Stockbroker Engaged in a Distinct and Separate Business, Subject to Distinct and Separate Fixed and Percentage Taxes

March 8, 1972 BIR RULING NO. 007-72 Stockbroker engaged in a distinct and separate business, subject to distinct and separate fixed and percentage taxes . Gentlemen: This refers to your letter dated October 30, 1971 stating as follows: "1. According to Section 195-A of the National Internal Revenue Code, dealers in securities are subject to 3% tax on gross income. a) As contemplated by this section, does this mean that the 3% tax is based on the gross selling price of securities or on selling price minus purchase price equals gross income? b) Are brokers maintaining a trading account engaged in the purchase and sale of securities liable to pay the aforesaid dealer's tax? "2. A corporation is engaged in poultry and livestock business with authorized capital stock of one million pesos (P1,000,000.00) and paid-up capital stock of two hundred thousand pesos (P200,000.00) a) What are the fixed and percentage taxes payable? b) If the head office is in Manila and the farm is in the province, where will the corporation file its income tax return? Will it make a difference if the head office is engaged in the selling activities or if both the head office and farm are engaged in the same activities?" In reply, I have the honor to inform you as follows: 1. (a) For purposes of the percentage tax on dealers in securities prescribed in Section 195-A of the Tax Code, as amended by Republic Act No. 6110, the basis of the tax is the gross income which means selling price less the actual cost or purchase price (Sec. 43, Revenue Regulations No. 2.) (b) In addition to the payment of the stockholder's fixed and percentage taxes as provided in Sections 182 (A) (3) (bb) and 195, respectively, of the Tax Code, a broker engaged in the purchase and sale of securities is also subject to the fixed tax of P150.00 imposed in Section 182 (A) (3) (z) and to the dealers in securities percentage tax of 3% prescribed in Section 195-A both of the Tax Code, as amended by Republic Act No. 6110. This is for the reason that for engaging in the sale of securities, the stockbroker is engaged in a distinct and separate business subject to separate and distinct fixed and percentage taxes. 2. (a) A person engaged in the business of raising poultry and swine is exempt from business tax, pursuant to Section 188(b) of the Tax Code, (BIR Ruling dated July 31, 1956; Int. Rev. Bull. Vol. 1 No. 7) Accordingly, the corporation for engaging in poultry and liverstock business is not subject to fixed and percentage taxes. It is however, subject to the payment of income and residence taxes. (b) Pursuant to Section 46(c) of the Tax Code, the income tax return shall be made to the Commissioner of Internal Revenue or Collection agent in which is located the principal office of the corporation where its books of accounts and other data from which the return is prepared are kept. Hence, since the principal office of the corporation is located in Manila, it should file its income tax return in said city. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue