TRAIN Law

(Tax Reform for Acceleration & Inclusion)

Speaker:

DR. JASON R. RADAM, CPA, MICB

What is TAX?
Mandatory financial charge levied upon a taxpayer by the
taxing authority in order to fund various public expenditures
What is TRAIN?
RA 10963
 ?
? ? ? ? ?
 What do you think?

Happy Sad Angry Surprised Confused

The Vision of TRAIN
• By 2020
The Vision of TRAIN
• By 2040
DOF Proposed Tax Reform Packages

•Reduction of tax rates • Reduction of tax rate

•Shift to simplified PIT • Simplification of tax
system provisions
•Expansion of VAT base • Limit on VAT zero-rating to
•Excise tax on sugary, direct exporters
automobiles and • Rationalization of fiscal
petroleum products Personal Corporate incentives
Income Income
Tax Reform for
• Estate tax amnesty
Tax (PIT) Tax (CIT)
• VAT refund in cash

Acceleration and Inclusion Act

• General tax amnesty
• Amendments to bank
secrecy law
(TRAIN)
Property
Capital
Income
Tax
Tax •Harmonization of capital
• Lower estate and donor’s tax
rates income tax rates on deposits
• Lower rate of transaction and investment, dividends,
taxes on land equity and other passive
income to 10%
• Update Schedule of Zonal
Values •Increase stock transaction tax
from 0.5% to 1%
How much will the TRAIN generate?

P894B P250B P308B

VAT

P21B P565B P215B

PCSO
P3B P81B P279B
Source: http://www.manilatimes.net/train-1a-1b-income-seen-hitting-p969-2b/373185/
Simplified filing of tax returns - INDIVIDUALS
Simplified filing of tax returns for individuals

Filing of ITR - taxable income ≤ P250,000

Except - engaged in business or practice of profession

4-page ITR

Personal Profile and Information

Total Gross Sales, Receipts or Income from Compensation

Page
Page 11 to
to 12
4 Allowable Deductions under the Code

Taxable Income

Income Tax Due and Payable

Deadlines - INDIVIDUALS
Simplified filing of tax returns for individuals
ITR Filing

Installment Payment of Tax Due

Simplified filing of tax returns - CORPORATIONS
Simplified filing of tax returns for individuals

4-page ITR

Corporate Profile and Information

Total Gross Sales, Receipts or Income from Services Rendered

Allowable Deductions
Page 1 to 8
4

Taxable Income

Income Tax Due and Payable

Personal Income Tax Rates
Personal Income Tax Rates
Old
Taxable Income 2018 – 2022 2023 Onwards
Rate (Effective*)
Not over P10,000 5% (2.50%)
Not over P30,000 10% (6.67%)
Not over P70,000 15% (10.24%) EXEMPT EXEMPT
Not over P140,000 20% (14.11%)
Not over P250,000 25% (18.04%)
Not over P400,000 20% (3.75%) 15% (2.81%)
30% (22.50%)
Not over P500,000
25% (11.88%) 20% (9.22%)
Not over P800,000
Not over P2,000,000 30% (20.38%) 25% (16.47%)
32% (25% up)
Not over P8,000,000 32% (27.32%) 30% (23.83%)
Over P8,000,000 35% (30.13% up) 35% (27.53% up)
Breakeven – P11.833M (2018 – 2022) and P18.75M (2023 onwards)
*Effective tax rate computed based on the average tax due per income bracket
New income tax brackets
Personal Income Tax Rates - Comparison

Personal Income Tax

Revised Withholding Tax
Personal Income Tax Rates Tables
SEMI-MONTHLY
10,417 and
10,417 16,667 33,333 83,333 333,333
below

25% + 30% + 32% + 35% +

0 20%
1,250 5,416.67 20,416.67 100,416.67

MONTHLY
20,833 and
20,833 33,333 66,667 166,667 666,667
below

25% + 30% + 32% + 35% +

0 20%
2,500 10,833.33 40,833.33 200,833.33

RMC No. 105-2017 (Effective Jan. 1, 2018 to Dec. 31, 2022)

Personal Income Tax Rates

P11,264/M
(P512/day MWE)
Personal Income Tax Rates

P20,000/M

Additional Take Home Pay* Additional Take Home Pay*

P1,042/M P1,042/M
P12,500/Y P12,500/Y

*Computed using maximum availment of personal and additional exemptions (under old rules) and tax-exempt bonuses
(under old and new rules)
Personal Income Tax Rates

P60,000/M

Additional Take Home Pay* Additional Take Home Pay*

P3,117/M P5,075/M
P37,400/Y P60,900/Y

*Computed using maximum availment of personal and additional exemptions (under old rules) and tax-exempt bonuses
(under old and new rules)
Personal Income Tax Rates

P400,000/M

Additional Take Home Pay* Additional Take Home Pay*

P5,797/M P18,272/M
P69,560/Y P219,260/Y

*Computed using maximum availment of personal and additional exemptions (under old rules) and tax-exempt bonuses
(under old and new rules)
Personal Income Tax Rates

P850,000/M

Additional Income Tax* Additional Take Home Pay*

P1,603/M P15,688/M
P19,240/Y P188,260/Y

*Computed using maximum availment of personal and additional exemptions (under old rules) and tax-exempt bonuses
(under old and new rules)
Personal Income Tax Rates

P1.4million/M

Additional Income Tax* Additional Income Tax*

P19,478/M P2,187M
P233,740/Y P26,240/Y

*Computed using maximum availment of personal and additional exemptions (under old rules) and tax-exempt bonuses
(under old and new rules)
Personal Income Tax Exemption

Additional
Personal
Exemption
Exemption
P25,000/
P50,000
dependent

Premium on Tax exempt 13th

health/ month pay and
hospitalization other P90,000
benefits
insurance
P82,000
P2,400
Self-employed and Professionals
Personal Income Tax Rates

Gross sales/
receipts ≤ P3M
(Optional)

Graduated income tax

8% income tax on
gross sales/receipts rates
(20% - 35%)

3% percentage tax
Other Individual
Final Tax
Tax Rates

FBT
Employees of RHQ, EXCEPT:
ROHQ, OBU and Registering with
Petroleum Service SEC after
Contractors Jan. 1, 2018
Creditable Withholding Tax
Personal Income Tax Rates Rates

Jan. 1, 2019
Filing – Withholding Taxes
Personal Income Tax Rates

FINAL and CREDITABLE

JAN FEB MAR APR

Q1 Q2
MAY JUN JUL AUG
SEP OCT NOV DEC
Q3 Q4
Passive
Final Tax
Income

Citizens

Resident Aliens
FCDU
Deposit Domestic Corporations

Resident Foreign Corporations

Passive
Final Tax
Income

Citizens

Resident Aliens
CGT Nonresident Aliens

Domestic Corporations

Resident Foreign Corporations

Non-Resident Foreign Corporations

Percentage
Final Tax
Tax

STT
QUICK CHECK

How much is the tax-

1 exempt income?
A. ≤ P250,000
B. ≤ P340,000
C. ≤ P350,000
QUICK CHECK

Answer
1
A. ≤ P250,000
B. ≤ P340,000
C. ≤ P350,000
Estate Tax
Final Tax

Old Rules New Rules

5% - 20% 6%
Deduction for
expenses, losses and
indebtedness

Medical expenses
Estate Tax
Final Tax

Old Rules New Rules

Standard deduction
P1M P5M

Family home (max)

P10M
P1M
Estate Tax
Final Tax
- Filing

Old Rules New Rules

Certification of CPA –
gross value > P2M P5M

Deadline - 6 months
from death of decedent 1 year
Donor’s
Final Tax
Tax Rate

Old Rules New Rules

2% - 15% 6%

30% - strangers 6%
Donor’s
Final Tax
Tax

Old Rules New Rules

EXCEPT:
Made in the ordinary
Transfer for insufficient course of business
consideration (bona fide, at arm’s
length, and free from
any donative intent)
QUICK CHECK
True or False:
2 S1: The donor’s and estate tax
rate is the same.
S2: Donor’s tax rate is 6%
regardless if stranger or not.
A. True, False C. False, True
B. True, True D. False, False
QUICK CHECK

2 Answer

B. True, True
VAT Zero-Rating on Export Sale of Goods and
Services
Sale of goods to non-resident buyer for delivery to resident local
export-oriented enterprise

Sale of goods and services to export-oriented enterprise

(70% export sales)

Export sales under EO 226

Processing, manufacturing, or repacking goods for persons doing

business outside the Philippines which goods are subsequently
exported

* Upon establishment of Enhanced VAT Refund System and if all pending VAT refund claims
as of Dec. 31, 2017 shall be fully paid in cash by Dec. 31, 2019
VAT Zero-Rating on Export Sale of Goods and
Services

Export sales under EO 226 (Art. 23)

Sales to bonded manufacturing warehouses of export-

oriented manufacturers

Sales to export processing zones

Sales to registered export traders operating bonded trading

warehouses supplying raw materials used in the manufacture
of export products

Sales to foreign military bases, diplomatic missions and

other agencies and/or instrumentalities granted tax
immunities
VAT Zero-Rating on Export Sale of Goods and
Services

Old Rules New Rules

Foreign currency
denominated sale

Sale of gold to BSP VAT-exempt

VAT Exemption
Final Tax

Old Rules New Rules

2018 - 2020 2021 onwards
Sale of residential lot
≤ P1,919,500 R
E
Sale of house and lot, and other T
residential dwellings A
≤ P3,199,200 I P2M
N
Sale of low-cost and socialized
E Only socialized
housing D housing
VAT Exemption
Final Tax

Old Rules New Rules

Lease of residential
units P15,000/month
P12,800/month

VAT threshold
P3M
≤ P1,919,500
Additional VAT-Exempt Transactions

Tax-Free
Exchange

Diabetes
High cholesterol
Hypertension
Jan. 1, 2019 Dues
Other VAT
Final Tax
Amendments

Old Rules New Rules

Amortization of input Allowed only until

tax on capital goods December 31, 2021

BIR - 90 days
Timing for claim for refund –
30 days to appeal to
120 days
CTA on deemed
denial
Other VAT
Final Tax
Amendments

Old Rules New Rules

Monthly filing and Quarterly effective

payment of VAT January 1, 2023

Final withholding VAT Shift to creditable

on sales to government system effective
January 1, 2021
VAT - comparison

Brunei – 0%

Myanmar – 5%

Malaysia – 6%

Philippines Singapore – 7%

12% Thailand – 7%

Cambodia – 10%

Indonesia – 10%

Laos - 10%

Vietnam - 10%
Additional
Final Tax
VATable Transactions
Excise Tax on Cigars and Cigarettes
Excise Tax Rates on Petroleum Products

Jan 2022 – Dec

2023

Jan 2020 – Dec

2021

July 2018 – Dec

2019

Jan – June 2018

vs. P31.20 (old

rules)
4% increase annually
Excise Tax on Cigars and Cigarettes
Excise Tax Rates on Petroleum Products
Cigarettes Average Consumption

2012
2013
2014
108.7B
105.5B
102.3B

Source: http://business.inquirer.net/199962/sin-taxes-blow-out-smoking-in-ph-but-gives-life-to-illicit-cigarette-trade
Excise Tax on Cigars and Cigarettes
Excise Tax Rates on Petroleum Products
Estimated revenues based on ave. consumption – 102 billion sticks

2019 2021 2023

P179B P191B P204B

P172B P191B P204B

2018 2020 2022

Excise Tax on Petroleum Products
Excise Tax Rates on Petroleum Products
Particulars Old 2018 2019 2020
Lubricating oils and greases P4.50 P8.00 P9.00 P10.00
Processed gas P0.05 P8.00 P9.00 P10.00
Waxes and petrolatum P3.50 P8.00 P9.00 P10.00
Denatured alcohol P0.05 P8.00 P9.00 P10.00
Naphtha regular gasoline,
P4.35 P7.00 P9.00 P10.00
pyrolysis gasoline
Leaded premium gasoline P5.35 - - -
Unleaded premium gasoline P4.35 P7.00 P9.00 P10.00
Aviation turbo jet fuel, Aviation
P3.67 P4.00 P4.00 P4.00
gas
Asphalts P0.56 P8.00 P9.00 P10.00
Kerosene P3.00 P4.00 P5.00
Diesel fuel oil P2.50 P4.50 P6.00
Liquefied petroleum gas Nil P1.00 P2.00 P3.00
Bunker fuel oil P2.50 P4.50 P6.00
Petroleum coke P2.50 P4.50 P6.00
*Excise tax rates per liter or per kilogram, as applicable
Excise Tax on Petroleum Products

P0.17 each*

P2.50
Excise Tax/L on
diesel fuel oil

Ave engine fuel consumption - 6km/L

Ave passengers – 10/trip

*Estimated excise tax/L/4kms/passenger

Excise Tax on Petroleum Products

P0.96*

P2.65 ↑
Excise Tax/L on
unleaded premium
gasoline P2.12**

Estimated excise tax/L/4kms based on average car engine fuel consumption

*11km/liter
**5km/liter
Excise Tax on Automobiles

Net Manufacturer’s Price/

Old Eff. Tax Rate
Importer’s Selling Price
Not over P600,000 2% 2%
Not over P1.1M 20% + P12,000 2 – 10.18%
Not over P2.1M 40% + P112,000 10.19 – 24.38%
Over P2.1M 60% + P512,000 24.39% up

Net Manufacturer’s Price/

New
Importer’s Selling Price
Not over P600,000 4%
Not over P1M 10%
Not over P4M 20%
Over P4M 50%
Excise Tax on Automobiles

Manufacturer's Selling Price - P600,000

Excise Tax on Automobiles

Manufacturer's Selling Price – P1.1million

Excise Tax on Automobiles

P328,000 P328,000
(20%) (20%)

Manufacturer's Selling Price – P1.64million

Excise Tax on Automobiles

Manufacturer's Selling Price – P2.1million

Excise Tax on Automobiles

Manufacturer's Selling Price – P3million

Excise Tax on Automobiles

Manufacturer's Selling Price – P4million

Excise Tax on Automobiles

Manufacturer's Selling Price – P5million

Excise Tax on Automobiles

Manufacturer's Selling Price – P6million

Excise Tax on Automobiles

P3.74million P3.74million
(50%) (50%)

Manufacturer's Selling Price – P7.48million

Excise Tax on Automobiles

Manufacturer's Selling Price – P8million

Excise Tax on Non-essential services

5%

• Related to:
• Congenital or developmental defect or
abnormality
• Personal injury resulting from an accident
Exempt or trauma
• Disfiguring disease, tumor, virus or
infection
Excise Tax on Sweetened Beverages

2L Soda
P6.00/liter
caloric sweeteners and non- SP @ P62
caloric sweeteners*

P12/liter
SP @ P74
high fructose corn syrup

SP @ P50

*Coconut sap and purely steviol glycosides - Exempt

Excise Tax on Sweetened Beverages

EXCLUSIONS

100%

100%

3 in 1 Meal replacement
COFFEE and medically
indicated beverages
 ExciseTax
Excise Taxonon Mineral
Mineral Products
Products

2% 4%
2018 – P50
2019 – P100
2020 up – P150

P10/MT

Indigenous petroleum
3% 6%
 Impact
Excise Taxon
onPower Prices
Mineral Products

Excise Tax

Additional 12% VAT –

NGCP transmission
charge
QUICK CHECK
Taxable or not?
3

SODA
3 in 1
COFFEE
 Documentary
Documentary Stamp
Stamp TaxTax

Original issuance of
shares Transfer of shares

Debt instruments Leases

2x except on insurance, loans, sale of real property, among others
Donation subject to DST on conveyance of real property
Issuance of Receipts and Invoices

P100

Mandatory –
P25

Large Taxpayers

Electronic receipts
and invoices
E-commerce (within 5 years) Exporters
Interconnectivity
(Electronic Sales Reporting System)

Electronically report sales data to the BIR through the use

of electronic POS system

Large Taxpayers

eSales Reporting
System
(within 5 years)

Exporters
Penalties (eReporting)

• 1/10 of 1% of the annual

net income

Failure to transmit sales

data

• Permanent closure
Penalties (eReporting)

▪ Penalty P500,000 - P10M

▪ Imprisonment 2 - 4 years
Use/possession of
automated sales
suppression devices ▪ Maximum penalty to be
imposed (deemed as
Economic Sabotage)
Other Penalties

Interest

*Deficiency and delinquency interest

Other Penalties

• P1,000 – P50,000
Failure or
refusal to issue • 2 – 4 years
receipts or
invoices
• P500,000 – P10million

• 6 – 10 years
Attempt to
evade or defeat
tax • P30,000 – P100,000

• 2 – 4 years
What will the Tax
Reform fund?
 What will the tax reform fund?
Build, Build, Build Education Social Services

Strengthening the Achieving a more Providing better

country’s infrastructure conducive learning healthcare services and
backbone environment facilities

Proposed Tax Reform

Package
Education

Source: Department of Finance

Social Services

Source: Department of Finance

Infrastructure

Source: Department of Finance

Infrastructure

Source: Department of Finance

Infrastructure

“For every $1 billion spent on

infrastructure, 200,000 direct
jobs are created.”
International Labour Organization
estimate for developing countries

“A sustained increase in public

infrastructure spending to 5% of GDP would
add a total of 5-6% to GDP after 15 years.”
International Monetary Fund
Infrastructure
Infrastructure

Source: Philippine Institute for Development Studies - 2017 National Expenditure Program
Infrastructure

Source: http://www.build.gov.ph
Infrastructure

Source: http://www.build.gov.ph
Questions and Answers