JANUARY 18, 2018 BY EJ ARBOLEDA

TRAIN Law Primer or So what do I file now?

The Income Tax Reform Law (Tax Reform for Acceleration and Inclusion of TRAIN)
(RA No. 10963 + veto message) changes a lot of things for the DIY taxpayer. Aside
from the forms themselves, the tax reform law also changes the frequency, the
processes, and the formula & tax tables that we’ve all gotten used to. As a
freelancer, professional, or self-employed individual, this can be a confusing
change. This article aims to make the tax TRAIN easier to understand.

Does TRAIN exempt me from paying any tax?

According to bir gov ph, if you are earning less than P250,000 annually, you are
exempt from paying percentage tax, income tax, and/or, the 8% gross receipt tax.
Yes, this means you are not required to file any tax return.

From VAT to Non-VAT – TRAIN’s New VAT Threshold

The previous threshold for a taxpayer to be required to be a VAT taxpayer was
around P1,919,000. TRAIN raises the VAT threshold to P3,000,000. If you were a
taxpayer earning below the P1.9 Million threshold, then things don’t change much
for you – you’re still a non-VAT taxpayer.

All about that 8% Tax – TRAIN’s “Gift”

As a non-VAT taxpayer you now have 2 choices when it comes to filing your taxes:

1. Good ol’ Percentage Tax + Income Tax

2. The brand new 8% Tax

Percentage Tax
Not a lot of changes for percentage tax. Depending on the alphanumeric tax code
that applies to your income that percentage is still what is applied to your gross
receipts.

For most individuals, this would be 3% (PT 010) of your gross income.

Income Tax
The Income Tax table, on the other hand, has changed a LOT. Your tax dues are
now computed thus:
Taxable Income Formula

Not Over P250,000 0%

Over P250,000 but not over P400,000 20% of the excess over P250,000

Over P400,000 but not over P800,000 P30,000 + 25% of the excess over P400,000

Over P800,000 but not over P2,000,000 P130,000 + 30% of the excess over P800,000

Over P2,000,000 but not over P8,000,000 P490,000 + 32% of the excess over P2,000,000

Over P8,000,000 P2,410,000 + 35% of the excess over P8,000,000

Note: This table is effective from Jan 1, 2018 to Dec 31, 2022 only. It changes
(becomes lower!) after that.
8% Gross Receipts Tax
This is a new option for non-VAT taxpayers. Instead of filing the percentage tax
and the income tax, they can opt to file 8% Gross Receipts Tax. The computation
is very simple:

(GROSS Income – P250,000) * 0.08 = Tax Due

So which one should I choose?

You should choose the option that helps you save more, of course. How do you
determine that? We gotchu, fam – we made a calculator for you! Depending on
how much expenses you’ve spent, that will determine whether the 8% Gross
Receipts Tax is a good option for you OR if you should stick with Percentage +
Income Tax. You can find it HERE.

That’s It?
We are still waiting for the DOF to release the Implementing Rules & Regulations
(IRR) for the changes in the TRAIN law. There will be more details on frequency,
the process, and the actual forms so that we can comply with the latest changes
brought about by this Tax Reform.

Once the IRR is released then we start to see the details of the process and the
steps that will help the BIR in keeping track of everything. With Taxumo, you are
assured that the forms you are filing are the latest forms and that they comply
with the latest regulations of the BIR. So if you don’t want to worry about all of
this (and you shouldn’t), sign up to Taxumo now!