CABRIA CPA REVIEW CENTER

INTRODUCTION TO BUSINESS TAXATION Tel. Nos. (043) 980-6659

JIEXEL L. MANONGSONG
Business – is the regular conduct of commercial or economic activity with the primary motive of profit
or livelihood. The secondary concerns of business may fall under the categories of social responsibility,
environmental safety or promotion, and safeguarding of public welfare and interest.
Requisites of a Business Activity
1. It is intended for profit – the primary motive of an activity is to maximize profit or the interest
of the shareholders.
2. It is regularly undertaken – the activity must possess the quality of continuing and progressing
economic act and not a mere single disconnected act.
3. It is financial in character – the activity involves the exchange of values or transactions that
are financial in nature.
4. It is legally undertaken – a business activity is considered legal when it is not against the law,
public order, and public safety.
Exceptions:
1. Primarily intended for profit except:
a. The importation of goods for personal use
b. An overseas communication made that is either related or non-related to business –
10% percentage tax except exempt*
2. Regularly undertaken
a. The single service rendered by a Non-Resident Alien in the Philippines (Sec. 105, NIRC,
as amended)
b. The sale of house and lot and other forms of residence or dwelling valued over Php 3,
199, 200
c. The single winning in horse race or jai-alai
d. The only sale of shares through local stock exchange by one who is not a security dealer
Cases
1. Calix, a resident citizen, is engaged in accounting services. The gross receipts from his services
rendered within the year amounted to Php 500, 000. Is Calix engaged in a business activity?
2. Angel, a NRA - ETB, rendered one-time advisory service during the current taxable year to the
ALNP Company, a Philippine domestic corporation, for a consultancy fee of Php 1, 000, 000. Is
she engaged in a business activity?
3. Chris, a resident citizen, regularly sells balut along the road. During the current year, his gross
sales amounted to Php 100, 000. Is the activity of Chris subject to business tax?

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CABRIA CPA REVIEW CENTER
4. Jovie bought household appliances and kitchen utensils from USA amounting to Php 900, 000
for her personal use. Is she engaged in business or trade? Is the activity subject to business
tax?
5. Fatimah called Nello who is working in Vietnam. They talked about family matters and she was
billed by Smart Telcoms Php 2, 500. Is Fatimah engaged in business? Is the activity subject to
business tax?

Concept and Nature of Business Taxes

• ONEROUS transfer – there is monetary consideration involved in the transfer of goods or
services between the owner and the buyer.
• GRATUITOUS transfer – transfer of goods or services without consideration (free)
Kinds of Business Taxes
• Value Added Tax (VAT)
• Percentage Tax (Other Percentage Tax)
• Excise Tax

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