CREATE: Reduction of Percentage Tax to 1%

By: Pamela Ruth G. Calog, CPA

4 days ago

On March 26, 2021, Republic Act. No. 11534, or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act was signed to amend the Tax Code and serve as a Coronavirus disease (COVID-19) relief measure.


Albeit temporary, one of the key changes was the reduction of percentage tax for Non-VAT taxpayers from 3% to 1%.


Percentage tax is a business tax imposed on persons, entities, or transactions specified under Sections 116 to 127 of the Tax Code, as amended, and as required under special laws. Section 116 is hereby further amended by CREATE to read as follows:


“Any person whose sales or receipts are exempt under Section 109 (BB) of this Code from the payment of value added tax and who is not a VAT-registered person shall pay a tax equivalent to three percent (3%) of his gross quarterly sales or receipts: Provided, That cooperatives, shall be exempt from the three percent (3%) gross receipts tax herein imposed.


PROVIDED, FURTHER, THAT EFFECTIVE JULY 1, 2020 UNTIL JUNE 30, 2023, THE BATE SHALL BE ONE PERCENT (1%).


Notably, the effectivity of the CREATE percentage tax rate of 1% shall retroact from July 1, 2020. Hence, it will affect returns already submitted such as:


  1. BIR Form No. 2551M - Monthly Percentage Tax Return

  2. BIR Form No. 2551Q - Quarterly Percentage Tax Return


    For comments, you may also please send email at info(@)cbos.com.ph

Frequently Asked Questions

  • No, there are no annual returns for persons subject to Percentage Tax. Hence, there is no requirement to do so.

  • How about those persons subject to Percentage Tax but not the 3% rate?

    Only persons (1) whose sales or receipts are exempt from VAT and (2) not VAT-registered will benefit the temporary rate of 1%. All others are not amended.

  • Who are liable to register as VAT taxpayers?

    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:


    1. His gross sales or receipts for the past twelve (12) months, other than those that are exempt under Section 109 (A) to (U), have exceeded Three Million Pesos (P3,000,000.00): or


    1. There are reasonable grounds to believe that his gross sales or receipts for the next twelve (12) months, other than those that are exempt under Section 109 (A) to (U), will exceed Three Million Pesos (P3,000,000.00).

Related Articles

RR No. 21-2020: Implementation of the VAPP

Issued on September 4, 2020, Revenue Regulations No. 21-2020 prescribes the policies, procedures and guidelines in the implementation of the Voluntary Assessment and Payment Program (VAPP) for the collection of additional tax revenues, which could otherwise be collected through audit and enforcement effort for Taxable Year 2018.

By: Pamela Ruth G. Calog, CPA

4 days ago

Filing Guidelines: Percentage Tax

Percentage tax is a business tax imposed on persons, entities, or transactions specified under Sections 116 to 127 of the National Internal Revenue Code of 1997 (also known as Tax Code), as amended, and as required under special laws.

By: Pamela Ruth G. Calog, CPA

4 days ago

COVID: Additional VAT Exemptions

The Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law which was signed last March 26, 2021 offers temporarily additional VAT Exemptions to serve as a Coronavirus disease (COVID-19) relief measure.

By: Pamela Ruth G. Calog, CPA

4 days ago

Subscribe for FREE to our Bookkeeping & Taxation services.

Enjoy 2 filing months for free

Contact Us

We are ONLINE Bookkeepers and Accountant.

Now is the time to move from traditional bookkeepers to ONLINE bookkeepers.

416-1296 / 0933-358-3949

info@cbos.com.ph

Monday-Friday 9am-5pm

3rd Floor Unit 3A Core 1, CAIAA Center Vibo Place N. Escario St. Cebu City, Cebu, 6000