Chapter 9 Percentage Tax

BUSINESS
AND
TRANSFER
TAXES
PERCENTAGE TAX P-1
PERCENTAGE TAX
THE THREE PERCENT

(1%)* PERCENTAGE TAX
ON GROSS SALES OR
GROSS RECEIPTS
PERCENTAGE TAX
Under the Create

* Before the Create Law, It will be 1%
Law, the rate was from July 1, 2020-
3%. June 30, 2023,
Thereafter, 3%
The Percentage taxes under Title
V of the National Internal
Revenue code are as follows
PERCENTAGE
TAX (1) Tax on domestic carriers;
(2) Tax on international carriers
(3) Franchise tax:
(4) Overseas communication tax
PERCENTAGE TAX
(5)Tax on banks and non-bank financial intermediaries performing
quasi-banking functions;
(6)Tax on other non-bank financial intermediaries:
(7) Tax on life insurance companies:
(8) Tax on agents of foreign insurance companies:
(9) Amusement Tax
(10) Tax on Winnings
(11)Tax On stock Transaction
PERCENTAGE TAX
General rules on tax base and taxpayer of percentage taxes.
Generally, percentage taxes are based on gross receipts. The term "gross
receipts" means cash actually or constructively received. Receivables, although
Income thereon is earned already, are not yet taxable.
There are no deductions from gross receipts to arrive at the taxable gross
receipts, except, returns and allowances, and discounts. The taxpayer is the
seller of the goods or services (with exceptions)
PERCENTAGE TAX
The taxpayer of the 1% percentage tax:

A taxpayer:
(a)who is exempt from the value-added tax under paragraphs (s) of Section
109 of the National Internal Revenue Code (gross sales or receipts in the
preceding year did not exceed P3,000,000), and not under any other
paragraph of the same section; and
(b)did not avail of Optional VAT registration.
PERCENTAGE TAX
Illustration 1.
Mr. A, whose gross annual sales never exceeded
P3,000,000 had, in a taxable month, gross sales of
P100,000, sales returns and allowances of P5,000, and
sales discounts of P2,000. The percentage tax
is____________
PERCENTAGE TAX
Gross sales 100,000

Less:
Sales returns and allowances 5,000
Sales discounts 2,000 7,000
Sales* subject to percentage tax 93,000
Percentage tax at 3% 2,790
1% 930
PERCENTAGE TAX
Illustration 2. Mr. B is a trader. His gross sales in the

preceding year amounted to P3,000,000. His gross
annual sales in the preceding year did not exceed
P3,000,000. Is he subject to the three percent (1%)
percentage tax.
PERCENTAGE TAX
Illustration 3
Mr. C sells agricultural food product. In 202a his
gross sales amounted to P440,000. For the first
month of 202b his gross sales amounted to
P100,000, What business tax would he pay in 20A
PERCENTAGE TAX
None. He is not subject to the value added tax because he is

exempt under paragraph (a) of Section 109 of the National
Internal Revenue Code. He is not subject to the one percent (1%)
percentage tax because his exemption is not under paragraph on
volume sales.
PERCENTAGE TAX
4. Mr. D had gross sales of P3,000,000 in 202a. In the first

month of 202b, his gross sales amounted to P200,000, any
tax not included, with purchases from VAT-registered
suppliers at fifty percent (50%) of the selling price, value-
added tax not included. For 20B, what is the business tax
due and how much?
PERCENTAGE TAX
For B, Mr. D was subject to the 1% percentage tax, or P2,000.
- Gross receipts of P3,000,000 is exactly the threshold amount. It

did not exceed the threshold of P3,000,000.
PERCENTAGE TAX
OPTIONAL VAT REGISTRATION.

When the gross sales or receipts of the preceding year did not exceed three
million pesos (P3,000,000), to determine whether it is better to be VAT-
registered or remain subject to the 1% percentage tax, one must not look
only at, and compare, the percentages - the 1% and the 12% (of net sales or
receipts). One has to look into the net effect of all the business taxes that
converge on the operations of the business.
PERCENTAGE TAX
Illustration 5.
Sales 200,000
Purchases from VAT registered persons 100,000
Expenses, paid to VAT registered persons 60,000
PERCENTAGE TAX
IF VAT REGISTERED.
Output taxes (P200,000 x 12%) 24,000

Less: Input taxes
– On purchases(P100,000 x 12%) 12,000
On expenses(60,000 x 12%) 7,200 19,200
Value-added tax payable 4,800
IF NOT, VAT REGISTERED

Percentage tax (200,000x 1%) 2,000
PERCENTAGE TAX
Which is the Business tax to pay:

A. Other percentage tax ( Under Title V of
NIRC)
B. The 1% Percentage Tax or
C. Value added Tax
PERCENTAGE TAX
Illustration 6.
A taxpayer had on record, in his books o accounts, the following:
May 2 Purchase from a VAT supplier, of goods to be sol P50,000, VAT of P6,000,
not included.
May12 Purchase from a non-VAT supplier, of goods be sold, P90,000
May 15 Sale of P30,000.
May 26 Sale of P10,000.
How much is the percentage tax of May?
PERCENTAGE TAX
Computed as follows:
May 15 Sale of 30,000
May 26 10,000
Total sales of the month P40,000
Percentage tax of ( 3% of 40,000) 1,200

1% 400
PERCENTAGE TAX
RETURN AND PAYMENT OF THE 3% PERCENTAGE TAX.

A monthly percentage tax return must be filed and t tax paid
within twenty (20) days after the end of the month
The taxpayer, with several branches or place of bus ness, but all
subject to the percentage tax, may file a separate return for each
branch or place of business, or a consolidated return for all.
PERCENTAGE TAX
THE TRANSITION.
A taxpayer who initially presumed that the gross sales/receipts and other non-operating income for the taxable year
will not exceed the three million pesos (P3,000,000) VAT threshold but has actually exceeded the same during the
taxable year, will be liable to VAT prospectively starting on the first day of the month following the month when the
threshold is breached. The taxpayer will pay the required percentage tax covering gross sales/ receipts and other non-
operating income from the beginning of the taxable year of commencement of business/practice of profession until
the time the taxpayer became liable to the VAT, without imposition of penalty it timely paid on the immediately
succeeding month/quarter. Thus, there may be an instance when a taxpayer has two business returns in a
month/quarter-ie., percentage and VAT returns.
A non-VAT taxpayer who volunteers to be a VAT taxpayer knowing that their gross receipts and other non-operating
income will exceed the VAT threshold within the taxable year, will automatically be subject to the graduated income
tax rates if the 8% income tax rate is initially selected. Any income tax under paid under the said flat 8% income tax
rate will be deducted from the income tax due under the graduated income tax.
Application
1. The Taxpayer began his business in 202a, He did
not register as VAT taxpayer because he anticipated
that his gross sales for the year shall not exceed P
3,000,000. He had a sales of 2,800,000 and cost of
sales of 1,400,000 in 202B. How much was the tax
on his business for 20A?
2. Before the year 2O2B, A Co. had a gross sales never exceeding
3,000,000. It was not VAT registered. From January 2 to March 10, 202B,
A Co. had the following data( sales and purchases figures have no VAT
component).
Sales 3,000,000
Purchases from VAT 1,500,000
And from March 11 to December 31, 202 b, It had the following data:
Sales 9,000,000
Purchases from VAT suppliers 4,500,000
How much were the business taxes paid
On January to March 10, 202B
On March 11 to December 31 202B
PERCENTAGE TAX

Chapter 9 Percentage Tax

Uploaded by

Copyright:

Available Formats

Chapter 9 Percentage Tax

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Chapter 9 Percentage Tax

Uploaded by

Copyright:

Available Formats

BUSINESS

THE THREE PERCENT

Under the Create

General rules on tax base and taxpayer of percentage taxes.

The taxpayer of the 1% percentage tax:

Gross sales 100,000

Illustration 2. Mr. B is a trader. His gross sales in the

None. He is not subject to the value added tax because he is

4. Mr. D had gross sales of P3,000,000 in 202a. In the first

For B, Mr. D was subject to the 1% percentage tax, or P2,000.

- Gross receipts of P3,000,000 is exactly the threshold amount. It

OPTIONAL VAT REGISTRATION.

Output taxes (P200,000 x 12%) 24,000

IF NOT, VAT REGISTERED

Which is the Business tax to pay:

Percentage tax of ( 3% of 40,000) 1,200

RETURN AND PAYMENT OF THE 3% PERCENTAGE TAX.

You might also like