Here are 10 TRAIN tax reform provisions that you probably do not know

— but ought to know.

1. Deadline for filing of annual Income Tax

Return (ITR)
The Tax Reform for Acceleration and Inclusion (TRAIN) law or Republic
Act (RA) No. 10963 sets a new deadline for the filing of the annual
Income Tax Return (ITR). Previously, the deadline to submit the
taxpayer’s ITR to the Bureau of Internal Revenue (BIR) is April 15. Under
the TRAIN law, the new deadline to file the annual ITR is May
15.
2. Personal and additional exemptions have
been removed
Some people already know this, but many are still unaware: under the
tax reform, the personal exemption of P50,000 and
additional exemption of P25,000 per dependent, which
 were enjoyed by taxpayers in the old tax system, have now been
removed.
In the past, an individual may avail of personal exemption (P50,000) and
additional exemption (maximum of P100,000 if there are four
dependents) to be deducted from the taxable income. Under TRAIN, the
exemption has been simplified and made more straightforward. This
simply means:

 if the taxpayer’s gross income is P250,000 or below, he or

she is automatically exempted from paying the income tax; and
 it doesn’t matter now if the taxpayer has one dependent
or four dependents or no dependent at all
That means two taxpayers with the same gross income will pay exactly
the same tax due — regardless if one taxpayer has four children (i.e.,
four dependents) while the other has none.

In addition to the removal of personal and additional exemptions, the

maximum P2,400 premium for health and hospitalization insurance,
which is previously deductible from taxable income, has also been
removed.

3. Tax on lotto winnings and PCSO prizes

Under the existing National Internal Revenue Code (NIRC), lotto
winnings and all PCSO prizes are tax-exempt. This has now been
changed by the TRAIN law.

Starting 2018, all PCSO and lotto prizes are taxed 20% if the
amount of the prize or winnings is above ten thousand pesos (P10,000).
OLD TAX RATE NEW TAX RATE (TRAIN TAX REFORM)

Lotto Winnings and PCSO Prizes None (Tax-exempt) 20% if amount is above P10,000

4. Tax on pre-terminated long-term time

deposits
Long-term time deposits (TD), or time deposits with duration of 5 years
and 1 day, will continue to be tax-exempt. However, the tax on interest
income of these deposits once preterminated has been changed.

From the current rate of 5-20%, the tax charged on the interest income
of long-term time deposits that are
preterminated (meaning, withdrawn prior to the scheduled maturity
date) has been increased to a fixed 20%.
OLD TAX NEW TAX RATE (TRAIN TAX
RATE REFORM)

Interest Income on Pre-terminated Long-Term 5-20% 20%

Time Deposit

5. Tax on interest income of foreign currency

deposits
Under the existing tax code, the interest income on foreign currency
accounts (e.g., US dollar, Euro, Japanese Yen, Korean won, etc.)
deposited in Philippine banks is 7.5%. The TRAIN law has increased
the foreign currency deposit unit (FCDU)’s interest
income tax rate to 15%.
OLD TAX RATE NEW TAX RATE (TRAIN TAX REFORM)

Interest Income of FCDU 7.5% 15%

6. Tax on stock transactions

The tax rate on sale of stocks have been increased. The sale of
stocks not traded in the Philippine Stock Exchange
(PSE) is previously taxed 5-10%. This is now increased to 15% under
the tax reform.
Meanwhile, sale of stocks that are traded in the PSE will be
taxed 0.6% of the gross trade amount, up from the previous rate of
0.5%. (Read more details here: Impact of New PSE Stock
Transaction Tax)
7. Documentary Stamps (Doc Stamps) Tax
The documentary stamp tax (DST) has been doubled, with the
new doc stamps tax ranging from P1.50 to P3.00 under the tax reform.
 8. Donor’s Tax
The donor’s tax was revised to a flat rate of 6% regardless
of the relationship between the donor and the donee. Previously, the
donor’s tax was 2% to 15% if the donor and donee are related, and 30%
if the donation was to a stranger.
Donations or gifts below P250,000 are tax-exempt. Donations with value
of at least P250,000 are taxed using the new rate of 6% on the amount
in excess of P250,000.

9. Estate Tax
Under TRAIN, the estate tax is now a flat 6% rate on the
amount in excess of P5 million.
Estates with a net value of P5 million and below will be tax-exempt.
Family homes that are valued at no more than P10 million will also be
exempted. Under current tax laws, only family homes worth P1 million
are tax-exempt.

10. Cosmetic Surgery Tax

Starting 2018, all cosmetic surgeries, aesthetic procedures,
and body enhancementsintended to improve, alter, or enhance a
person’s appearance is now subject to a tax of 5%.

We provide below a more comprehensive tax table showing the

additional take-home pay for monthly salaries up to P250,000. Here’s
how to read the tax table:

1. Look for the row closest to the amount of gross salary

you’re receiving per month.
2. Check the corresponding next column which shows how
much withholding tax is currently being deducted from your
salary.
3. The next column “Monthly Tax in 2018 (under Tax Reform)”
shows the expected amount of income tax that will be
deducted from your salary beginning January 2018.
4. Finally, the column “Additional Take-Home Pay per Month”
shows your tax savings, that is, how much incremental salary
you will receive as additional take-home pay due to the
implementation of the reduced personal income tax rates.
Income Tax Table: Additional Take-Home Pay
in 2018
ADDITIONAL TAKE-HOME PAY
MONTHLY MONTHLY TAX IN MONTHLY TAX IN 2018
MONTH (UNDER 2018 TAX
SALARY 2017 (CURRENT) (UNDER TAX REFORM)
REFORM)

P10,000 620.09 0 620.09

P15,000 1,541.83 0 1,541.83

P20,000 2,683.84 0 2,683.84

P25,000 3,918.22 634.57 3,283.65

P30,000 5,353.53 1,624.57 3,728.96

P35,000 6,853.53 2,655.72 4,197.81

P40,000 8,331.03 3,886.97 4,444.06

P45,000 9,831.03 5,136.97 4,694.06

P50,000 11,391.98 6,386.97 5,005.01

P55,000 12,991.98 7,636.97 5,355.01

P60,000 14,591.98 8,886.97 5,705.01

P65,000 16,191.98 10,136.97 6,055.01

P70,000 17,791.98 11,497.69 6,294.29

P75,000 19,391.98 12,997.69 6,394.29

P80,000 20,991.98 14,497.69 6,494.29

P85,000 22,671.98 15,997.69 6,674.29

P90,000 24,405.32 17,497.69 6,907.63

 ADDITIONAL TAKE-HOME PAY
MONTHLY MONTHLY TAX IN MONTHLY TAX IN 2018
MONTH (UNDER 2018 TAX
SALARY 2017 (CURRENT) (UNDER TAX REFORM)
REFORM)

P95,000 26,138.65 19,122.69 7,015.96

P100,000 27,871.98 20,747.69 7,124.29

P105,000 29,605.32 22,372.69 7,232.63

P110,000 31,338.65 23,997.69 7,340.96

P115,000 33,071.98 25,622.69 7,449.29

P120,000 34,805.32 27,247.69 7,557.63

P125,000 36,538.65 28,872.69 7,665.96

P130,000 38,271.98 30,497.69 7,774.29

P135,000 40,005.32 32,122.69 7,882.63

P140,000 41,738.65 33,747.69 7,990.96

P145,000 43,471.98 35,372.69 8,099.29

P150,000 45,205.32 36,997.69 8,207.63

P155,000 46,938.65 38,622.69 8,315.96

P160,000 48,671.98 40,247.69 8,424.29

P165,000 50,405.32 41,941.98 8,463.34

P170,000 52,138.65 43,675.32 8,463.33

P175,000 53,871.98 45,408.65 8,463.33

P180,000 55,605.32 47,141.98 8,463.34

P185,000 57,338.65 48,875.32 8,463.33

P190,000 59,071.98 50,608.65 8,463.33

P195,000 60,805.32 52,341.98 8,463.34

P200,000 62,538.65 54,075.32 8,463.33

P205,000 64,271.98 55,808.65 8,463.33

 ADDITIONAL TAKE-HOME PAY
MONTHLY MONTHLY TAX IN MONTHLY TAX IN 2018
MONTH (UNDER 2018 TAX
SALARY 2017 (CURRENT) (UNDER TAX REFORM)
REFORM)

P210,000 66,005.32 57,541.98 8,463.34

P215,000 67,738.65 59,275.32 8,463.33

P220,000 69,471.98 61,008.65 8,463.33

P225,000 71,205.32 62,741.98 8,463.34

P230,000 72,938.65 64,475.32 8,463.33

P235,000 74,671.98 66,208.65 8,463.33

P240,000 76,405.32 67,941.98 8,463.34

P245,000 78,138.65 69,675.32 8,463.33

P250,000 79,871.98 71,408.65 8,463.33

Here’s a summary of the approved new income tax tables which will be
implemented beginning 2018.

Personal Income Tax Rates – From Year 2018

to 2022
Lower income tax rates, with exemption for
those earning P250,000 and below (Years
2018-2022)
In the approved tax reform bill under the Tax Reform for Acceleration and
Inclusion (TRAIN) program:

Those earning an annual salary of P250,000 or below will no longer

pay any income tax.
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 annual incomes between P400,000 and P800,000 will
pay a fixed amount of P30,000 plus 25% of the excess over
P400,000.
Those with yearly salaries between P800,000 and P2 million will be
charged a fixed amount of P130,000 plus 30% on the excess over
P800,000.
High-income earners receiving salaries between P2 million and P8
million annually will pay a fixed amount of P490,000 plus 32% of the
excess over P2 million.
Finally, the highest income tier receiving salaries of at least P8 million
per year will have withholding taxes of P2.41 million plus 35% of
the excess over P8 million.
All these will be implemented from 2018 until 2022, but beginning 2023,
the rates will further fall.

Personal Income Tax Rates – Beginning Year

2023

Income Tax rates to be lowered further (Year

2023 onwards)
From year 2023 onwards, the income tax rates will be further adjusted,
as follows:
Those earning an annual salary of P250,000 or below will continue
to be exempted from paying income tax.
Those earning between P250,000 and P400,000 per year will be
charged a lower income tax rate of 15% on the excess over
P250,000.
Those with annual salaries from P400,000 to P800,000 will have
withholding taxes of P22,500 plus 20% of the excess over
P400,000.
Salaried employees with annual incomes between P800,000 and P2
million will be charged a fixed amount of P102,500 plus 25% on the
excess over P800,000.
Those receiving salaries between P2 million and P8 million per year will
be charged P402,500 plus 30% of the excess over P2 million.
Finally, the highest income segment of employees with annual salaries
of at least P8 million will pay P2.2025 million plus 35% of the
excess over P8 million.

List of New Taxes under

approved TRAIN Tax Reform
of 2018
1. New Personal Income Tax Rates
Personal income tax rates will be lowered, while salaried employees
earning annual income of P250,000 or below will be exempted from
paying income taxes.
Full details of the new income tax rates and tax tables can be
found here.
2. Lower Tax Rates for Professionals
With the revised personal income tax table, salaried employees will
surely benefit from the lower tax rate. Self-employed professionals,
meanwhile, can expect to pay lower taxes as well with the reduced tax
rates for professionals, as follows:
ANNUAL SALES OR GROSS
TAX RATE
RECEIPTS

P250,000 and below 0%

Below P3 million May choose either 8% flat tax on gross receipts or follow pers
income tax table

Above P3 million Subject to personal income tax table

Professionals will no longer have to file and pay the percentage tax;
instead they will be charged a withholding tax of 8% flat rate on
gross sales or receipts.
Self-employed professionals earning annual income of P3 million and
below may choose to pay the 8% flat tax or follow the personal income
tax table.
 3. Tax on 13th Month Pay and Other Bonuses
The threshold for tax exemption on 13th month pay and
other bonuses received by salaried employees has been raised from
the current P82,000 to P90,000. This means 13th month pay and
bonuses paid to employees that amount to P90,000 or below will not be
taxed.
4. Tax on Drinks using Sugar and Caloric /
Non-Caloric Sweeteners
Beverages that use sugar and other sweeteners will be taxed effective
January 2018. These include softdrinks and other cola drinks, fruit
juices, and powdered drinks, among others.

The sugar tax is as follows:

 P6.00 per liter of drink that uses caloric and non-caloric
sweeteners
 P12.00 per liter of drink that uses high fructose corn
syrup (HFCS)
5. Tax exemption of milk, 3-in-1 coffee,
medicines for diabetes, etc.
Exempted from the sugar tax are milk, 3-in-1 coffee, 100% natural
fruit juice or vegetable juice, medically-indicated beverages, and drinks
and beverages that use natural sweeteners such as coco sugar or
stevia.
Meanwhile, drugs and medicines prescribed for diabetes, high
cholesterol, or hypertension will also be exempted from the 12%
VAT.
6. Taxes on LPG, Diesel, Gasoline, and other
fuel products
 Liquefied Petroleum Gas or LPG is currently not taxed, but will be
charged excise tax as follows:
 P1.00 tax per liter in 2018
 P2.00 tax per liter in 2019
 P3.00 tax per liter in 2020
Diesel is also currently not taxed, but will have new taxes, as follows:
 P2.50 tax per liter in 2018
 P4.50 tax per liter in 2019
 P6.00 tax per liter in 2020
Gasoline, both regular and unleaded, will have the following excise
taxes raised from the current P4.35 per liter:
 P7.00 tax per liter in 2018
 P9.00 tax per liter in 2019
 P10.00 tax per liter in 2020
Other fuels and oil products will be taxed as follows:

 Aviation gas – P4.00 per liter

 Asphalts – P8.00 per kilo
 Kerosene – P3.00
 Naphtha – P7.00
 Bunker fuel – P2.50
 Lubricating oil – P8.00
 Paraffin wax – P8.00
 Petcoke – P2.50
UPDATE: Pres. Duterte has vetoed the exemption from excise taxes of
petroleum products used as input, feedstock, or as raw material in the
manufacturing of petrochemical products, or in the refining of petroleum
products, or as replacement fuel for natural gas fired combined cycle
power plants.
7. Taxes on Cars and Automobiles

The new excise taxes for cars will follow a four-tier scheme:

Excise Tax on Cars and Automobiles

NET MANUFACTURER'S PRICE TAX RATE ON HYBRID CARS TAX RATE ON NON-HYBRID

P600,000 and below 2% 4%

 NET MANUFACTURER'S PRICE TAX RATE ON HYBRID CARS TAX RATE ON NON-HYBRID

Above P600,000 to P1 million 5% 10%

Above P1 million up to P4 million 10% 20%

Above P4 million 25% 50%

Pick-up trucks and electric vehicles will be exempted from additional

taxes. Hybrid cars, as seen in the table above, will be charged 1/2 (half)
the taxes imposed on non-hybrid automobiles.

8. Tax on Coal
The approved excise tax on coal is as follows (currently P10.00 tax
per metric ton):
 P50.00 tax per metric ton in 2018
 P100.00 tax per metric ton in 2019
 P150.00 tax per metric ton in 2020
9. Tax on Tobacco Products
Excise taxes on tobacco products will be increased to P32.50
initially during the first six months of 2018, then will rise to P35.00 from
the rest of 2018 until 2019.
From 2020 to 2021, the tobacco tax will rise to P37.50, followed by a
fixed tax of P40.00 to be imposed from 2022 to 2023. From 2023
onwards, tobacco taxes will rise 4% annually.
10. Donor’s Tax
Donations or gifts with at least P250,000 worth will be charged
a donor’s tax of 6% flat rate. This will be charged regardless of the
relationship between the donor and the donee.
11. Estate Tax
The estate tax, or tax levied on the properties or estate of lawful heirs
and beneficiaries inherited from a deceased person, will now be subject
to a flat rate of 6% on the amount in excess of P5 million.
Estates with a net value of P5 million and below will be exempted from
paying the estate tax. Family homes that are valued at P10 million or
less will also be exempted from estate tax. Under existing tax laws, only
family homes worth P1 million are exempted.
12. Tax on Cosmetic Surgery and other
Aesthetic Procedures
Starting 2018, there will be a 5% tax on cosmetic surgeries, aesthetic
procedures, and body enhancements.

13. Documentary Stamp Tax

The documentary stamp tax (DST) charged on some legal or business
transactions will double from P1.50 to P3.00 beginning 2018.

14. Stock Transaction Tax

Stock trading in the Philippines might be affected with the revised taxes
on stock market activity.

The stock transaction tax — a tax charged on stock sellers when a

buy or sell transaction is made — will be increased to 0.6% of the gross
trade amount from the current 0.5% rate.
Stock-related transactions of companies not listed in the Philippine Stock
Exchange (PSE) will be slapped with a higher stock transaction tax of
15%, an increase from the current 5% or 10%.

15. Foreign Currency Interest Income Tax

The tax on interest income on foreign currency deposits is
currently pegged at 7.5%. This will increase to 15% of the interest on
foreign currency deposit unit (FCDU) under the TRAIN tax reform.
 List of Vetoed Items by Pres. Duterte
Here are five (5) items in the tax reform bill that was vetoed by Pres.
Duterte when he signed the bill into law.

1. Veto on the 15% special tax rate for employees

of Regional Headquarters (RHQ), Regional Operating
Headquarters (ROHQ), Offshore Banking Units, and
Petroleum Service Contractors and Subcontractors. Thes
employees will be taxed using the regular income tax table as
shown in Item No. 1 above.
2. Veto on the exemption of self-employed professionals,
with gross sales or receipts not exceeding P500,000, from the
payment of the 3% percentage tax.
3. Veto on the excise tax exemption of petroleum products
used as input, feedstock, or as raw material in the
manufacturing of petrochemical products, or in the refining of
petroleum products, or as replacement fuel for natural gas fired
combined cycle power plants (see Item No. 6 above).
4. Veto on the zero rating of sales of goods and
services to separate customs territory and tourism enterprise
zones, specifically, the areas under the Tourism Infrastructure
Enterprise Zone Authority (Tieza).
5. Veto on the earmarking of incremental tobacco taxes

VAT exemptions under new

Philippine Tax Reform (2018)
Included in the tax reform is the updating of VAT-able products and
transactions. The list of items that will or won’t be charged the 12%
Value Added Tax (VAT) underwent several revisions in Congress in
the last few months, but the final version is shown below.
We begin with a list of products or transactions that currently enjoy VAT
exemption and will continue to be VAT-exempt under the new tax reform
program.

Products, service, or groups that will

continue to be VAT-exempt
 Food and agricultural products
 Senior citizens
 Persons with Disability (PWD)
 Cooperatives
 Tourism
 Education
 Renewable energy
 Health
 Enterprises and BPOs located in Special Economic Zones
 Condominium association dues
 Rentals and leases below P15,000 per month
The following items, meanwhile, will now also enjoy the benefit of not
paying VAT.
 Groups, products, or transactions that will
be VAT-exempt
 Businesses with annual gross sales of P3 million and below
 Government owned and controlled corporations (GOCCs),
state universities and colleges (SUC), and government agencies
 Medicines for diabetes, cholesterol, and hypertension (VAT
exemption beginning 2019)
 Socialized housing, or houses priced at P450,000 and
below, and low-cost housing, or those priced at P3 million and
below (VAT exemption retained from 2018 to 2020 only)