What are the changes on the Income Taxation in Philippines?

Details of Tax Reform Bill of the Duterte Administration (House Version)

Here are five (5) key highlights of the Duterte administration’s proposed Tax Reform bill.
1. Lowering of personal income taxes, except for high income earners
In the proposed tax reform package which will be used until 2019, those earning P250,000 per
year and below will be exempted from paying personal income taxes. According to the DOF,
this will benefit 83% of taxpayers who supposedly fall under this tax bracket.
Those earning between P250,000 and P400,000 per year will be charged an income tax rate
of 20% on the excess over P250,000.
Those earning between P400,000 and P800,000 annually will pay a fixed amount of P30,000
plus 25% of the excess over P400,000.
Those with incomes between P800,000 and P2 million per year will be charged a fixed amount
of P30,000 plus 30% on the excess over P800,000.
Those earning between P2 million and P5 million annually will pay a fixed amount of P490,000
plus 32% of the excess over P2 million.
Finally, the increased income tax rate will be felt by those making more than P5 million per year,
who will be charged a fixed amount of P1.45 million plus 35% of the excess over P5 million.
Beginning 2020, though, the rates will further fall as seen in the table below summarizing the
proposed income tax rates.
Proposed Income Tax Rates – Year 2020 onwards
BRACKET INCOME PER YEAR TAX RATE
1 Below P250,000 0%
2 P250,000 to P400,000 15% of the excess over
P250,000
3 P400,000 to P800,000 P22,500 + 20% of the excess
over P400,000
4 P800,000 to P2,000,000 P102,500 + 25% of the
excess over P800,000
5 P2,000,000 to P5,000,000 P402,000 + 30% of the
excess over P2,000,000
6 Over P5,000,000 P1,302,500 + 35% of the
excess over P5,000,000

2. Higher taxes on diesel, petroleum, and other oil products

As a consequence of lower income tax rates, the revenues collected by the government will
surely be severely affected. This is why the DOF is proposing that taxes be recovered from
other sources instead.
These other sources include diesel, oil, and other petroleum products which will be slapped a
so-called “highly progressive tax” which supposedly shifts the tax to higher-income segments of
the population.
According to the DOF, the justification is that the top 10%, or around two million households,
consume more than half of the fuel in the Philippines. The same study said that the top 1% of
Filipino families consume 13% of fuel.
Currently, there is no excise tax on diesel and, based on the proposal, the tax on diesel will
increase to P3 per liter in 2018, then to P5.00 on Jan. 1, 2019, and to P6.00 on Jan. 1, 2020.
In addition, kerosene, liquefied petroleum gas (LPG), and bunker oil will be imposed the same
excise tax of P3 per liter in 2018; P5.00 in 2019; P6.00 in 2020.
Other petroleum products such as gasoline, lubricating oils, and greases will also be charged
additional tax of P8.00 per liter or kilogram in 2018; P9.00 in 2019; and P10.00 in 2020.
3. Removal of certain VAT Exemptions
The DOF also proposes to remove certain exemptions on the 12% Value Added Tax (VAT) in
order to generate more revenues.
At present, the following entities are exempted from paying VAT but will start to pay the tax once
the bill is approved:

 lease of residential units

 low-cost and socialized housing
 power transmission
 domestic shipping importation
 boy scouts and girl scouts
 VAT exemptions found in special laws, except those covering senior citizens and people
with disability
The threshold for VAT exemptions was increased to P5 million and indexed to inflation every
three years.
For self-employed and professionals within the VAT threshold of P5 million, the substitute bill
will require them to pay an 8% tax on gross sales or receipts in lieu of the income and
percentage taxes.
The tax for those above the VAT threshold will be based on the 30% corporate income tax rate
with minimum tax.
4. New Excise Taxes on Cars and Automobiles
Cars and automobiles are already presently charged excise taxes but will be charged additional
taxes upon the approval of the tax reform bill.
Compared to the original tax proposal, the approved version in May 2017 includes a fifth price
segment, above P3.1 million, which was absent in the earlier proposals
The excise tax will be dependent on the importer’s or manufacturer’s net selling price of the car
and this will therefore increase the final selling prices of automobiles in the country.
The new excise taxes for automobiles are as follows.
Excise Tax on Cars and Automobiles
AUTOMOBILE’S NET 2018 2019
SELLING PRICE
Below P600,000 3% 4%
P600,000 to P1.1 million P18,000 + 30% in excess of P24,000 + 40% in excess of
P600,000 P600,000
P1.1 million to P2.1 million P168,000 + 50% in excess of P224,000 + 60% in excess of
P1.1 Million P1.1 Million
P2.1 million to P3.1 million P668,000 + 80% in excess of P824,000 + 100% in excess
P2.1 Million of P2.1 Million
Above P3.1 million P1.468 million + 90% in P1.824 million + 120% in
excess of P3.1 Million excess of 2.1 Million

5. Tax on Sugary Drinks

Drinks containing sugar such as powdered juice, energy drinks, soft drinks, bottled iced tea, and
other sugary beverages will be slapped with an additional tax of around P10.00 per liter.
As per the study of the Philippine Association of Store and Carinderia Owners (PASCO), a non-
profit organization of microretailers, prices of sugary beverages are expected to increase with
the proposed tax as follows:

 Soft drinks – from P16.00 to P25.00 per liter

 3-in-1 instant coffee mix – from P5.00 to P8.00 per sachet
 Ready-to-drink juice – from P20.00 to P26.00
 Powdered juice drink (including powdered iced tea) – from P9.00 to P20.00 per 1-liter
sachet
SOURCES: https://www.pinoymoneytalk.com/dof-tax-reform-package-may-2017/
Philippine Daily Inquirer, Rappler, GMA News, ABS-CBN News