Under the new tax law called Train, individuals earning less than P250,000 will be exempt from income tax. Those earning over P250,000 will pay income tax at rates from 20% to 35%. Train also increases taxes on cigarettes, oil, vehicles, and introduces new taxes on sugary drinks and cosmetic procedures while simplifying some tax compliance processes. It removes some itemized deductions but increases other deductions and thresholds. Estate and donor's taxes will now be a flat 6% rate while PCSO winnings over P10,000 will be taxed 20%.
Under the new tax law called Train, individuals earning less than P250,000 will be exempt from income tax. Those earning over P250,000 will pay income tax at rates from 20% to 35%. Train also increases taxes on cigarettes, oil, vehicles, and introduces new taxes on sugary drinks and cosmetic procedures while simplifying some tax compliance processes. It removes some itemized deductions but increases other deductions and thresholds. Estate and donor's taxes will now be a flat 6% rate while PCSO winnings over P10,000 will be taxed 20%.
Under the new tax law called Train, individuals earning less than P250,000 will be exempt from income tax. Those earning over P250,000 will pay income tax at rates from 20% to 35%. Train also increases taxes on cigarettes, oil, vehicles, and introduces new taxes on sugary drinks and cosmetic procedures while simplifying some tax compliance processes. It removes some itemized deductions but increases other deductions and thresholds. Estate and donor's taxes will now be a flat 6% rate while PCSO winnings over P10,000 will be taxed 20%.
Under the new tax law called Train, individuals earning less than P250,000 will be exempt from income tax. Those earning over P250,000 will pay income tax at rates from 20% to 35%. Train also increases taxes on cigarettes, oil, vehicles, and introduces new taxes on sugary drinks and cosmetic procedures while simplifying some tax compliance processes. It removes some itemized deductions but increases other deductions and thresholds. Estate and donor's taxes will now be a flat 6% rate while PCSO winnings over P10,000 will be taxed 20%.
Download as DOCX, PDF, TXT or read online from Scribd
Download as docx, pdf, or txt
You are on page 1/ 5
Personal Income Tax
Prior to the enactment of the new law, an individual employee or self-employed taxpayer would normally have to pay income tax at the rate of 5% to 32%, depending on one's bracket.
Under Train, an individual with a taxable income of P250,000 or less will now be exempt from income tax. Those with a taxable income of above P250,000 will be subject to the rate of 20% to 35% effective 2018, and 15% to 35% effective 2023. Moreover, the deductible 13th month pay and other benefits are now higher at P90,000 compared to P82,000 under the old law.
The table shows the comparison of the brackets and tax rates under the NIRC and Train:
Another innovation under Train is the option of self-employed individuals and/or professionals whose gross sales or receipts do not exceed P3,000,000 to avail of an 8% tax on gross sales or gross receipts in excess of P250,000, in lieu of the graduated income tax rates.
It is not being highlighted, however, that some items that were previously deducted to arrive at taxable income had been removed under Train. These are the personal exemption of P50,000, additional exemption of P25,000 per dependent child, and the premium for health and hospitalization insurance of P2,400 per year.
Estate Tax
The estate tax rate was also changed from 5% to 32% of the net estate to a flat rate of 6%. Additionally, the following deductions allowed in computing the net estate (to be subjected to estate tax) were increased:
Donor’s tax
The donor’s tax rate was also amended to a single rate of 6% regardless of the relationship between the donor and the donee. In the old law, the rates of donor’s tax were 2% to 15% if the donor and donee are related, and 30% if otherwise. However, the donation of real property is now subject to Documentary Stamp Tax of P15 for every P1,000. Value Added Tax
There are also amendments to VAT which lessen the burden of taxpayers:
1. Increase of VAT threshold from P1,919,500 to P3,000,000
2. Starting 2019, the sale of drugs and medicines for diabetes, high cholesterol, and hypertension will be exempt from VAT 3. Increase of VAT exemption for lease of a residential unit from P12,800 to P15,000 4. Association dues, membership fees, and other assessments and charges collected by homeowners associations and condominium corporations are now expressly VAT exempt
Increased taxes
Passive Income
Train imposes higher taxes on some passive incomes, including interest income from dollar and other foreign currency deposits.
There is also a significant increase in the tax on sale of shares of stocks.
Excise Tax
Train imposes higher excise taxes on cigarettes, manufactured oils (petroleum products), mineral products and automobiles.
Cigarettes Manufactured oils and other products
Mineral products
Automobiles
Hybrid vehicles shall be subject to 50% of the applicable excise tax rates. But purely electric vehicles and pick- ups shall be exempt from excise tax.
Documentary Stamp Tax
Unlike the House of Representatives’ version of Train wherein no change was introduced on the rates of Documentary Stamp Taxes (DST), Train increases the DST on almost all taxable documents. New taxes
Aside from increase and decrease of certain taxes, Train also introduces new taxes in the form of excise tax on sweetened beverages and non-essential services.
Sweetened Beverages
Non-essential services
Invasive cosmetic procedures directed solely towards improving, altering, or enhancing the patient’s appearance is now subject to excise tax of 5%.
PCSO winnings Previously, PCSO winnings, regardless of amount, were exempt from tax. Train subjects PCSO winnings to a 20% final withholding tax if the amount is more than P10,000. Simplified tax compliance
Apparently, the Philippine tax system is a very complicated one. This was certainly considered by Congress when it enacted the Train law. Consequently, Train introduces amendments which are geared towards simpler tax compliance. Some of these amendments are:
1. The Income Tax Returns shall not be more than 4 pages
2. The Tax Return for final and creditable withholding taxes shall be filed quarterly instead of monthly 3. With regard to estate tax, the following measures were adopted to simplify its computation and payment: o In lieu of actual funeral expenses (up to P200,000) and medical expenses (up to P500,000), Train increases the standard deduction (wherein no substantiation is required) from P1,000,000 to P5,000,000 o Notice of death is no longer required o CPA certification is now required only if the gross estate is above P5,000,000 (up from P2,000,000) o The deadline for filing of estate tax return is now one year from death (before, 6 months from death) o Bank deposits left by the decedent may be withdrawn by the heirs subject only to 6% withholding tax. Before a certification from the BIR that estate tax has been paid was required. 4. Beginning January 1, 2023, the filing of VAT Return and payment of tax shall be done quarterly instead of monthly 5. The BIR is required to act on application for VAT refund within 90 days. Otherwise, the BIR official, agent or employee will be criminally liable. 6. The Financial Statements of a taxpayer should be audited if the gross annual sales, earnings, receipts or output exceed P3,000,000 (up from P150,000)
