Business tax is the tax you pay for the privilege of doing business, computed on your receipts rather than your profit. For a lending company, it is one of the more confusing taxes because lenders sit in a special category. Get the classification right and the rate follows naturally; get it wrong and you either overpay or invite a BIR assessment.
Are you a financial intermediary?
The Tax Code treats non-bank financial intermediaries (NBFIs) — a category that includes lending and financing companies — differently from ordinary service businesses. Instead of the general 3% percentage tax or 12% VAT, their lending income is subject to a Gross Receipts Tax under the sections governing NBFIs. Because a licensed lending company's core activity is lending money and earning interest, it generally falls into this NBFI treatment.
| Situation | Tax | Rate |
|---|---|---|
| Interest/commission/discount, remaining maturity ≤ 5 yrs | Gross Receipts Tax | 5% |
| Interest/commission/discount, remaining maturity > 5 yrs | Gross Receipts Tax | 1% |
| Small non-VAT taxpayer under Sec. 116 (≤ ₱3M) | Percentage Tax | 3% |
| Receipts exceed the VAT threshold and VAT-registered | VAT | 12% |
How the GRT maturity rule works
The split between 5% and 1% turns on the remaining maturity of the instrument. Interest earned on short-term loans — the bulk of most lending books — is taxed at 5%. Interest on longer instruments with a remaining maturity above five years is taxed at just 1%. Because most micro and consumer loans run under a year, the 5% rate is what most lenders remit on the majority of their interest income.
Note the base: business tax is on gross receipts, not net income. You pay it on interest and fees collected, before deducting your expenses. That is a different tax from income tax, and you owe both.
The ₱3M VAT threshold and the 3% option
There is a simpler regime for the smallest players. A taxpayer who is not VAT-registered and whose gross annual receipts do not exceed ₱3,000,000 may fall under the general 3% percentage tax (Section 116). Once your receipts cross ₱3M, you are generally required to register for VAT (12%). For lenders specifically classified as NBFIs, the GRT treatment above usually governs regardless — which is exactly why you should confirm your classification with your RDO or accountant rather than assuming the 3% default.
Filing BIR Form 2551Q
Whether you remit GRT or the 3% percentage tax, the return is BIR Form 2551Q (Quarterly Percentage Tax Return), filed quarterly — generally within 25 days after the close of each taxable quarter. You declare your gross receipts for the quarter, apply the correct rate using the matching alphanumeric tax code, and pay. Keeping a clean record of interest and fee collections per quarter is what makes this a lookup rather than a reconstruction.
A worked quarterly computation
Put the rule to work. Suppose in a quarter you collected ₱400,000 of interest on short-term loans (remaining maturity under five years) and ₱50,000 of interest on a longer instrument maturing in seven years. As a non-bank financial intermediary, you apply 5% GRT to the short-term interest — ₱400,000 × 5% = ₱20,000 — and 1% GRT to the long-term interest — ₱50,000 × 1% = ₱500. Your total Gross Receipts Tax for the quarter is ₱20,500, declared on Form 2551Q. Notice that the seven-year loan, though it earned real interest, contributes very little business tax because of the maturity split.
If instead you were a small non-VAT taxpayer under the 3% percentage tax, the same ₱450,000 of receipts would carry ₱450,000 × 3% = ₱13,500. This is exactly why your registered classification matters so much: the identical income can produce a different business tax depending on the tax type on your Certificate of Registration.
Don't confuse business tax with income tax
A frequent and costly error is treating the 2551Q as if it were your only tax. It is not. Gross Receipts Tax (or percentage tax) is a business tax on receipts; income tax is a separate tax on your net profit, filed on the 1702/1701 series. You owe both, on different bases and different schedules. Budget for the business tax every quarter and the income tax annually, and never let one substitute for the other.
LendKoPH tracks your interest and fee collections as they happen, so your quarterly gross receipts figure — and the right rate for it — are ready when 2551Q comes due. Because classification is nuanced, always confirm your exact business-tax type with your accountant or RDO against your BIR Certificate of Registration.
Frequently asked questions
What business tax does a lending company pay?
Usually Gross Receipts Tax as a non-bank financial intermediary — 5% on interest/commissions/discounts from loans with a remaining maturity of 5 years or less, and 1% if more than 5 years. Small non-VAT taxpayers under ₱3M may instead pay the 3% percentage tax.
Is GRT computed on profit or receipts?
On gross receipts — the interest and fees you actually collect — before deducting expenses. It is separate from income tax, which is on net profit.
Which form do I file?
BIR Form 2551Q, the Quarterly Percentage Tax Return, generally within 25 days after the close of each quarter.
Do I pay both business tax and income tax?
Yes. Gross Receipts Tax or percentage tax is a business tax on receipts (quarterly), while income tax is a separate tax on net profit (quarterly and annual). You owe both.
