business tax

• NIRT are collected by the Bureau of Internal Revenue, the government agency primarily in charge to assess and collect all taxes and charges imposed by the NIRC, other tax laws, and regulations.
• National Internal Revenue Taxes

  • Income Tax
  • Business Taxes
  • Value-added Tax
  • Other Percentage Tax
  • Excise Tax
  • Transfer Taxes (Estate Tax, Donor's Tax, Documentary Stamp Tax)
• Income Tax


  The tax imposed on EARNINGS derived from trade, profession, or occupation. The taxable amount is the taxpayer's net taxable income.
• Business Tax


  The tax imposed on the right or PRIVILEGE TO ENGAGE IN AN ONEROUS TRANSFER of goods or services in the normal conduct of business. The taxable amount is the gross sales or gross receipts.
• Transfer Tax


  The tax imposed on one's right to make CASUAL AND GRATUITOUS TRANSFER of one's property to another person.
• Documentary Stamp Tax


  The tax imposed on the right to enter into a transaction that is described in the document needed to be filed in any government office.
• Modes of Property Transfer

  • Onerous transfer (Normal course of business)
  • Casual transfer (Capital gains tax)
  • Gratuitous transfer (Transfer taxes)
• If Candy is not engaged in realty business and the property is transferred to Thea for a price of P6,000,000

  CGT on sale of capital asset, Documentary stamp tax
• If Candy is a VAT registered realtor and the property is transferred to Thea for a price of P6,000,000

  VAT for the sale in the course of business, Income tax on the gain arising from sale, Documentary stamp tax
• If, out of the generosity, Candy transfers the property to Thea as a gift

  Donor's tax for the gratuitous transfer, Documentary stamp tax
• If the property is transferred to Thea by the fact of Candy's death

  Estate tax for the transfer of inheritance, Documentary stamp tax
• Situs of Taxation


  For income tax, the prominent determinant factor is the protection afforded to the taxpayer by the taxing authority. For transfer tax, the prominent determinant factor is the location of the property. For business tax, only goods or rights to be consumed or exercised within are taxable.
• Consumption


  The acquisition or utilization of goods or services by any person, through purchase, exchange or other means. The utilization (not the goods or services) is subject to consumption tax.
• Types of Consumption


  • Resident Buyer from Resident Seller (Domestic Consumption)
  • Resident Buyer from Non-Resident Sellers (Imported, Domestic Consumption)
  • Non-Resident Buyer from Resident Seller (Export, Foreign Consumption)
  • Non-Resident Buyer from Non-Resident Seller (Foreign Consumption)
• Business


  A trade or commercial activity, pursued with a viewpoint of obtaining profit, and regularly engaged in. It is not a performance of a single disconnected act to obtain a gain, and may be pursued by any person within the lawful commerce of men.
• Transactions Subject to Business Tax

  • Commercial Activities (Sales of goods and services related to trade, profession or business not exempted by law from business tax, Sale of ordinary asset used in business, other than business inventory)
  • Services rendered by a nonresident foreign person (without regard to the rule of regularity)
• Casual Sales Not Subject to Business Tax, but Subject to Income Tax

  • Sale of house and/or lot classified as capital asset (not used in business)
  • Sale of personal car and other tangible assets not used in business
  • Employment services
• Classification of Business Taxes

  • Value-Added Tax (VAT)
  • Other Percentage Taxes (OPT)
  • Excise Taxes
• Value-added Tax on


  • Sale of good or properties
  • Sale of Services
  • Importation of goods
• Percentage Taxes


  • 3% on sale of goods, properties, or services
  • Common Carrier's Tax (Domestic & International)
  • Franchise Tax
  • Overseas Communication Tax
  • Tax on banks and non-bank financial intermediaries performing quasi-banking functions
  • Tax on other non-bank financial intermediaries
  • Tax on insurance companies
  • Tax on agents of foreign insurance companies
  • Amusement Tax
  • Tax on winnings
  • Stock Transaction Tax
• Excise Taxes


  • Sin Products (Distilled spirits, Wines, Fermented liquors, Tobacco products, Cigars, Cigarettes)
  • Non-essential goods (Automobiles, Jewelries)
  • Non-essential Services (Domestic procedures, surgeries, and body enhancement undertaken for aesthetic purposes)
  • Environmentally degrading products (Manufactured fuel oils (gasoline, diesel fuel, etc.), Minerals)
• Excise tax is an addition to either VAT or percentage tax, if the taxpayer produces certain excisable goods such as alcohol or cigarettes.
• VAT and percentage tax are mutually exclusive. Businesses which pay VAT do not pay the percentage tax.
• Businesses are required to be registered first before the commencement of its economic activities. Non-compliance to business registration renders the business illegal.
• Upon registration, the taxpayer will indicate in the BIR form whether his business is subject to VAT or OPT.
• If the products of the business are harmful or nonessential, in addition to VAT or OPT, the business will also be subject to Excise Tax.
• Mandatory VAT Registration


  • Any person who, in the course of trade or business, sells, barters or exchanges goods or properties or engages in the sale or exchange of services shall be liable to register if:
• Optional VAT Registration
• A non-VAT person who issues VAT Invoice/OR shall pay the following: 1. Other percentage taxes applicable to his transactions; 2. VAT due on the transaction under section106 or 108 of the Tax Code without the benefit of any input tax credit; and 3. 50% surcharge under sec. 24 (B) of the Tax Code.
• The taxpayer shall apply for the authority to print with the BIR before the printing of invoice and receipts. The invoices and receipts should be registered with the BIR.
• The cash register receipts must show

  • Proprietor's business name
  • Business address
  • VAT or non-VAT number
  • Amount and date of transaction
• In case of VAT invoice, the amount of tax shall be shown as a separate item in the invoice or receipt.
• A commercial invoice is to be issued for sale of goods while an official receipt is to be issued for the amount of cash received from sales or rendering of services.
• Types of Business Tax Returns

  • VAT Taxpayers: Monthly Tax Return (BIR Form 2550 M), Quarterly Tax Return (BIR Form 2550 Q)
  • Non-VAT Taxpayers: Quarterly Tax Return (BIR Form 2551 Q)
• VAT Taxpayers remit VAT monthly. On January 1, 2023, VAT payment will transition into a full quarterly payment under the TRAIN Law.
• The TRAIN Law requires percentage taxpayers to file quarterly tax returns.
• Taxability of Sales


  • VAT (0%, 12%)
  • Excise
  • OPT (3% General Rate)
  • Exempt
• Exempt Sales


  • Sale of Goods
  • Sale of Services
  • Others
• Exempt Goods


  • Sale of goods to senior citizens and PWD
  • Agricultural or marine products and inputs
  • Books, newspapers or magazines
  • Medicines prescribed for diabetes or hypertension
  • Passenger or cargo vessels and aircrafts
• Agricultural or marine food products are still considered in their original state even if they have undergone the simple process of preparation, preservation, or packaging for the market.