From question How to replace a character for a newline in Vim?. You have to use \\r when replacing text for a newline, like this
:%s/%/\\r/g
From vim docs on patterns:
\r matches \n matches an end-of-line - When matching in a string instead of buffer text a literal newline character is matched.
\r matches
\r
\n matches an end-of-line - When matching in a string instead of buffer text a literal newline character is matched.
\n