OTHER PERCENTAGE TAXES Flashcards Preview

TAXATION - Review > OTHER PERCENTAGE TAXES > Flashcards

Flashcards in OTHER PERCENTAGE TAXES Deck (67)
Loading flashcards...
1
Q

What is percentage tax?

A

Percentage tax is a national tax measured by a CERTAIN PERCENTAGE of the gross selling price or gross value in money of goods sold or bartered; or of the gross receipts or earnings derived by any person engaged in the sale of services.

2
Q

What is the scope of percentage tax?

A

It covers the following:

  1. Services specifically subject to percentage taxes
  2. All other sales of goods, services or lease of properties other than exempt sales, provided that the SELLER:
    a. DID NOT EXCEED THE VAT THRESHOLD
    b. IS NON VAT-REGISTERED
3
Q

What are the services specifically subject to percentage tax?

A

PE DC IC F OM BNB L A W A S

  1. Persons Exempt from VAT
  2. Domestic Carriers and keepers of garage
  3. International Carriers
  4. Franchises
  5. Overseas dispatch, message or conversation originating from the Philippines
  6. Banks and Non-Bank financial intermediaries performing quasi-banking functions
  7. Tax on other Non-Bank financial intermediaries not performing quasi-banking operations
  8. Life insurance premiums
  9. Agents of foreign insurance companies
  10. Winnings
  11. Amusement Taxes
  12. Sale/barter/exchange of shares of stock listed and traded through the local stock exchange or through initial public offering.
4
Q

Explain the tax on persons exempt from VAT.

A

(SECTION 116) - 3%
To be subject to percentage tax, the person must:
a. NOT be VAT registered
b. Annual gross sales must NOT EXCEED 3,000,000.

Percentage tax is computed as:
Tax base x 3% = OPT

Tax base is:

a. Seller of Goods - Gross Sales
b. Seller of Services - Gross Receipts

5
Q

If a person has sales/services not exceeding the 3,000,000 threshold, but registered as a VATable business, his VATable status shall be irrevocable for?

A

3 consecutive years.

6
Q

What are common carriers?

A

Common carriers refers to the persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods, either by land, water or air, for compensation, offering their services to the public and shall include transportation contractors.

7
Q

Explain the Percentage tax on domestic carriers and keepers of garage.

A

(SECTION 117) - 3%
Persons liable are the following:
a. Cars for rent or hire driven by the lessee
b. Transportation contractors
c. Other domestic carriers BY LAND for transport of passengers
d. Keepers of garage

Exempt persons:

a. owners of bancas
b. owners of animal-drawn two-wheeled vehicles

Percentage tax is computed as:
Tax base x 3% = COMMON CARRIERS TAX

Tax base is the HIGHER BETWEEN:

a. Actual Gross Receipts
b. Minimum Gross Receipts

8
Q

Explain the Percentage tax on international carriers.

A

(SECTION 118) - 3%
Persons liable here are:
a. International air carriers
b. International shipping carriers

Percentage tax is computed as:
Gross receipts x 3% = COMMON CARRIERS TAX

9
Q

Summarize the applicable tax on domestic and international carriers.

A

DOMESTIC Passengers |Cargoes/Mail
Land OPT 3%| VATable Sea/Air

a. Local VATable | VATable
b. Outgoing zero-rated | zero-rated
c. Incoming EXEMPT | EXEMPT

                     INTERNATIONAL                             
      Passengers | Cargoes/Mail    Land              N/A             |    N/A     

Sea/Air

a. Local N/A | N/A
b. Outgoing EXEMPT | OPT 3%
c. Incoming EXEMPT | EXEMPT

It must be noted that OUTGOING INTERNATIONAL CARRIERS are SUBJECT TO 2.5% INCOME TAX.

“VATable” means that the person/business is subject to VAT if VAT-registered or VAT-registrable, otherwise, said person/business will be subject to the 3% general percentage tax.

10
Q

Explain the percentage tax on franchises.

A

(SECTION 119) 2% AND 3%
Franchises liable are:
1. Franchises on GAS AND WATER UTILITIES - 2% of gross receipts derived from business covered by the law granting the franchise

  1. Franchises on RADIO/TV BROADCASTING - 3% of gross receipts derived from business covered by the law granting the franchise
    a. Must NOT BE VAT REGISTERED
    b. Annual gross receipts of PRECEDING YEAR MUST
    NOT EXCEED 10,000,000
  2. PAGCOR - 5% OF GROSS REVENUES ON GAMING OPERATIONS

OPT shall be based on GROSS RECEIPTS OF THE FRANCHISE.

11
Q

Explain the percentage tax on overseas dispatch, message or conversation originating from the Philippines.

A
(SECTION 120) - 10%
Requisites:
a. There must be an overseas dispatch/message
b. Originated from PH
c. Made through wireless communication

Person liable is the USER of the facility

Percentage tax is computed as:
Payment for service x 10% = OVERSEAS COMMUNICATION TAX

The following are exempt:

a. Diplomatic Services
b. International Organizations
c. News Agencies or services
d. Government

12
Q

What are banks/banking institutions?

A

These refer to those entities engaged in the lending of funds obtained in the form of deposits.

13
Q

What are non-bank financial intermediaries?

A

These refer to persons/entities whose principal function include the lending/investing/placement of funds or evidences of indebtedness or equity deposited with them/acquired by them.

14
Q

What are quasi-banking functions?

A

These refer to the borrowing of funds from TWENTY 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.

15
Q

Explain the percentage tax on banks/non-bank financial intermediaries performing quasi-banking functions.

A

(SECTION 121) - 5%, 1%, 0%, 7%

GROSS RECEIPTS OR INCOME DERIVED FROM:

A. Interest/commissions/discounts from LENDING AND FINANCIAL LEASING:

a. Remaining maturity period in 5 YEARS OR LESS - 5%
b. Remaining maturity period is MORE THAN 5 YEARS
- 1%

B. Dividends and equity shares in net income of subsidiaries - 0%

C. Royalties/rentals of property/profits from exchange and all other items treated as gross income under the Tax Code - 7%

D. Net Trading Gains within the taxable year on foreign currency/debts/securities/derivatives and other similar financial instruments - 7%

16
Q

Explain the percentage tax on OTHER non-bank financial intermediaries NOT performing quasi-banking functions.

A

(SECTION 122) - 5%, 5%, 1%

GROSS RECEIPTS OR INCOME DERIVED FROM:

A. Interest/commissions/discounts and all other items treated as gross income under the Tax code - 5%

B. Interest/commissions/discounts from LENDING AND FINANCIAL LEASING:

a. Remaining maturity period in 5 YEARS OR LESS - 5%
b. Remaining maturity period is MORE THAN 5 YEARS
- 1%

17
Q

Explain the percentage tax on Life insurance premiums.

A

(SECTION 123) - 2%

Percentage tax is computed as follows:
Premiums collected x 2% = Premiums tax

However, the following premiums are exempt from tax:
a. Premiums refunded within six months after payment on account of rejection of risk or returned for other reason

b. Premiums paid upon re-issuance by a company that has already paid the tax

c. Premiums collected or received by any branch of a domestic corporation/firm or association doing business outside the Philippines on account of any life insurance of the insured who is a non-resident, if any tax on such premium is imposed by the foreign country where the branch is established.

d. Premiums collected are received on account of any reinsurance, if the insured, in case of personal insurance, resides outside the Philippines if any tax on such premiums is imposed by the foreign country where the original insurance has been issued or perfected.

e. Portion of the premiums collected or received by the insurance companies or variable contracts in excess of the amounts necessary to insure the lives of the variable contract workers

f. Premium collected by a purely cooperative company/association.

18
Q

Explain the percentage tax on agents of a foreign insurance company.

A

(SECTION 124) - 4%, 5%

Persons liable are:
a. Fire/Marine/Miscellaneous agents of non-resident foreign corporations engaged in insurance business computed as follows:

Premiums collected x 4% = Premiums Tax

b. Owners of property DIRECTLY obtaining insurance from non-resident foreign corporations engaged in insurance business computed as follows:

Premium payments x 5% = Premiums Tax

19
Q

Explain the percentage tax on amusement.

A

(SECTION 125) - 10%, 15%, 18%, 30%

The following amusement places and their corresponding rate are as follows:

a. Boxing exhibition - 10% or exempt
b. Professional Basketball games - 15%
c. Cockpits/cabarets/night or day clubs - 18%
d. Jai-alai and racetracks - 30%

Percentage tax shall be computed as follows:

Gross receipts x Rate = Amusement Tax

Gross receipts encompasses ALL RECEIPTS such as radio/TV rights of the proprietor/lessee/operator of the amusement place.

20
Q

To be exempt from amusement tax, what are the requisites for boxing exhibitions?

A
  1. A World or Oriental championship is at stake
  2. One of the contenders is a CITIZEN of PH
  3. Promoted by citizens of the PH or by a corporation/association AT LEAST 60% of the capital is owned by such citizen.
21
Q

Explain the percentage tax on winnings.

A

(SECTION 126) -10%, 4% or 10%
Persons liable are:
1. Owners of the winning horse computed as:

Winnings x 10% = Tax on Winnings

  1. Bettor in horse race or jai-alai computed as:

(Gross Winnings - cost of ticket) x Rate=Tax on winnings

Rate:

a. Ordinary - 10%
b. Special(Double/forecast/quinella/trifecta) - 4%

22
Q

Explain the percentage on stock transactions.

A

(SECTION 127) 0.6%, 4%, 2%, 1%
Kinds of Stock Transaction Tax:
A. Tax on SALE/BARTER/EXCHANGE of Stock LISTED AND TRADED THROUGH THE LOCAL STOCK EXCHANGE

Requisites:

a. Seller must NOT BE A DEALER in securities
b. Shares sold is listed and traded in LSE

Percentage tax shall be computed as:
Gross Selling Price x 0.6% = Stock transaction tax

B. Tax on SHARES OF STOCK SOLD OR EXCHANGED THROUGH INITIAL PUBLIC OFFERING

Requisites:
a. Sale is made through the LSE
b. It is an INITIAL PUBLIC OFFERING OF A “CLOSELY
HELD CORPORATION”

Percentage tax shall be computed as:
Gross Selling Price x Rate = Stock transaction tax

Rate depends whether the ratio of shares sold over shares outstanding after the sale is:
25% and below - 4%
More than 25% to 33.33% - 2%
More than 33.33% - 1%

Persons liable
1. Primary offering of unissued stock - Issuing corporation

  1. Secondary offering of stocks by existing shareholders during the IPO - seller of stock.
23
Q

What does “follow-on/follow through offering of shares” mean?

A

It refers to an offering of shares to the investing public AFTER an IPO. After an IPO, the corporation becomes publicly listed, and so sale of shares by non-dealers become subject to stock transactions tax under Sec 127.

24
Q

Section 116 or tax on VAT exempt persons shall be returned and paid every?

A

25 days after the end of each quarter.

25
Q

Section 117 or tax on domestic common carriers shall be returned and paid every?

A

25 days after the end of each quarter.

26
Q

Section 118 or tax on international common carriers shall be returned and paid every?

A

25 days after the end of each quarter.

27
Q

Section 119 or tax on franchises shall be returned and paid every?

A

25 days after the end of each quarter.

28
Q

Section 120 or percentage tax on overseas dispatch, message or conversation originating from the Philippines shall be returned and filed every?

A

25 days after the end of each quarter

29
Q

Section 121 or percentage tax on banks/non-bank financial intermediaries performing quasi-banking functions shall be returned and filed every?

A

25 days after the end of EVERY QUARTER

30
Q

Section 122 or percentage tax on OTHER non-bank financial intermediaries NOT performing quasi-banking functions shall be filed and returned every?

A

25 days after the end of the EVERY QUARTER

31
Q

Section 123 or percentage tax on Life insurance premiums shall be filed and returned every?

A

25 days after the end of each quarter.

32
Q

Section 124 or percentage tax on agents of a foreign insurance company shall be filed and returned every?

A

25 days after the end of each quarter.

33
Q

Section 125 or percentage tax on amusement shall be filed and returned every?

A

25 days after the end of each quarter.

34
Q

Section 126 or percentage tax on winnings shall be returned and filed every?

A

Tax shall be withheld by the operator and remitted to the BIR within 5 BANKING DAYS FROM DATE OF WITHHOLDING/COLLECTION.

35
Q

Section 127A or percentage tax on sale/barter/exchange of stocks listed in LSE by non-dealers shall be filed every?

A

The stockbroker who effected the sale shall remit the tax to the BIR within 5 banking days from collection.

36
Q

Section 127B or percentage tax on stocks sold through IPO shall be filed and returned every?

A

A. Primary Offering - 30 days from date of listing in the LSE

B. Secondary Offering - 5 banking days from date of collection

37
Q

T or F
A person who has already paid a business tax will become exempt in paying income tax.

A

False. Income tax is in addition to business tax.

38
Q

Explain how a Self-Employed or Professional (SEP) individual can be exempt from percentage tax under Section 116.

A

A SEP who has sales/receipts of 3,000,000 AND BELOW can choose to be taxed at either:

A. Regular income tax, OR
B. 8% tax on the Gross Sales/Receipts and other operating income IN EXCESS OF 250,000 IN LIEU OF THE GRADUATED TAX RATE AND SECTION 116, PROVIDED THAT:
a. The SEP is non-VAT registered
b. The SEP is not engaged in VAT-exempt sales
transaction
c. The SEP is not subject to other OPT other than Sec
116
d. The taxpayer SIGNIFIES IN HIS 1ST QUARTER
RETURN OF THE TAXABLE YEAR HIS INTENTION
TO ELECT THE 8% OPTION.

If the taxpayer’s gross sales or receipts EXCEED THE VAT THRESHOLD (3,000,000), he shall automatically be subjected to the graduated rates under Sec 24 of the Tax Code with the following guidelines:

a. The taxpayer shall be allowed an income tax credit of quarterly payments initially made under the 8% income tax option
b. Taxpayer is likewise liable for business tax in addition to income tax. A 3% percentage shall be imposed on the first 3,000,000, and VAT on the excess.

39
Q

Is the 8% option available for VAT-registered taxpayers?

A

No.

40
Q

T or F
The 3% common carrier’s tax is based on the actual quarterly gross receipts or minimum quarterly receipts, whichever is lower.

A

False. Whichever is higher.

41
Q

What is a Transportation network vehicle service (TNVS)? What rules apply to TNVS?

A

It is a pool of land transportation vehicles whose accessibility to the riding public is facilitated through the use of common point of contact which may be in the form of text, phone, applications, and other means.

TNVS which are holders of valid and current CERTIFICATE OF PUBLIC CONVENIENCE (CPC) shall be subject to 3% common carriers tax under SEC 117 on their transport of passengers by land.

TNVS which are NOT holders of valid and current CERTIFICATE OF PUBLIC CONVENIENCE shall be subject to 12% VAT.

NON CPC HOLDER KAY AMPONGAN IS VATABLE???

42
Q

The owners of vehicles other than the TNVS used in transporting passengers/goods shall be referred as?

A

Partners.

43
Q

T or F
If the 2.5% income tax on international carriers is not applicable because of reciprocity or treaty, the common carriers tax under Sec 118 shall still apply.

A

True.

44
Q

T or F
When a Radio/TV broadcasting franchisee registers as VAT taxpayer, the registration shall not be revoked.

A

True.

45
Q

When a business has 2 or more operations and only some parts are specifically subject to OPT, how shall business tax be computed for those not subject to OPT?

A

The basis shall be the gross sales or receipts for the taxable year, as a general rule. If the business’ gross sales or receipts exceeds 3,000,000, then the operations not subject to OPT shall be subject to VAT. If not, it shall be subject to 3% percentage tax under Sec 116.

46
Q

T or F
The overseas communication tax is imposed on the owner of the communication facilities used to make overseas communication.

A

False. It is imposed on the user of the facility.

47
Q

Are collections on overseas calls originating from abroad subject to VAT?

A

No.

48
Q

T or F
Under Sec 121 and 122, duly registered credit cooperatives are subject to percentage tax.

A

False. Only banks, financing/credit companies, money changers, pawnshops, and other financial intermediaries are subject to percentage tax under Sec 121 and 122.

49
Q

Abdul Bank has a net trading loss of 10,000 on January 2020 and net trading gain of 20,000 on February. What is Abdul Bank’s gross receipts tax?

A

Banks are subject to a 7% gross receipts tax on net trading gains. In this case, the CUMULATIVE NET GAIN is 10,000 (20,000 - 10,000) multiplied by 7% for a total of 700 Gross receipts tax.

50
Q

T or F
Non-life insurance businesses are subject to premiums tax.

A

False. Non-life insurance businesses are subject to VAT.

51
Q

What entities are exempt from premiums tax on insurance?

A

Purely cooperative companies and associations.

52
Q

What life insurance premiums are exempt from premiums tax?

A

The following premiums are exempt from tax:
a. Premiums refunded within six months after payment on account of rejection of risk or returned for other reason

b. Premiums paid upon re-issuance by a company that has already paid the tax
c. Premiums collected or received by any branch of a domestic corporation/firm or association doing business outside the Philippines on account of any life insurance of the insured who is a non-resident, if any tax on such premium is imposed by the foreign country where the branch is established.
d. Premiums collected are received on account of any reinsurance, if the insured, in case of personal insurance, resides outside the Philippines if any tax on such premiums is imposed by the foreign country where the original insurance has been issued or perfected.
e. Portion of the premiums collected or received by the insurance companies or variable contracts in excess of the amounts necessary to insure the lives of the variable contract workers
f. Premium collected by a purely cooperative company/association.

53
Q

What is the tax base for premiums tax?

A

Premiums collected.

54
Q

T or F
Admission charges to amusement places are required for the imposition of amusement tax.

A

False.

55
Q

What is the tax base for amusement tax?

A

Gross receipts, which includes income from TV/radio rights, tickets sold, and sale of food/beverages WITHIN the amusement place.

56
Q

Suppose Abdul operates a restaurant inside the Araneta Coliseum, where a professional basketball game is about to take place. Is his restaurant sales subject to amusement tax?

A

No. His business is separate and therefor not subject to amusement tax.

57
Q

What is the tax base on tax on winnings?

A

Gross winnings.

58
Q

What is another term for ordinary winnings in race track betting?

A

Winner takes all (10%)

59
Q

What is the difference between capital gains and the percentage tax on stock transactions?

A

In capital gains, the stocks must be SOLD DIRECTLY TO THE BUYER, NOT THROUGH THE LSE. Also the seller must not be engaged in stock trading

In stock transactions tax, the seller must be a non-dealer and the stock must be listed and traded in the LSE.

60
Q

What transactions are subject to Advance OPT?

A
  1. Sale of sugar (other than raw cane sugar) who is not VAT registered and whose annual sales do not exceed 3M.
  2. Transport of naturally grown and planted timber products
  3. Sale of jewelry/gold/other metallic minerals to NON-RESIDENT INDIVIDUALS NOT ENGAGED IN TRADE OR BUSINESS IN THE PHILIPPINES AND/OR NRFC.
61
Q

What happens when the business closes or when a person retires from business?

A

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.

25 DAYS KAY AMPONGAN???

62
Q

Are stock transaction taxes deductible for income tax purposes?

A

No. It is not deductible for income tax purposes.

63
Q

T or F
Rent-a-car companies are also subject to common carrier’s tax under Sec 117.

A

True.

64
Q

Syria does not impose business taxes to PH carriers as an act of goodwill. Does business tax under Sec 118 apply to Syrian carriers as reciprocity?

A

Yes. Business tax still applies. Reciprocity does not make it exempt from OPT under Sec 118.

65
Q

T or F
Duly registered Credit Cooperatives are also subject to OPT subject to the rules on Sec 121 and 122.

A

FALSE. Sec 121 and 122 does not include cooperatives.

66
Q

What are the instances wherein there is no OPT on life insurance premiums?

A

The following premiums are exempt from tax:
a. Premiums refunded within six months after payment on account of rejection of risk or returned for other reason

b. Premiums paid upon re-issuance by a company that has already paid the tax
c. Premiums collected or received by any branch of a domestic corporation/firm or association doing business outside the Philippines on account of any life insurance of the insured who is a non-resident, if any tax on such premium is imposed by the foreign country where the branch is established.
d. Premiums collected are received on account of any reinsurance, if the insured, in case of personal insurance, resides outside the Philippines if any tax on such premiums is imposed by the foreign country where the original insurance has been issued or perfected.
e. Portion of the premiums collected or received by the insurance companies or variable contracts in excess of the amounts necessary to insure the lives of the variable contract workers
f. Premium collected by a purely cooperative company/association.

67
Q

Give a summary on the deadline of filing and payment of OPT.

A

All OPT should be filed and paid WITHIN 25 DAYS AFTER THE END OF EVERY QUARTER USING BIR FORM 2551Q, EXCEPT FOR THE FOLLOWING:

  1. WINNINGS - Tax shall be withheld by the operator and remitted to the BIR within 20 days from the date of withholding.
  2. STOCK TRANSACTION TAX - The stockbroker who effected the sale shall remit the tax to the BIR within 5 banking days from collection.
  3. INITIAL PUBLIC OFFERINGS - A. Primary Offering - 30 days from date of listing in the LSE

B. Secondary Offering - 5 banking days from date of collection