Tax Reform for Acceleration

and Inclusion (TRAIN) Briefing

In providing our comments in these slides we have relied upon our understanding of current Philippine tax laws, regulations, rules,
and issuances of the relevant tax authorities as of this date. Should these laws, regulations, rules, and issuances change, some of
the issues/conclusions discussed in these slides may change as well. We will not be responsible for updating the information herein,
unless we are specifically requested to do so. Please also note that our comments and conclusions have been put together on the
basis of our understanding of the facts as discussed above. These slides are solely for your needs and are not to be relied upon by
any other person or entity. Hence, if you wish to disclose copies of these slides to any other person or entity, you must inform them
that they may not rely upon our work for any purpose without our written consent.
 What is TRAIN?

Page 2
DOF Proposed Tax
DOF Proposed TaxReform
ReformPackages
Packages

•Reduction of tax rates • Reduction of tax rate

•Shift to simplified PIT • Simplification of tax
system provisions
•Expansion of VAT base • Limit on VAT zero-rating to
•Excise tax on sugary, direct exporters
automobiles and • Rationalization of fiscal
petroleum products Personal Corporate incentives
• VAT refund in cash
Income Income
Tax Reform for
• Estate tax amnesty
Tax (PIT) Tax (CIT)
Acceleration and
• General tax amnesty
• Amendments to bank

Inclusion
secrecy law

Property
Act (TRAIN)
Capital
Income
Tax
Tax
• Lower estate and donor’s •Harmonization of
tax rates capital income tax rates on
• Lower rate of transaction deposits and investment,
taxes on land dividends, equity and other
passive income to 10%
• Update Schedule of Zonal
Values •Increase stock transaction
tax from 0.5% to 1%

Page 3
 RA No. 10963

Page 4
Personal Income Tax Rates
Personal Income Tax Rates
Taxable Income Old Rate 2018 – 2022 2023 Onwards
Not over P10,000 5%
Not over P30,000 500 + 10%
Not over P70,000 2,500 + 15% 0% 0%
Not over P140,000 8,500 + 20%
Not over P250,000 22,500 + 25%
Not over P400,000 20% 15%
50,000 + 30%
Not over P500,000
30,000 + 25% 22,500 + 20%
Not over P800,000
Not over
130,000 + 30% 102,500 + 25%
P2,000,000
125,000 + 32%
Not over
490,000 + 32% 402,500 + 30%
P8,000,000
Over P8,000,000 2,410,000 + 35% 2,202,500 + 35%

Breakeven – P11.833M (2018 – 2022) and P18.75M (2023 onwards)

New income tax brackets

Page 5
Personal Income Tax Exemption

Additional
Personal
Exemption
Exemption
P25,000/
P50,000
dependent

Premium on Tax exempt 13th

health/ month pay and
hospitalization otherP90,000
benefits
insurance
P82,000
P2,400

Page 6
 Sample Computation

Tax Due
Taxable Old Tax Code New Tax Code
Income (2018-2022) Difference
*
Rate Due Rate Due

530,000 32% 134,600 25% 62,500 (72,100)

1,000,000 32% 285,000 30% 190,000 (95,000)
5,000,000 32% 1,565,000 32% 1,450,000 (115,000)
8,100,000 32% 2,557,000 35% 2,445,000 (112,000)

11,833,333 32% 3,751,667 35% 3,751,667 0

15,900,000 32% 5,053,000 35% 5,175,000 122,000
19,000,000 32% 6,045,000 35% 6,260,000 215,000
23,000,000 32% 7,325,000 35% 7,660,000 335,000
23,470,000 32% 7,475,400 35% 7,824,500 349,100
*The calculated tax due is HIGHER/(LOWER) using the new tax code rates.

Page 7
Self-employed and Professionals
Personal Income Tax Rates

Gross sales/
receipts ≤ P3M
(Optional)

Graduated income
8% income tax on
gross sales/receipts tax rates
(0% - 35%)

3% percentage tax

RMC No. 1-2018 (Procedure on the use of withholding tax table on compensation and 8% withholding
tax on income payments to self-employed individuals or professionals)

Page 8
Other Individual Tax Rates
Final Tax

FBT

Page 9
Creditable Withholding
Personal Income Tax Rates Tax Rates

Jan. 1, 2019

Page 10
Passive Income
Final Tax

Citizens

Resident Aliens
FCDU
Deposit Domestic Corporations

Resident Foreign Corporations

Page 11
Passive Income
Final Tax

Citizens

Resident Aliens
CGT Nonresident Aliens

Domestic Corporations

Resident Foreign Corporations

Non-Resident Foreign Corporations

Page 12
Percentage Tax
Final Tax

STT

Page 13
Donor’s Tax Rate
Final Tax

Old Rules New Rules

2% - 15% 6%

30% - strangers 6%

Page 14
Donor’s Tax
Final Tax

Old Rules New Rules

EXCEPT:
Transfer for Made in the ordinary
insufficient course of business
consideration (bona fide, at arm’s
length, and free from
any donative intent)

Page 15
VAT Zero-Rating on Export Sale of Goods
and Services
Sale of goods to non-resident buyer for delivery to resident
local export-oriented enterprise

Sale of goods and services to export-oriented enterprise

(70% export sales)

Export sales under E.O. 226

Processing, manufacturing, or repacking goods for persons

doing business outside the Philippines which goods are
subsequently exported

* Upon establishment of Enhanced VAT Refund System and if all pending VAT refund claims
as of Dec. 31, 2017 shall be fully paid in cash by Dec. 31, 2019

Page 16
VAT Zero-Rating on Export Sale of Goods
and Services

Export sales under EO 226 (Art. 23)

Sales to bonded manufacturing warehouses of export-

oriented manufacturers

Sales to export processing zones

Sales to registered export traders operating bonded

trading warehouses supplying raw materials used in the
manufacture of export products

Sales to foreign military bases, diplomatic missions

and other agencies and/or instrumentalities granted tax
immunities

Page 17
Other VAT Amendments
Final Tax

Old Rules New Rules

VAT threshold
≤ P1,919,500 P3M

BIR - 90 days
Timing for claim for 30 days to appeal
refund – 120 days to CTA on
deemed denial

Page 18
Excise Tax on Cigars and Cigarettes
Excise Tax
(RR No. 3-2018 datedRates on
Jan. 5, 2018 Petroleum
- received by BIR RecordsProducts
Management Division on
January 15, 2018)

Jan 2022 – Dec

2023

Jan 2020 – Dec

2021

July 2018 – Dec

2019

Jan – June 2018

vs. P31.20 (old rules)

4% increase annually

Page 19
Excise Tax on Petroleum Products
Excise Tax
(RR No. 2-2018 datedRates on
Jan. 5, 2018 Petroleum
- received by BIR RecordsProducts
Management Division on
January 24, 2018)

Particulars Old 2018 2019 2020

Lubricating oils and greases P4.50 P8.00 P9.00 P10.00
Processed gas P0.05 P8.00 P9.00 P10.00
Waxes and petrolatum P3.50 P8.00 P9.00 P10.00
Denatured alcohol P0.05 P8.00 P9.00 P10.00
Naphtha regular gasoline,
P4.35 P7.00 P9.00 P10.00
pyrolysis gasoline
Leaded premium gasoline P5.35 - - -
Unleaded premium gasoline P4.35 P7.00 P9.00 P10.00
Aviation turbo jet fuel, Aviation
P3.67 P4.00 P4.00 P4.00
gas
Asphalts P0.56 P8.00 P9.00 P10.00
Kerosene P3.00 P4.00 P5.00
Diesel fuel oil P2.50 P4.50 P6.00
Liquefied petroleum gas Nil P1.00 P2.00 P3.00
Bunker fuel oil P2.50 P4.50 P6.00
Petroleum coke P2.50 P4.50 P6.00
*Excise tax rates per liter or per kilogram, as applicable

Page 20
Excise Tax on Petroleum Products
Mandatory Marking of All Petroleum Products

Requirement to use an official fuel marking or similar technology on

petroleum products (mandatory within five (5) years from the effectivity of
this Act).

Counting of Metering Devices: (1) Manufacturers and/or Importers to provide with counting
or metering devices; (2) DOF shall maintain a registry of all petroleum manufacturers and/or
importers and articles of being manufactured and/or imported; (3) DOF shall mandate the
creation of a real-time inventory of petroleum; and (4) Importers of finished petroleum
products shall provide with Bureau-accredited metering devices to determine the accuracy of
the volume of petroleum products they imported

CIR or his authorized representatives may conduct periodic random

field tests and confirmatory tests on fuel required to be marked under
Section 148-A

Penalties on offenses relating to fuel marking (may amount from P1M to P10M,
imprisonment from 4 to 8 years, and/or revocation of licenses to engaged in business)

Page 21
Excise Tax on Automobiles
Excise Tax
(RR No. 5-2018 datedRates on
Jan. 5, 2018 Automobiles
- received by BIR Records Management Division on
January 15, 2018)

Net Manufacturer’s Price/

Old Eff. Tax Rate
Importer’s Selling Price
Not over P600,000 2% 2%
Not over P1.1M 20% + P12,000 2 – 10.18%
Not over P2.1M 40% + P112,000 10.19 – 24.38%
Over P2.1M 60% + P512,000 24.39% up

Net Manufacturer’s Price/

New
Importer’s Selling Price
Not over P600,000 4%
Not over P1M 10%
Not over P4M 20%
Over P4M 50%

► Vehicles purely powered by electricity and pick-ups – not subject to excise tax
► Hybrid vehicles – subject to 50% of applicable rate

Page 22
SampleTax
Excise Computation
Rates on Automobiles
Tax Due
Manufacturer’s OLD RULE NEW RULE Difference*
Selling Price Effective
Due Rate Due
Rate
600,000 2% 12,000 4% 24,000 12,000
1,100,000 10.18% 112,000 20% 220,000 108,000

1,640,000 20% 328,000 20% 328,000 0

2,100,000 24.38% 512,000 20% 420,000 (92,000)
3,000,000 35.07% 1,052,000 20% 600,000 (452,000)
4,000,000 41.30% 1,652,000 20% 800,000 (852,000)
5,000,000 45.04% 2,252,000 50% 2,500,000 248,000
6,000,000 47.53% 2,852,000 50% 3,000,000 148,000
7,480,000 50% 3,740,000 50% 3,740,000 0
8,000,000 50.65% 4,052,000 50% 4,000,000 (52,000)
*The calculated tax due is HIGHER/(LOWER) using the new tax code rates.

Page 23
Excise Tax on Sweetened Beverages

2L Soda
P6.00/liter
caloric sweeteners and non- SP @ P62
caloric sweeteners*

P12/liter
SP @ P74
high fructose corn syrup

SP @ P50

*Coconut sap and purely steviol glycosides - Exempt

Page 24
ExciseTax
Excise TaxRates
on Sweetened Beverages
on Automobiles

EXCLUSIONS

100%

COFFEE

100% Meal replacement

and medically
indicated beverages
(Ground coffee, instant soluble coffee,
pre-packaged coffee products)

Page 25
 Excise Tax on Mineral Products
Excise Tax
(RR No. 1-2018 on
dated Jan.Mineral Products
5, 2018 - received by BIR Records Management Division on
January 15, 2018)

2% 4%
2018 – P50
2019 – P100
2020 up – P150

P10/MT

Indigenous petroleum
3% 6%

Page 26
 Documentary Stamp Tax
Documentary Stamp
(RR No. 4-2018 dated Dec. Tax by BIR Records Management Division
19, 2017 - received
on January 15, 2018)
PARTICULARS TAXABLE UNIT CURRENT TAX AMENDMENT
CODE PROVISION UNDER TRAIN

Original issuance of shares of PhP 200, or fractional thereof, PhP 1.00 PhP 2.00
stocks of the par value

Sales, agreements to sell, PhP 200, or fractional part PhP 0.75 PhP 1.50
memoranda of sales, deliveries thereof, of the par value
or transfer of shares or
certificates of stock
DST paid upon original issue in 25% 50%
case of stock without par value

Certificates of profits or interest PhP 200 pesos, or fractional PhP 0.50 PhP 1.00
in property or accumulations part thereof, of the face value

Page 27
 Documentary Stamp Tax
(RR No. 4-2018 dated Dec. 19, 2017 - received by BIR Records Management Division
on January 15, 2018)
PARTICULARS TAXABLE UNIT CURRENT TAX AMENDMENT
CODE PROVISION UNDER TRAIN

Bank checks, drafts, certificates

of deposit not bearing interest, PhP 1.50 PhP 3.00
and other instruments

All debt instruments PhP 200, or fractional part PhP 1.00 PhP 1.50
thereof, of the issue price

All bills of exchange or drafts PhP 200, or fractional part PhP 0.30 PhP 0.60
thereof, of the face value

Page 28
 Documentary Stamp Tax
(RR No. 4-2018 dated Dec. 19, 2017 - received by BIR Records Management Division
on January 15, 2018)

PARTICULARS TAXABLE UNIT CURRENT TAX AMENDMENT

CODE PROVISION UNDER TRAIN

Amount of insurance not exceeding Exempt Exempt

PhP 100,000

Amount of insurance exceeds

Life insurance policies PhP 100,000 PhP 10.00 PhP 20.00
but does not exceed
PhP 300,000

Amount of insurance exceeds

PhP 300,000 PhP 25.00 PhP 50.00
but does not exceed
PhP 500,000

Page 29
 Documentary Stamp Tax
(RR No. 4-2018 dated Dec. 19, 2017 - received by BIR Records Management Division
on January 15, 2018)

PARTICULARS TAXABLE UNIT CURRENT TAX AMENDMENT

CODE PROVISION UNDER TRAIN

Amount of insurance exceeds

PhP 150,000 PhP 50.00 PhP 100.00
but does not exceed
PhP 750,000
Life insurance policies
Amount of insurance exceeds
PhP 750,000 PhP 75.00 PhP 150.00
but does not exceed
PhP 1,000,000

Amount of insurance exceeds PhP 100.00 PhP 200.00

PhP 1,000,000

Page 30
 Documentary Stamp Tax
(RR No. 4-2018 dated Dec. 19, 2017 - received by BIR Records Management Division
on January 15, 2018)

PARTICULARS TAXABLE UNIT CURRENT TAX CODE AMENDMENT

PROVISION UNDER TRAIN

Policies of annuities PhP 200

or fractional part thereof, of the PhP 0.50 PhP 1.00
premium or installment payment or
contract price collected

Pre-need plans PhP 200

or fractional part thereof, of the PhP 0.20 PhP 0.40
premium or contribution collected

Certificates PhP 15.00 PhP 30.00

Page 31
 Documentary Stamp Tax
(RR No. 4-2018 dated Dec. 19, 2017 - received by BIR Records Management Division
on January 15, 2018)

PARTICULARS TAXABLE UNIT CURRENT TAX CODE AMENDMENT

PROVISION UNDER TRAIN

Warehouse receipt* PhP 15.00 PhP 30.00

PhP 1 PhP 0.10 PhP 0.20

cost of ticket

Jai-alai, horse race tickets, Additional DST on every

lotto or other authorized PhP 1 PhP 0.10 PhP 0.20
numbers games cost of ticket if it exceeds
PhP 1

* A document that provides proof of ownership of commodities that are stored in a warehouse, vault, or
depository for safekeeping.

Page 32
 Documentary Stamp Tax
(RR No. 4-2018 dated Dec. 19, 2017 - received by BIR Records Management Division
on January 15, 2018)

PARTICULARS TAXABLE UNIT CURRENT TAX CODE AMENDMENT

PROVISION UNDER TRAIN

PhP 1.00 PhP 2.00

Bills of lading or receipts if the value of the goods if the value of the
exceed goods exceed
Value of goods PhP 100 PhP 100

PhP 10.00 PhP 20.00

if the value of the goods if the value of the
exceed goods exceed
PhP 1,000 PhP 1,000

Proxies PhP 15.00 PhP 30.00

Page 33
 Documentary Stamp Tax
(RR No. 4-2018 dated Dec. 19, 2017 - received by BIR Records Management Division
on January 15, 2018)

PARTICULARS TAXABLE UNIT CURRENT TAX CODE AMENDMENT

PROVISION UNDER TRAIN

Powers of attorney PhP 5.00 PhP 10.00

First
PhP 2,000 PhP 3.00 PhP 6.00
or fractional part thereof

Leases and other hiring

agreements For every
PhP 1,000
or fractional part thereof, in
excess of the first PhP 1.00 PhP 2.00
PhP 2,000
for each year of the term of
the said contract or
agreement

Page 34
 Documentary Stamp Tax
(RR No. 4-2018 dated Dec. 19, 2017 - received by BIR Records Management Division
on January 15, 2018)

PARTICULARS TAXABLE UNIT CURRENT TAX AMENDMENT UNDER

CODE PROVISION TRAIN

Mortgages, pledges, and deeds of First PhP 20.00 PhP 40.00

trust PhP 5,000
of the amount secured

On each
PhP 5,000 PhP 10.00 PhP 20.00
or fractional part thereof in excess of
the first
PhP 5,000

Deed of sale, conveyances and On the consideration contracted to Retained;

donation of Real Property be paid for such realty or on its PhP 15.00 Added donation as one
FMV, whichever is higher of the mode of
transfer of property*

*Transfers exempt from donor’s tax under Section 101 (a) and (b) of this Code shall be exempt from the tax imposed
under this Section.

Page 35
 Documentary Stamp Tax
(RR No. 4-2018 dated Dec. 19, 2017 - received by BIR Records Management Division
on January 15, 2018)

PARTICULARS TAXABLE UNIT CURRENT TAX CODE AMENDMENT UNDER

PROVISION TRAIN

Registered gross tonnage of the PhP 500 PhP 1,000

ship, vessel or steamer does not
exceed one thousand (1,000) tons, Additional Additional
and the duration of the charter and PhP 50 PhP 100
Charter Parties contract does not exceed six (6) for each month or fraction for each month or
months of a month in excess of 6 fraction of a month in
and Similar months excess of 6 months
Instruments
Registered gross tonnage exceeds PhP 1,000 PhP 2,000
one thousand (1,000) tons and do
not exceed ten thousand (10,000) Additional Additional
tons, and the duration of the PhP 100 PhP 200
charter and contract does not for each month or fraction for each month or
exceed six (6) months of a month in excess of 6 fraction of a month in
months excess of 6 months

Page 36
 Documentary Stamp Tax
(RR No. 4-2018 dated Dec. 19, 2017 - received by BIR Records Management Division
on January 15, 2018)

DST
PARTICULARS TAXABLE UNIT CURRENT TAX CODE AMENDMENT UNDER
PROVISION TRAIN

Registered gross tonnage PhP 1,500 PhP 3,000

Charter Parties
exceeds ten thousand (10,000)
and Similar tons, and the duration of the Additional Additional
Instruments charter and contract does not PhP 150 PhP 300
exceed six (6) months for each month or fraction for each month or
of a month in excess of 6 fraction of a month in
months excess of 6 months

Page 37
 Other Penalties

• P1,000 – P50,000
Failure or
refusal to • 2 – 4 years
issue
receipts or
invoices
• P500,000 – P10million

• 6 – 10 years
Attempt to
evade or
defeat tax • P30,000 – P100,000

• 2 – 4 years

Page 38
Appropriation of Incremental Revenues
Final Tax
from TRAIN

< 70% < 30%

To fund for: (1) programs

under RA 10659 (i.e.,
Sugarcane Industry Dev’t
To fund infrastructure Act of 2015); (2) Social
projects mitigating measures and
investments; and (3)
Social welfare and
benefits program

Page 39
Appropriation of Incremental Revenues
from TRAIN (cont’d)

(3) Social welfare and benefits program (cont’d)

Unconditional cash transfer to households in the 1st to 7th month income deciles
of the National Household Targeting System for Poverty Reduction (NHTS-PR),
PPP Program, and the social pension program for a period of 3 years from the
effectivity of this Act

Fuel vouchers to qualified franchise holders of Public Utility Jeepneys

(PUJs)

For minimum wage earners, unemployed, and the poorest 50% of the
population: (1) 10% fare discount; (2) NFA purchase discount; (3) Free
skills under TESDA

Other social benefits programs to be developed and

implemented by the government.

Page 40
Other Amendments: Income Tax

Simplified Filing of Tax Returns (i.e., 4-page ITR, May 15 (before April
15) for 1st Qtr. ITR filing for individual, October 15 (before July 15)
installment payment of tax due for individual)

Revised withholding tax table starting January 1, 2018

Compensation of employees of RHQ, ROHQ, OBU and

Petroleum Service Contractors subject to regular tax
rates

Quarterly (before monthly) filing of final and creditable

withholding taxes

Page 41
Other Amendments: Estate Tax

Change in tax rate to 6% (before 5% - 20%)

Removal of the following: (1) Deduction for expenses,

losses and indebtedness, and (2) Medical expenses

Increase of standard deduction to P5M (before P1M) and

family home to P10M (before P1M)

Requirement for certification of CPA for gross value of more

than P5M (before P2M) and deadline of filing is changed to 1
year (before 6 months) from death of decedent

Page 42
Other Amendments: Value Added Tax

Removal of VAT Zero Rating on foreign currency denominated sale

transactions

For 2018 to 2020: Retained VAT exempt treatment on: (1) sale of
residential lot < P1,919,500 (?); (2) sale of house and lot, and other
residential dwellings < P3,199,200 (?); and (3) sale of low-cost and
socialized housing

For 2021 onwards: (1) sale of residential lot < P1,919,500 will no longer
be exempt from VAT; (2) sale of house and lot, and other residential
dwellings is exempt if < P2,000,000 (before P3,199,200); and (3) only
the sale of socialized housing (i.e., not including low-cost) will be VAT
exempt

P15,000 (before P12,800) per month lease of residential units is VAT exempt

Page 43
Other Amendments: Value Added Tax
(cont’d)
Additional VAT exempt transactions: (1) sale or lease of goods and
services to senior citizens and PWDs pursuant to RA No. 9994 and RA
No. 10754, respectively; (2) tax-free exchange; (3) sale of drugs and
medicines prescribed for diabetes, high cholesterol, and hypertension
starting Jan. 1, 2019; and (4) association dues collected by homeowners
associations and condominium corporations

Amortization of input tax on capital goods allowed only until

December 31, 2021

Quarterly filing of VAT effective January 1, 2023 and final withholding VAT
on sales to government will shift to creditable system effective January 1,
2021

Page 44
Other Amendments: Excise Tax

5% excise tax on non-essential services (e.g., invasive cosmetic

procedures, surgeries and body enhancements). Exceptions
are: (1) services related to congenital or development defect or
abnormality; (2) personal injury resulting from an accident or
trauma; and (3) disfiguring disease, tumor, virus or infection.

Page 45
Other Amendments: Admin Matters
Issuance of receipts and invoices on sale of merchandise and service rendered valued at
P100 (before P25) or more. And, issuance of electronic receipts and invoices (within 5
years from effectivity of this act) by exporters, those engaged in e-commerce and
taxpayers under the jurisdiction of the Large Taxpayers Service

Electronic reporting of sales data to the BIR through the use of electronic POS
System for exporters and large taxpayers (within 5 years from effectivity of this act)

Penalties on failure to transmit sales data

Penalties on use/possession of automated sales suppression devices

Change of interest for unpaid amount of tax from 20% (40% for deficiency and
delinquency interests) to double of legal rate of interest (i.e., 2 x 6%)

Page 46
 Questions?

The better the question. The better the answer.

The better the world works.
Thank you!

In providing our comments in this presentation, we have relied upon our

understanding of current Philippine tax laws, regulations, rules, and issuances of the
relevant tax authorities as of this date. Should these laws, regulations, rules, and
issuances change, some of the issues/conclusions discussed in this presentation
may change as well. We will not be responsible for updating the information herein,
unless we are specifically requested to do so. Please also note that our comments
and conclusions have been put together on the basis of our understanding of the
facts. This presentation is solely for your needs and is not to be relied upon by any
other person or entity. Hence, if you wish to disclose copies of this presentation to
any other person or entity, you must inform them that they may not rely upon our
work for any purpose without our written consent.