Chapter 1 INTRODUCTION TO BUSINESS TAXES (7) Automobiles

WHAT IS BUSINESS? (8) Yachts and other vessels intended for

pleasure
➢ "Business" or "in the course of trade or business"
means the regular conduct or pursuit of a (9) Manufactured fuel oils (e.g., gasoline, diesel
commercial or economic activity, including foll, bunker fuel oil, etc.):
transactions incidental thereto, by any person or
(10) Mineral products (e.g., gold, silver);
government entity.
(11) Non-essential goods (0.9., jewelry, perfumes
The requisites are:
(There is an remuneration in the law.), and
➢ The activity must be a commercial or economic
(12) Sweetened beverages
activity, and
➢ There must be regularity in the activity. A (b) On sellers of services of
commercial or economic activity is an activity
where the purpose is profit or income. Domestic procedures, surgeries, and body on
enhancements undertaken for aesthetic reasons entirely
Exception: by provision of law focused on altering and enhancing a patient's
appearance, improving aesthetic appeal, symmetry and
1. overseas communication tax – Percentage tax
proportion (but not reconstructive surgery or repair,
2. one time importation for personal use – VAT reconstruction and restoration of bodily functions due to
congenital disorders, trauma, burns, infectious, disease,
3. Winnings – percentage tax
and those intended to correct dysfunctional areas of the
4. Sale thru a local stock exchange of shares of stock of body)
domestic corporation- percentage tax

THE BUSINESS TAXES

THE PERCENTAGE TAXES
There are three major business taxes in the National
The percentage taxes are on sales of services
Internal Revenue Code, namely:
(enumerated in the National Internal Revenue Code). The
(a) Excise tax; taxes are the following:

(b) Percentage tax; and (a) 3% percentage tax on sale of goods, properties on
services;
(c) Value-added tax.
(b) Common carrier's tax on domestic carriers;

(c) Common carrier's tax on international carriers;

THE EXCISE TAX
(d) Franchise tax:
On whom is the excise tax imposed?
(e) Overseas communications tax;
(a) On manufacturers and importers of
(f) Tax on banks and non-bank financial intermediaries
(1) Distilled spirits (e.g., liquors); performing quasi-banking functions:
(2) Wines (e.g., grape wine); (g) Tax on other non-bank financial intermediaries;
(3) Fermented liquors (e.g., beer); (h) Tax on insurance companies
(4) Tobacco products (e.g., chewing tobacco); (I) Tax on agents of foreign insurance companies
(5) Cigars; (j) Amusement tax
(6) Cigarettes (g) Tax on winnings, and
(h) Stock transaction tax. OPTIONAL REGISTRATION

THE VALUE-ADDED TAX Any person who is not required to register as a

VAT taxpayer because the sales, barters or exchanges of
The value-added is on:
goods or properties, or the sales or exchanges of services,
(a) Sale of goods or properties: do not, or will not exceed three million pesos
(P3,000,000), may opt to register under the value-add ed
(b) Sale of services; tax system.
(c) Importation of goods. The threshold of P3,000,000. For purposes of
determining the threshold of three million pesos
(P3,000,000). the husband and wife will be considered as
Can there be, on one business: separate taxpayers. If taxpayer has two or more lines of
Excise tax with value-added tax? businesses that would otherwise be subject to the value-
added tax, the gross sales/receipts will be combined for
Excise tax with the 3% percentage tax? purposes of determining if the threshold was exceeded.
Excise tax with some other percentage tax? CANCELLATION OF VAT REGISTRATION
Value-added tax with percentage tax? The registration of any person as a value-added taxpayer
may be cancelled if:

a) Written application and can demonstrate to the

REGISTRATION OF BUSINESS
Commissioner's satisfaction that his gross sales
Every taxpayer subject to the value-added tax or receipts for the following twelve (12) months
must register with the Bureau of Internal Revenue as a will not exceed three million pesos (P3,000,000);
VAT taxpayer and pay an annual registration fee of for or
every separate and distinct establishment, including b) He has ceased to carry on his trade or business
facility types (sales outlets, places of production, and does not expect to recommence any trade or
warehouses and storage places) where the business is business within the next twelve (12) months.
conducted.
When will the cancellation take effect?
Every taxpayer not subject to the value-added
Answer: The first day of the following month.
tax but subject to the excise tax or percentage tax must
register with the Bureau of Internal Revenue and pay an REGISTRATION OF INVOICES AND RECEIPTS.
annual registration fee for every separate and distinct
establishment where the business is conducted. A taxpayer who is in business will have his invoices and
receipts registered with the Bureau of Internal Revenue.
If a VAT taxpayer, such invoices and receipts will clearly
show that he is a VAT taxpayer
MANDATORY FOR VALUE ADDED REGISTRATION TAX
ELECTRONIC RECEIPTS OR SALES OR COMMERCIAL
Any person who, in the course of trade or business, sells,
INVOICES.
barters or exchanges goods or properties, or engages in
the sale or exchange of services will be liable to register What is the provision of the TRAIN LAW on this?
for value-added tax if:
Within five (5) years from the effectivity of that law and
(a) Gross sales or receipts within the year exceeded three upon the establishment of a system capable of storing
million pesos (P3,000,000); and processing the required data, the Bureau of Internal
Revenue will require:
(b) There are reasonable grounds to believe that his gross
sales or receipts for the next twelve (12) months will A. Taxpayers engaged in e-commerce, and
exceed three million (P3.000,000), pesos
B. Taxpayers under the Large Taxpayers Service.