax on international carriers;
d. Franchise tax;
e. Overseas Communications tax;
f. Tax on banks and non-bank financial
intermediaries performing quasi-banking
functions;

g. Tax on other non-bank financial

intermediaries;
h. Tax on life insurance companies;
i. Tax on agents of foreign insurance
companies;
j. Amusement Tax;
k. Tax on winnings;
l. Tax on stock transactions.

TAX BASE OF PERCENTAGE TAXES
Percentage taxes are based on gross

receipts.
Payable by the sellers of the services, except the
overseas communications tax, which is payable by the
user of the facilities of the seller.
Gross Receipts are cash actually or constructively
received. Receivables are not yet taxable although an
income is already earned thereon.
There are no deductions from gross receipts, except
Sales Returns and Allowances and Sales Discounts, to
arrive at the taxable gross receipts.
TAX RATES
A. 3% percentage tax based on gross

quarterly sales on persons exempt from the value
added tax because their gross annual sales do not
exceed one million five hundred thousand pesos
(P1,919,500.00),
Take Note of the BUSINESSES THAT ARE EXEMPTED

FROM VAT OR PERCENTAGE TAXES (regardless of
annual gross sales or receipts) , as provided for by
Section 109 of the National Internal Revenue Code (NIRC)

TAX RATES
B. Tax on Domestic Carriers
There are common carrier’s that can be

subjected to Percentage Tax known as
“common carriers tax. and there are also
common carriers that can be subjected to
Value Added Tax.

TAX RATES
COMMON CARRIER BY LAND:
1. Transporting goods or cargoes 12% Value Added Tax

2. Transporting passengers 3% Common Carriers Tax
3. Cars for rent or hire driven
by the lessee 3% Common Carriers Tax
4. Carriers Transportation Contractors,
including persons who transport
passengers for hire 3% Common Carriers Tax
5. Other domestic carriers by land for
transport of passengers, except owners
of animal-drawn two wheeled vehicles 3% Common Carriers
6. Keepers of garages 3% Common Carriers Tax
The percentage tax/common carriers tax

of 3% is based on quarterly gross receipts
TAX RATES
How does one determine the actual gross receipts of a

jeepney or taxi on which to apply the 3% percentage
tax?
The law provides statutory minimum

quarterly gross receipts:

TAX RATES
Quarterly Monthly
Jeepney for hire:
Manila and other cities P 2,400 P 800
Provincial P 1,200 P 400
Public Utility Bus:
Not exceeding 30 passengersP 3,600 P 1,200
Exceeding 30 but not 50 pax P 6,000 P 2,000
Exceeding 50 passengers P 7,200 P 2,400
Taxis:
Manila and other cities P 3,600 P 1,200
Provincial P 2,400 P 800
Car for hire:
With chauffeur P 3,000 P 1,000
Without chauffeur P 1,800 P 600

TAX RATES
COMMON CARRIER BY AIR or SEA
From one point in the Philippines to

another point in the Philippines
Transporting goods or cargoes 12% VAT
Transporting passengers 12% VAT
From one point in the Philippines to a

point outside the Philippines
Transporting goods or cargoes 0% Value Added Tax
Transporting passengers 0% Value Added Tax

TAX RATES
C. INTERNATIONAL CARRIERS
International air carriers and international

shipping carriers doing business in the
Philippines shall pay a tax equivalent to 3% of
their quarterly gross receipts from shipping
outgoing from the Philippines.

TAX RATES
D. FRANCHISE TAX
Franchise is a law. It authorizes a certain person, natural

or juridical persons, to operate a public utility. Certain
franchise grantees are subject to percentage tax and also
known as franchise tax .
However, there are also other franchise grantees that

shall be subject to the value added tax.

TAX RATES
FRANCHISE TAX IS:
On Gross Receipts covered by the law granting the

franchise;
1. for radio and/or television broadcasting

companieswhose annual gross receipts of the
preceding year did not exceed P10,000,000.00 3%
2. on gas and water utilities 2%

TAX RATES
F. Tax ON BANKS AND NON-BANK FINANCIAL

INTERMEDIARIES PERFORMING QUASI-BANKING
FUNCTIONS.
TAX BASE:
Gross receipts from sources WITHIN the Philippines.

TAX RATES
Note:
On radio and/ or television broadcasting company
whose annual gross receipts of the preceding year
exceeded P 10,000,000 shall be subject to the
value added tax.
However, those whose gross receipts did not

exceed P10,000,000.00 may opt to be registered
under the value added tax system. But once the
option is exercised, (as a VAT registered) the option
is IRREVOCABLE.

TAX RATES
E. OVERSEAS COMMUNICATIONS TAX
AMOUNTS RECEIVED FOR OVERSEAS

DISPATCH MESSAGE OR CONVERSATION
ORIGINATING FROM THE PHILIPPINES (outgoing
message) SHALL BE SUBJECTED TO A PERCENTAGE
TAX KNOWN AS THE OVERSEAS COMMUNICATIONS
TAX.
Tax Base – on the amount paid by the user to the

provider of the communication facility.
Tax Rate- 10% of the amount paid.

TAX RATES

FUNCTIONS.
TAX BASE:

TAX RATES
But, the overseas communications tax shall
not apply to :
1.Government
2. Diplomatic Services
3. International Organization
4. News services

TAX RATES

FUNCTIONS.
TAX BASE:

TAX RATES

FUNCTIONS.
TAX BASE:

TAX RATES
FUNCTIONS.
TAX RATES:
1.On interest, commissions and discounts from lending

activities as well as income from financial leasing on the
basis of the remaining maturities of instruments from which
such receipts were derived:
Maturity period is five years or less 5%
Maturity period is more than five years 1%

TAX RATES
FUNCTIONS.
TAX RATES:
2. On dividends and equity shares in net income

subsidiaries 0%
3. On royalties, rentals of property, real or personal, profits
from exchange and all other items treated as gross
income under the income tax law and on net trading
gains on foreign currency, debt instruments, derivatives
and other similar financial instruments 7%
TAX RATES
G. Tax ON OTHER NON-BANK FINANCIAL INTERMEDIARIES
TAX BASE:
TAX RATES:
1.On interest, commissions and discounts from lending
activities as well as income from financial leasing on the
basis of the remaining maturities of instruments from which
such receipts were derived:
Maturity period is five years or less 5%
Maturity period is more than five years 1%
2. On interest, commissions, discounts and all other items
treated as gross income under the income tax law. 5%
TAX RATES
H. Tax ON INSURANCE COMPANIES.
Insurance companies may be divided into two classes:

A.Non-life insurance companies; and
B.Life insurance companies.
Note: NON-LIFE INSURANCE COMPANIES ARE

SUBJECT TO THE VALUE ADDED TAX.
LIFE INSURANCE COMPANIES ARE SUBJECT

TO A PERCENTAGE TAX, called PREMIUM
TAX.
TAX RATES
H. Tax ON INSURANCE COMPANIES.
Tax Base: Total life insurance premiums collected

(gross receipts), whether in money, notes,
credits, or any substitute for money;
Tax Rate: Five percent (5%)

TAX RATES
Exemptions:
1. Premiums refunded within six (6) months after

payment on account of rejection of risk or returned for
other reasons to a person insured;
2. Reinsurance premiums paid by a company that has
already paid a tax;
3. Premiums collected or received by any branch of a
domestic corporation, firm or association doing
business in the Philippines on account of any life
insurance of an insured who is a non resident , if any tax
on such premiums is imposed by the foreign country
where the branch is established;
TAX RATES
Exemptions:
4. Reinsurance premiums, if the insured of personal

insurance resides outside the Philippines, if ay tax on
such premium is imposed by the foreign country where
the original has been issued or perfected.
5. Portion of the premiums collected or received by
insurance companies on variable contracts in excess
of the amount necessary to insure the lives of
variable contract owners.

TAX RATES
I. Tax ON AGENTS OF FOREIGN INSURANCE
COMPANIES.
Every fire, marine or miscellaneous insurance agent

authorized under the Insurance Code to procure
insurance as he may have previously been authorized
to transact on risks located in the Philippines, for those
companies not authorize to transact business in the
Philippines, SHALL PAY A TAX EQUAL TO TWICE
THE TAX IMPOSED ON LIFE INSURANCE
COMPANIES-hence, ten percent (10%).
TAX RATES
I. Tax ON AGENTS OF FOREIGN INSURANCE
COMPANIES.
BUT, An owner of property can obtain

directly for himself policies in foreign
companies but he must report to the Insurance
Commissioner and to the Commissioner of
Internal Revenue such case, and pay a tax of
five percent (5%) on premiums paid.

TAX RATES
J. AMUSEMENT TAX
Amusement Tax on admissions to theaters,

cinematographs, concert halls, circuses and other
places of amusement is a local tax.
The Tax Base of amusement tax is the

GROSS RECEIPTS of the proprietor, lessee or
operator of the amusement place. It includes
income from television, radio and motion picture
rights, if any.

TAX RATES
Amusement Places NOT ALL ARE SUBJECT TO THE

AMUSEMENT TAXES.
Amusement Activities- NOT ALL ARE SUBJECT TO
AMUSEMENT TAXES.
Amusement Places subject to percentage tax called

amusement tax:
Place for boxing exhibition 10%

Place for professional basketball 15%
Cockpits, cabarets, night or day clubs 18%
Jai-alai and race tracks 30%

TAX RATES
J. AMUSEMENT TAX
Exemption:
Boxing exhibitions where World or Oriental

Championships in any division is at stake shall
be exempt from amusement tax, IF ONE OF THE
CONTENDERS is a citizen of the Philippines and
said exhibitions are promoted by citizens of the
Philippines or a by a corporation or association at
least sixty percent (60%) of the capital of which is
owned by such citizens.
TAX RATES
K. TAX ON WINNINGS.
The tax is on winnings of:
1. person who wins in horse races and jai-alai. Tax must
be based on his WINNINGS . 10%
But if winnings is from double,
forecast, quinella and trifecta bets 4%
2. Owner of winning race horses,

based on the prize. 10%
Note: The tax shall be withheld from the

winnings or prize by the operator, manager, or
person in charge of the horse races or jai alai.
TAX RATES
L. TAX ON STOCK TRANSACTIONS
On sale, barter, exchange or other disposition of

shares listed and traded thru a local stock
exchange, other than by a dealer in securities:
½ of 1 percent based on the gross selling price

or gross value in money of the shares
sold.

TAX RATES
L.TAX ON STOCK TRANSACTIONS
On sale, barter, exchange or other disposition of shares thru

initial public offering of shares of stock in a closely held
corporation, in accordance with the proportion of the shares
sold, bartered, exchanged, or otherwise disposed of to the
total outstanding shares of stock after listing in the local
stock exchange, as follows:
Up to 25% 4%
Over 25%, but not over 33 and 1/3% 2%
Over 33-1/3% 1%

TAX RATES
RETURN AND PAYMENT OF PERCENTAGE TAXES
The taxpayer may file a separate return for each branch or

place of business, or a consolidated return for all.
As a general rule:
Every person liable to pay a percentage tax shall file a
quarterly return of the amount of his gross receipts and
pay the tax thereon, within twenty five (25) days after the
end of each taxable month.
Exceptions:
When the BIR Commissioner may, by rules and regulations,
prescribe the time for filing the returns.
A national internal revenue tax to which only:
•Manufacturers; or
•Importers
may be subjected to excise tax.

TWO (2) KINDS OF EXCISE TAXES
SPECIFIC
AD VALOREM
TAX
TAX
an excise tax imposed
an excise tax imposed
and based on weight
and based on selling
or volume or capacity
price or other specified
or any other physical
value of the article.
unit of measurement.
PURPOSES OF EXCISE TAX
•To curtail consumption of certain commodities which are
considered harmful to the individual as well as the
community as a whole;
•To protect domestic industries from competition caused by

similar imported products;
•To distribute the tax burden in proportion to benefit

derived from a particular government service;
•To raise revenue.

ARTICLES SUBJECT TO EXCISE TAX
o h o l TOBACCO
Al c
d ucts PRODUCTS
pr o
PETROLEUM
PRODUCTS
ARTICLES SUBJECT TO EXCISE TAX
n e ral
Mi AUTOMOBILES
o d u ct s
pr
NON-ESSENTIAL
GOODS
Alcohol Products-Distilled Spirits
Distilled Spirits
substance known as ethyl alcohol and ethanol

including all dilutions, purification and mixtures
thereof, from whatever source, by whatever
process produced, and shall include whisky,
brandy, rum, gin and vodka and other similar
products or mixtures.

Retail Price – it is the amount of money or prices which
an ultimate consumer or end user pays for the product.
If the Retail Price: Excise Tax would be:

Less than P250 per 750 ml. P 75 per proof liter
P250 to P675 per 750 ml. P 150 per proof liter
More than P675 per 750 ml. P 300 per proof liter
How to determine Proof Liter:

1 liter = 1,000 ml
Percent of proof = degree of proof per 100%
Proof liter = percent of proof liter x volume in
liter
But, if the alcohol products is produced from sap of nipa,

coconut, cassava, camote, buri palm or from juice or syrup
of sugar cane, the excise tax would be as follows:
Excise Tax
Small-scale production
(not more than 100 liters/day) P 4 per proof liter
Commercial production
(more than 100 liters/day) P 8 per proof liter

Alcohol Products-Wines
Wines
alcoholic beverages produced by fermentation

without distillation from juice of any kind of fruit.

Alcohol Products-Wines
Retail Price /Liter Tax per Liter
(exclusive of VAT & Excise Tax)
•Sparkling wine/Champagne, regardless of proof liter:
P500 and less P 100
More than P500 P 300
•Wine containing 14% alcohol or less P 12

•Wine containing more than 14% alcohol but not
more than 25% alcohol by volume P 24
•Fortified wines produced by mixture of distilled

spirits with water and other substance such
as flavoring extracts and coloring materials
in such portion that the resultant mixture contains Same manner
more than 25% of alcohol by volume as in distilled
spirits.
Alcohol Products-Fermented Liquors
Fermented liquors
alcoholic beverages produced by fermentation without

distillation of grains or malt, which include beer, lager, ale
porter and other similar products but excluding tuba, basi,
tapoy and other similar domestic fermented liquor.
Retail Price /Liter Tax per Liter

(exclusive of VAT & Excise Tax)
Less than P 14.50 P 6.15
P 14.50 up to P 22.00 P 9.15
More than P 22.00 P 12.15
Tobacco Products
1. P 0.75/KILO of the following tobacco products:
•Tobacco twisted by hand or reduced into a condition to be

consumed in any manner other than the ordinary mode of
drying and curing;
•Tobacco prepared or partially prepared with or without the

use of any machine or instrument or without being pressed or
sweetened;
•Fine-cut shorts and refuse, scraps, clippings, cuttings, stems

and sweepings of tobacco.
Tobacco Products
2. P 0.60/KILO of tobacco specially prepared for

chewing and not suitable for use in any other
manner;
3. P 1.00 per piece on cigar (cigar means all rolls of tobacco or any
substitute thereof, wrapped in leaf tobacco)
4. P0.40 per pack on cigarettes packed by hand (cigarette means all

rolls of finely cut leaf tobacco or any substitute thereof, wrapped in
paper or in any other similar materials).
Tobacco Products
5. Cigarette packed by machine:
Retail price/pack Excise Tax per pack

(excluding VAT & Excise Tax)
Below P 5.00 P 1.00

P5.00 to P6.50 P 5.00
Over P6.50 but not over P10 P 8.00

Over 10 P12.00

Petroleum Products
1. P 4.50/LITER of volume or P4.50/KILO of

lubricating oil and greases.
2. P 0.05/LITER on processed gas
3. P 3.50/KILO on waxes and petroleum
4. P0.05/LITER on denatured alcohol used for or
motive power.
5. P4.50/LITER on Naptha, regular gasoline and
other similar products of distillation.
6. P5.35/LITER on leaded premium gasoline
Petroleum Products
7. P3.67/LITER on aviation turbo jet fuel

8. P0.60/LITER on kerosene
9. P1.63/LITER of diesel fuel oil
10. ZERO on liquefied petroleum gas
11. P.056/KILO of asphalt
12. P.030/LITER of bunker fuel oil-But if other
petroleum product will be produce from the
banker oil, the excise which have been levied shall
be credited with excise taxes paid in the produced
petroleum products.
Mineral Products
1. P10 per metric ton on coal and coke;
2. On all non metallic minerals and quarry resources – 2% based
on actual market value of gross output thereof at the
time of removal.
3. On all metallic minerals –based on actual market value of
the gross output at the time of removal thereof; for:
- Copper and other metallic resources minerals:
1% on the 1st 3 years of effectivity of RA 7729
1 ½% on the 4th and 5th year
2% on the 6th year and thereafter
- Gold and Chromite – 2%
- On indigenous petroleum- 3% on the fair
international market price on the first taxable
sale, barter, exchange or such similar
transaction.
AUTOMOBILES
TAX BASE
1.If locally manufactured or if imported for re-sale

domestically, the tax base shall be the manufacturer or
importer’s selling price net of excise and value added
tax.
2. If the importation is not intended for re-sale domestically,

the tax base shall be the total value used by the
Bureau of customs in determining tariff and custom
duties, including custom duty and all other charges,
plus 10% of the total thereof.

AUTOMOBILES
TAX RATE
Engine Displacement in cubic centimeter:
Gasoline Driven Diesel Driven Tax Rate
Up to 1600cc Up to 1800 cc 15%

1601 to 2000cc 1801 to 2300cc 35%
2001 to 2700cc 2301 to 3000cc 50%
2701cc and over 3001cc or over 100%

Non-ESSENTIAL GOODS
Non essential goods include the following:
All goods commonly or commercially known as

Jewelry, whether real or imitation, pearls, precious
and semi-precious stoned and imitations thereof;
Perfumes and toilet waters;
Yachts and other vessels intended for pleasure or

sports.
Non-ESSENTIAL GOODS
EXCISE TAX BASE and RATE
20% of the wholesale price or the value of

importation used by the Bureau of Customs in
determining the tariff and custom duties, net of
excise tax and value added tax.

PLACE and TIME FOR FILING OF RETURN and
PAYMENT OF TAX
Return shall be filed and Excise tax shall be paid:
•By the manufacturer or producer before

removal of the products from the place of
production. A separate return for each place of
production shall be filed by every liable person.
PAYMENT OF TAX
•By the importer before removal of the

importation from the custom warehouse to be
paid to the Custom Officers under the regulation
of the Department of Finance.

PAYMENT OF TAX
With respect to the excise tax on locally produced

or extracted metallic mineral or mineral products,
the person liable shall file a return and pay the tax
within 15 days after the end of the calendar quarter
when such products were removed subject to such
conditions as may be prescribed by rules and
regulations to be promulgated by the Secretary of
Finance upon recommendation of the BIR.
PAYMENT OF TAX
The return shall be filed with and the tax paid

to any authorized agent bank or Revenue
Collection Officer, or duly authorized City or
Municipal Treasurer in the Philippines.

THANK YOU!!

What is Business

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What is Business

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What is Business?

Business OR in the course of trade or

the regular conduct or pursuit of a commercial or

These are sometimes referred to as transaction taxes.

These are also taxes on production/importation of “sin”

A commercial or economic activity is

atty. cleo d. sabado-andrada, cpa, mba

A. An importation of goods for personal use is subject to

2. There should be regularity in the activity, but

A regular activity is an activity involving

atty. cleo d. sabado-andrada, cpa, mba

2. There should be regularity in the activity, but

A. Services rendered in the Philippines by non-

atty. cleo d. sabado-andrada, cpa, mba

State whether the following transactions are:

1998 BAR Exam

1.Sale of fresh vegetables by Aling Ining at the Pamilihang

A. Sale or importation of AGRICULTURAL and MARINE

B. Sale or importation of fertilizers, seeds, seedlings

atty. cleo d. sabado-andrada, cpa, mba

C. Importation of personal and household effects

atty. cleo d. sabado-andrada, cpa, mba

atty. cleo d. sabado-andrada, cpa, mba

E. Services subject to percentage tax.

F. Services by agricultural contract growers and

atty. cleo d. sabado-andrada, cpa, mba

G. Medical, dental, hospital and veterinary services,

H. Educational services rendered by private

atty. cleo d. sabado-andrada, cpa, mba

J. Services rendered by regional or area headquarters

K. Transactions which are exempt under international

atty. cleo d. sabado-andrada, cpa, mba

L. Sales by agricultural cooperatives duly registered with

atty. cleo d. sabado-andrada, cpa, mba

M. Gross receipts from lending activities by credit

atty. cleo d. sabado-andrada, cpa, mba

N. Sales of non-agricultural non electric and non-credit

P. Sale of real property not primarily held for sale to

Q. Lease of residential unit with a monthly rental not

R. Sale, importation, printing or publication of books

atty. cleo d. sabado-andrada, cpa, mba

S. Sale, importation or lease of passenger or cargo

T. Importation of fuel, goods and supplies by persons

U. Services of banks, non bank financial intermediaries

Sale of Residential House and Lot 2,500,000 3,199,200

State whether the following transactions are:

1998 BAR Exam

1.Sale of fresh vegetables by Aling Ining at the Pamilihang

Businesses NOT expressly mentioned in

- exempt from the value added tax, BUT. . . . . .

atty. cleo d. sabado-andrada, cpa, mba

Manufacturers or importers who are subject to

Value Added tax; or

The 3% percentage tax

atty. cleo d. sabado-andrada, cpa, mba

Excise Taxes are imposed on:

-Distilled spirits - Automobiles

atty. cleo d. sabado-andrada, cpa, mba

What are the characteristics of the Value –Added Tax?

1996 BAR Exam

2. Levied on the sale, barter exchange or lease

3. Seller is the one statutorily liable for the