TRAIN LAW

Tax Reform for Acceleration and Inclusion

Republic Act No. 10963
Overview
• The first package of the Tax Reform for Acceleration and Inclusion or
Republic Act No. 10963, was enacted into law in December 2017 and
became effective on January 1, 2018.

• The TRAIN introduced amendments to personal income taxation, transfer

taxes, value-added tax, excise tax, taxation of sale of shares of stocks, and
documentary stamp tax, among others.
Overview
• The second package of the TRAIN 2 has also been submitted to Congress.
TRAIN 2 seeks the reduction of the corporate income tax. Relative to the
ASEAN region, the Philippines has the highest corporate income tax at 30
percent.

• TRAIN 2 also proposes to modify and limit the fiscal incentives granted to
certain businesses.

• A tax amnesty is also being proposed and is expected to accompany the

tax reform program, with a view to further enhancing revenue collection.
Income Tax
 For compensation income earners
(2018 - 2022)
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 of
P400,000
Over P800,000 but not over P2,000,000 P130,000 + 30% of the excess of
P800,000
Over P2,000,000 but not over P490,000 + 32% of the excess of
P8,000,000 P2,000,000
Over P8,000,000 P2,410,000 + 35% of the excess of
P8,000,000
 For compensation income earners
(2023 onwards)
BRACKET TAXABLE INCOME PER YEAR INCOME TAX RATE

1 P250,000 and below 0%

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

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

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

5 Above P2,000,000 to P8,000,000 P490,000 + 32% of the excess over P2,000,000

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

 Purely self-employed
and professionals
If gross sales/receipts and other non-operating income do not exceed the
P3 million threshold, taxpayer may opt to be taxed at:

• 8% of gross sales/receipts and other non-operating income in excess of

P250,000

• 2018 tax table

 Mixed income earners
A. On their compensation income – tax table

B. On their income from the conduct of trade or business or the practice of

their possession:
• If exceeding the VAT threshold – tax table
• If below the VAT threshold:
o either 8% of gross sales/receipts and non-other operating income in
excess of P250,000
o 2018 tax table
 Passive income Capital gains
• PCSO and lotto winnings exceeding
P10,000 would be subject to the 20% • Capital gains tax on sale of shares

final tax not traded in the local stock

• Interest income from a depository
bank under the expanded foreign
currency deposit system is subject to
exchange is increased to a flat rate
of 15%.
• Apply to corporate income tax

an increased final tax of 15%

• Apply to corporate income tax

Adjustments On Provisions
For Exclusions & Deduction
 On Exemption Of 13th Month Pay
and Other Benefits Exemption
• Amount of exempt 13th month pay and
other benefits is increased to P90,000

Fringe Benefit Tax Given to Non-

rank and File Employees
• The fringe benefits given to non-rank and file
employees are subject to 35% final tax rate.
The grossed-up monetary value is determined
by dividing the actual monetary value by 65%.
Optional Standard Deduction (OSD)

• May be availed only once by either the

general professional partnership or the
partners comprising such partnership.

Deduction of premium payments on health

and/or hospitalization insurance
• Allowed deduction of P2,400 per year worth of
premium payments on health and/or hospitalization
insurance of and individual provided that the family
has a gross income not exceeding P250,000 for the
taxable year is REPEALED.
On personal and additional
exemptions
REPEALED:
• P50,000 worth of basic
exemption
• P25,000 worth of additional
exemption per qualified
dependent not exceeding four
• Personal exemption allowable
to nonresident alien individual
Exemption allowed to estate and
trust
• Exemption of P20,000 allowed from the
income of the estate or tax is REPEALED.
Income tax collected at source –
husband and wife
REPEALED:
• Husband deemed head of the family and
proper claimant of additional exemption.
• Taxes to be withheld from the wages of
the wife must be in accordance with the
table for zero exemption of the
withholding tax table.