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 – From approval until year 2019

BRACKET INCOME PER YEAR TAX RATE

1 Below P250,000 0%

2 P250,000 to P400,000 20% of the excess over P250,000

3 P400,000 to P800,000 P30,000 + 25% of the excess over P400,000

4 P800,000 to P2,000,000 P130,000 + 30% of the excess over P800,000

5 P2,000,000 to P5,000,000 P490,000 + 32% of the excess over P2,000,000

6 Over P5,000,000 P1,450,000 + 35% of the excess over P5,000,000

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.
Excise Taxes on Diesel, Petroleum, and other Oil Products
FUEL PRODUCTS CURRENT TAX 2018 2019 2020
 FUEL PRODUCTS CURRENT TAX 2018 2019 2020

Diesel None P3.00 per liter P5.00 per liter P6.00 per liter

LPG, Kerosene, bunker oil P3.50 to P5.35 per Additional P3.00 per Additional P5.00 per Additional P6.00
liter or kg liter or kg liter or kg liter or kg

Gasoline, lubricating oils, P3.50 to P5.35 Additional P8.00 per Additional P9.00 per Additional P10.0
and greases liter or kg liter or kg liter or kg

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 SELLING
2018 2019
PRICE

Below P600,000 3% 4%

P600,000 to P1.1 million P18,000 + 30% in excess of P600,000 P24,000 + 40% in excess of P600,0

P1.1 million to P2.1 million P168,000 + 50% in excess of P1.1 Million P224,000 + 60% in excess of P1.1 M

P2.1 million to P3.1 million P668,000 + 80% in excess of P2.1 Million P824,000 + 100% in excess of P2.1

Above P3.1 million P1.468 million + 90% in excess of P3.1 P1.824 million + 120% in excess of
Million 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

 Bottled iced tea – from P20.00 to P30.00
 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

5 Reasons Why the Tax Reform Law is Good for Us

January 13, 2018 |Posted by MoneyMax.Ph | Local News, Money Matters, Personal Finance
Tags: Credit Card, Income Tax, Tax Reforms, Taxes, TRAIN Law

Starting in the first payday of 2018, some six million Filipino workers should see an income tax reduction in
their payslip, thanks to the newly implemented Tax Reform for Acceleration and Inclusion (TRAIN) Act.
The TRAIN law or Republic Act 10963, which took effect on January 1, 2018, is the first of five tax reform
packages for a simpler, fair, and efficient tax system.

Essentially, TRAIN lowers personal income tax, simplifies the estate and donor’s tax, and expands the value-
added tax (VAT) range. On the other hand, it increases excise taxes on fuel, mineral products, vehicles, and
cigarettes. It also imposes new taxes on sugar-sweetened beverages and cosmetic procedures.

Revenues collected from TRAIN will fund the government’s infrastructure and socio-economic programs.

What does this mean to an ordinary employee like you? Is it good or bad news? According to the government,
the benefits of tax reform will outweigh the effect of price hikes resulting from the higher excise taxes.

That remains to be seen. For now, be hopeful and look at the good effects of this new law on your personal
finance.

1. Higher Take-Home Pay

Photo by Doodeer via Freepik

Since the time you received your first-ever salary, you’ve been dreading to check your payslips. It really hurts
to see huge taxes being deducted from your hard-earned money.

Now, you can heave a sigh of relief because if your gross monthly salary is PHP 21,000 or less, you will no
longer be taxed.

Under the TRAIN law, those with an annual taxable income of PHP 250,000 are exempted from income tax
payment. Around 83% of taxpayers in the Philippines will benefit from the tax exemption, as reported by the
Department of Finance (DOF).

The income tax rate for Pinoys earning above PHP 250,000 per year will be 20% to 35% from 2018 to 2022
and 15% to 35% from 2023 and beyond.

Before the tax reform implementation, those with over PHP 250,000 to PHP 500,000 annual income had to pay
30% tax. Those earning over PHP 500,000 had a tax rate of 32%.

A lower income tax means higher take-home pay for 99% of Pinoy taxpayers. This also means additional
disposable income that you can use to manage your finances better, like investing your money, buying a life
insurance, and paying off your credit card debt.

To check how the new tax reform program will affect your income, you can use the DOF tax calculator. This
online tool also computes the impact of excise taxes and VAT on your income.
2. Fair Tax System
Above-minimum wage and middle-income earners (who had a high tax rate of 32%) will benefit the most from
the TRAIN law, said tax expert Raymond Abrea in a GMA News online report.

According to the DOF, the new law will lessen the tax burden of the poor and the middle class, passing it on to
the higher-income earners who comprise 0.1% of taxpayers in the Philippines. Those earning more than PHP 8
million annually will pay a higher maximum tax rate of 35% (previously at 32%).

Prior to TRAIN implementation, economists criticized the 20-year-old Philippine tax system under the
National Internal Revenue Code of 1997 for being unfair to the Filipino middle class. The Philippines had
the second highest income tax rates in Southeast Asia and seventh in Asia, according to the Joint Foreign
Chambers of the Philippines.

3. Higher Tax Exemption Cap for 13th Month Pay

From PHP 82,000, the tax exemption ceiling for 13th month pay and other bonuses is now at PHP 90,000.
Especially those with total bonuses (including 13th month pay) of over PHP 82,000 can have more money to
spend and save during the Christmas holidays.

4. Simpler Tax Filing and Payment

Computing the estate tax and donor’s tax used to be very complicated with different rates. In the old tax code,
the estate tax rates ranged from 5% to 32%, and the donor’s tax ranged from 2% to 30%. Under the new tax
reform law, the estate and donor’s tax will have a single, fixed rate of 6%.

For all other tax types, tax compliance is now simpler and easier. Here are the notable changes to the tax filing
and payment process under the TRAIN law:

 Optional flat 8% tax rate on gross sales or receipts not more than PHP 3 million (for self-employed
professionals and small businesses) that can be filed and paid annually or quarterly instead of monthly
or bi-monthly payments of business and income taxes
 Filing of tax return for final withholding tax to be done quarterly rather than monthly
 Filing of VAT Return and tax payment to be done quarterly rather than monthly from 2023 onwards

5. Higher VAT Threshold and New Exemptions

TRAIN raises the VAT threshold from PHP 1,919,500 to PHP 3 million. Goods and services sold by small and
micro businesses such as sari-sari stores (with total annual sales within or below the VAT threshold) are
exempt from VAT. This means no tax is passed on to buyers, lowering the prices they have to pay when
buying from these businesses.

The new law also expands VAT exemption for certain people and products, including the following:

 Senior citizens
 Persons with disability
 Raw food/agricultural products
 Tourism businesses
 Medicines for diabetes, high cholesterol, and hypertension (from 2019 onwards)
 Health and education
 Renewable energy (zero-rating)
 Homeowner fees (e.g., association dues, membership fees, etc.)
 BPO companies within special economic zones

Final Thoughts
The tax reform law may not be perfect, but it does provide a lot of benefits to the low and middle-income
classes. More money in your pocket, though, doesn’t mean you should upgrade your lifestyle, too.

Be wise in managing your finances—remember that prices of some goods will go up as a result of increased
excise taxes. Save and invest your extra take-home pay, and spend less on the non-essentials. Time to quit
smoking and drinking soda, perhaps?

4
SHARES
4
Via Philippine Canadian Inquirer
President Duterte on December 19, 2017 signed into law the Tax Reformation for
Acceleration and Inclusion (Train) bill, the first tax reform package, for a fairer and
simpler tax system for the Filipinos, allowing it to take effect starting January 1, 2018.
While we celebrated the new year and were excited to start with a clean slate, we were
taking the TRAIN law with us.

But what exactly does the TRAIN law entail? Clue: it’s not just tax exemption for wage-
earners.

1. Increased take-home money and bonuses

Via Sahifa
Probably the only thing that delighted citizens: under the TRAIN law, workers with an
annual salary of P250,000 is exempted from tax. Salaries that were once deducted 5%
to 32% in tax rate now have 0% tax deduction from 2018 and beyond.

Tax exemption includes the mandated 13th month bonus and other bonuses. This
means every employee can now take home more than they did the previous years. But
since everything is a give-and-take process, some goods will be priced higher from now
on.

2. Excise on sugar-sweetened beverage and cigarettes

Via Unsplash
It might come as a shock to you the next time you buy a bottle of your favorite soft drink
that it’s a bit pricey, this is one effect of TRAIN law. Sugar-sweetened beverages, once
without taxes, are now P6/liter while high fructose corn syrup beverages are at P12/liter.

Exempted from this are milk products, 100% natural fruit and vegetable juices, and
ground, instant, and pre-packaged coffee products.

We felt the blow when S&R announced they are discontinuing their unlimited soda
promo. Which other fast foods will follow suit?
Via Facebook: CNN Philippines
A pack of cigarettes that costs P30 will now cost P32.50 this year and will increase in
P2.5 increments until 2022. So if you buy a pack of cigarettes in 2022, it will damage
your wallet to the tune of P40 and it might possibly change your life. A 4% increase in
taxes will be implemented starting 2023.

3. Increase on petroleum and automobile tax

Via Market Watch

Your #TravelGoals might be in danger. The TRAIN law imposes an 8-peso increase in
petroleum products per liter this year. For diesel and kerosene, the once non-existent
excise tax will now be at P2.50-P3/liter. Household gas LPG will have an
added P1/liter. Taxes in petroleum and gas will gradually increase until 2020.

rosemarie@lalolalota
 D lang ako naiyak... napahagulgol pa

... Laslas pitaka sa sobrang mahal ng gas! Wahhhhhhhhhh

4:34 PM - Jan 7, 2018

See rosemarie's other Tweets

Twitter Ads info and privacy

If you’re planning on buying a car in the near future, do it as soon as possible because
automobiles aren’t exempt from excise tax. Vehicles worth P600,000 and below will
have a 4% tax rate. Vehicles over P600,000 up to P1 Million will have a 10%
increase, a 20% increasefor vehicles priced above P1 million to P4 million,
and 50% for vehicles above P4 million.

Hybrid cars are taxed half and electric vehicles and pick-ups are exempt from the rates.
Taxes will increase by more than 10-20% in 2019.

4. Estate tax, donor tax and Higher Documentary Stamp Tax

Via The Lobbyist
Under the TRAIN law, a flat rate of 6% will be imposed on both estate and donor tax. In
the old law, the net estate value last year went up to 20% if the estate was worth
P200,000 and above. With the TRAIN law, estates worth P5 million and below will have
zero tax rate, but P5 million and above will have 6% of the excess over P5 million.

In the previous law, donor’s tax goes up to 15% if the donor and the donee are related
and 30% if they’re not. The donor’s tax is now at 6% regardless of the relationship
between donor and donee.

Under the TRAIN law however, almost all Documentary Stamp Taxes have doubled.

5. No more tax exemption in lotto winnings and some cosmetic procedures

Via International Business Times
TRAIN law also removes the tax exemption of Lotto winnings. Beginning 2018, winnings
of more than P10,000 will be subject to 20% tax.

While the first proposal was for a 20% tax increase in some cosmetic procedures that
are for aesthetic purposes only, it was finalized to 5%. Exempted from this tax are
surgeries and procedures for correcting dysfunctional body areas and birth defects.

6. The effect on Value Added Tax

Via Juan Tax
The previous threshold of P1.9 million in Value Added Tax will now be increased to P3
million. Some exemptions from VAT then would be small businesses with total annual
sale of less than P3 million, senior citizens and PWDs, renewable energy, and drugs
and medicines for diabetes, hypertension, and cholesterol (starting 2019). Monthly
rentals up to P15,000 is also now exempted from VAT, a welcome addition to the
previous P10,000 below exemption.

This means more Filipinos can have a chance at being entrepreneurs which in turn, if
the business thrives, makes way for more infrastructures and jobs.

7. Tax compliance will become more simple

Via Manila Bulletin
A simplified tax filing and payment process is expected as workers with an annual
salary of P250,000 will be exempted from tax starting this year. This means workers
who fall in this bracket will now no longer have to file income tax returns (ITR). Self-
employed and professionals still have to file their ITRs for record and monitoring
purposes of the Bureau of Internal Revenue (BIR). In compliance also to this
simplification, BIR will also cut the current 12 pages of the ITR to four pages.

8. The government promises help

Via Inquirer
The government has promised a P200-a-month conditional cash transfer to poor
families to cushion the impact of the law to the poor. For the next two years this will be
increased to P300 a month.

If you’re wondering where the revenue from the TRAIN law will go, 70% of it is going to
the Build, Build, Build Program of the government that aims to spend more for
infrastructures until the end of the president’s term in 2022. The other 30% will go to
education, social protection, health, and housing among others.

We’re in for one heck of a ride financially; taxes will become even higher as the years
go by. You can look at this as something that will make you want to move abroad and
switch nationalities, or you can always look at the bright side: you can choose what you
want to spend your increased take-home money for and you can wait for a full year to
see the TRAIN law’s full impact.