(2018) New BIR Income Tax

Rates and Income Tax Tables

• The Philippine tax reform bill, known as TRAIN
or Tax Reform for Acceleration and Inclusion
program, has been signed into law by Pres.
Rodrigo Duterte on December 19, 2017 and
implementation began on January 1, 2018.
• In this article, let’s focus on the
approved Personal Income Tax Rates. Here’s a
summary of the new income tax tables to be
followed by the Bureau of Internal Revenue (BIR).
• There are two sets: (1) Income Tax Tables to be
implemented for the years 2018 to 2022; and (2)
Income Tax Tables which will be applicable from
the year 2023 onwards.
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.
 VAT exemptions under new Philippine
Tax Reform (2018)
• What are VAT-able and VAT-exempt items under
the recently approved Tax Reform for
Acceleration and Inclusion (TRAIN) law
implemented beginning January 2018?
• To recap, the TRAIN tax reform program includes
various provisions that touch on reducing
personal income taxes while increasing taxes on
products such as sweetened beverages, oil,
petroleum, and fuel products, coal, stock
transactions, cars and automobiles, among
others.
• Also 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)
 What’s in the 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.
• 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
TAX RATE
GROSS RECEIPTS
P250,000 and 0%
below
Below P3 million May choose either 8%
flat tax on gross
receipts or follow
personal income tax
table
Above P3 million Subject to personal
• 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
 Excise Tax on Cars and Automobiles

NET TAX RATE ON

TAX RATE ON
MANUFACTU NON-HYBRID
HYBRID CARS
RER'S PRICE
Pick-up trucks CARS
and electric vehicles will be exempted from additional taxes. Hybrid cars, as seen in the tab

P600,000 and 2% 4%
below
Above 5% 10%
P600,000 to
P1 million
Above P1 10% 20%
 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%.