TRAIN ACT: ITS SALIENT FEATURES

AND ITS IMPACT TO THE

WORKFORCE AND THE POPULACE
 BASIC CONCEPTS IN TAXATION
1. It is the process to which the sovereign, through its
law making body raises revenue to defray the
expenses of the government.
2. It is a means of government increasing its revenue
under the authority of the law, purposely used to
promote welfare and protection to its citizenry;
3. It is the collection of the share of the individual and
organizational income by a government under the
authority of the law.
TAXATION is the inherent power of the state to
impose and demand contribution upon persons
and properties or rights for the purpose of
generating revenues for public purpose.

Taxes are the lifeblood of the government without

which the state will be paralyzed.

The power of taxation upon necessity and is

inherent in every government or sovereignty.
PRINCIPLES AND THEORIES IN TAXATION
 1. THE BENEFIT PRINCIPLE- The principle holds the individuals
should be taxed in proportion to the benefits they receive
from the government and that taxes should be paid by
those people who receive the direct benefit of the
government programs and projects out of the taxes paid.
 2. THE ABILITY-TO-PAY PRINCIPLE- The principle holds that
taxes should relate with the people’s income or the ability
to pay, that is, people with greater income or wealth and
can afford to pay more taxes should be taxed at a higher
rate than with people with less rate.
 3. THE EQUAL-DISTRIBUTION PRINCIPLE- This principle that
income, wealth, and transaction should be taxed at a fixed
percentage, that is, people who earn more and buy more
should pay more taxes, but will not pay a higher rate of
taxes.
 CHARACTERISTICS OF TAXES

1. IT IS AN ENFORCED CONTRIBUTION.

2. IT IS GENERALLY PAYABLE IN CASH.
3. IT IS PROPORTIONATE IN CHARACTER.
4. IT IS IMPOSED ON PERSON OR PROPERTY.
5. IT IS IMPOSED BY THE STATE WHICH HAS
JURISDICTION OVER THE PERSON OR PROPERTY.
6. IT IS IMPOSED BY THE LAWMAKING BODY OF THE
STATE.
7. IT IS IMPOSED FOR PUBLIC PURPOSE.
TAXATION IS THE STRONGEST AMONG
THE THREE (3) INHERENT POWERS OF
THE GOVERNMENT BECAUSE WITHOUT
REVENUES, THE GOVERNMENT CANNOT
EXISTS AND NEITHER THE OTHER
POWERS EXISTS NOR EFFICIENTLY
FUNCTION FOR THE PEOPLE.
 PURPOSES OF TAXATION

1. PRIMARY PURPOSE- to raise revenues and to

mobilize resources

2. SECONDARY PURPOSES- (a)to regulate the

conduct of business or professions; (b) to achieve
economy and stability; (c) to protect local
industries
THE TAX REFORM FOR ACCELARATION
AND INCLUSION (RA 10963)
It is the first package of
comprehensive tax reform program
envisioned by the President.
The law was signed by the President
on December 11, 2017 and was
made effective fifteen days after its
publication.
 OBJECTIVES OF THE TRAIN LAW
It aims to make the current tax system simpler,
fairer, and more efficient.
It also aims to eradicate extreme poverty,
provide equal opportunities though inclusive
economic and political institutions and achieve
high income status.
By 2020 until 2040, it will reduce the poverty
rate from 26% to 17%.
SALIENT FEATURES OF THE TRAIN (TAX REFORM
FOR ACCELERATION AND INCLUSION) / RA 10963
1 . TAX SCHEDULE
EFFECTIVE JANUARY 1, 2018 UNTIL DECEMBER 31, 2022

RANGE OF TAXABLE INCOME TAX DUE = A + (B X C)

OVER NOT OVER BASIC ADDITIONAL OF OVER

(a) (b) (C)

- 250,000.00 - -

250,000.00 400,000.00 - 20% 250,000.00

400,000.00 800,000.00 30,000.00 25% 400,000.00

800,000.00 2,000,000.00 130,000.00 30% 800,000.00

2,000,000.00 8,000.000.00 490,000.00 32% 2,000,000.00

8,000,000.00 2,410,000.00 35% 8,000,000.00

 INCOME TAXATION
 Starting January 01, 2018, compensation earners, self-employed and
professional earners (SEPs) whose annual taxable incomes are
P250,000.00 and below or less than P21,000.00 a month is exempted from
the personal income tax.
 SEPs whose gross receipts or sales are below P3 million have the option to
choose from 8% flat rate or the TRAIN’s new personal income tax table.
 SEPs whose annual salaries are P500,000.00 and below are exempt from
3% percentage tax.
 The 13th month pay and other bonuses amounting to P90,00 are likewise
tax-exempt.
 The law repeals Section 35 of the Tax Code on personal exemptions of
individual taxpayers. Whether the taxpayer is single, married, head of
family, with or without dependents, the taxpayer is exempted from
paying personal income tax as long as he is earning less than P21,00 a
month.
SALIENT FEATURES OF THE TRAIN (TAX REFORM
FOR ACCELERATION AND INCLUSION) / RA 10963
MINIMUM WAGE EARNER
2.

statutory minimum wage rates are EXEMPTED from

income tax.
also exempted are the holiday pay, overtime pay,
night shift differential pay and hazard pay earned by
MWEs

3. 13TH MONTH PAY AND OTHER BENEFITS

Maximum of P90,000
SALIENT FEATURES OF THE TRAIN (TAX REFORM
FOR ACCELERATION AND INCLUSION) / RA 10963

4. PERSONAL AND ADDITIONAL EXEMPTIONS

NONE – already included in the P250,000
exempt from income tax
repeals the exemptions under the Magna
Carta for Persons with Disability and in the
Foster Care Act of 2012
 SALIENT FEATURES OF THE TRAIN (TAX REFORM FOR
ACCELERATION AND INCLUSION) / RA 10963
6. SELF-EMPLOYED INDIVIDUALS

PURELY SELF-EMPOYED/PRACTICE OF PROFESSION

OPTIONS:
The graduated rates under the Tax Code as amended;
OR
The 8% tax on gross sales or receipts and other non-
operating income in excess of P250,000 in lieu of the
graduated income tax rates and the percentage tax.
SALIENT FEATURES OF THE TRAIN (TAX REFORM
FOR ACCELERATION AND INCLUSION) / RA 10963
7. MIXED INCOME EARNERS
 The compensation income shall be subject to the graduated income tax rates
prescribed under the Tax Code; AND
 The income from business or practice of profession shall be subject to:
 a. If the gross sales/receipts and other non-operating income do not exceed the
VAT threshold, option to be taxed at:
 The graduated rates of the Tax Code as amended;
 OR
 The 8% tax on gross sales or receipts and other non-operating income in excess
of P250,000 in lieu of the graduated income tax rates and the percentage tax.
 b. If the gross sales/receipts and other non-operating income exceeds the VAT
threshold, the individual shall be subject to the graduated income tax rates.
 VALUE-ADDED TAX

Business with annual total sales of P3

million and below are exempt from paying
taxes.
VAT-FREE STARTING 2019:
Sales of drugs for diabetes, high cholesterol
and hypertension

VAT-FREE STARTING 2021:

-socialized and mass housing projects from P2
million and below
The following are exempt from VAT:

1. Raw foods
2. Agricultural products
3. Health and education
4. Senior citizens
5. Persons with Disabilities
6. Cooperatives
7. Renewal Energy
8. Tourism enterprises
9. BPOs in special economic zones
10. Socialized housing (P450,000.00 and below
11.Low-cost housing (amounting to P3million)
12. Leases below P15,000.00 and below
13. Condominium association dues
SALIENT FEATURES OF THE TRAIN (TAX REFORM FOR
ACCELERATION AND INCLUSION) / RA 10963
DOCUMENT ( DOCUMENTARY STAMP TAX) ATC AMOUNT

Sec 174 - Original Issue of Share of Stock DS101 P2.00/200

Sec 175 - Sales, Agreements to Sell, Memoranda of Sales, Deliveries or Transfer of Shares or DS102 P1.50/200

Certificates of Stock with par value

Sec 175 - Sales, Agreements to Sell, Memoranda of Sales, Deliveries or Transfer of Shares or DS102 50% of DST paid on original issue

Certificates of Stock without par value

Sec 179 - All Debt Instruments DS106 P1.50/200.00 of FV or a fraction of 365 days for

instrument with term of less than 1 year

Sec 188 - Certificates Issued DS114 P30.00/Certificate

Sec 189 - Warehouse Receipts DS115 Above P200.00=P30.00

Sec 193 - Powers of Attorney DS119 Above P200.00 = P30.00

Sec 194 - Leases and Agreements DS120 1st P2,000 = P6.00

Over P2,000 = P2.00/P1,000.00

Sec 195 - Mortgages, Pledges and Deeds of Trust DS121 1st P5,000=P40.00

Over P5,000=P20.00/P5,000.00

Sec 196 - Deeds of Sale, Conveyances and Donations of Real Property DS122 On first P1,000.00 = P15.00

In excess of P1,000 or fractional part thereof =

SALIENT FEATURES OF THE TRAIN (TAX REFORM FOR
ACCELERATION AND INCLUSION) / RA 10963
ESTATE TAX (RESIDENT OR NON-RESIDENT RA 10963 (TRAIN

Rate 6% based on the net value of the estate

Deductions:

Family Home 10M

Standard 5M

Funeral Expenses None

Judicial Expenses None

Medical Expenses None

Time of Filing 1 year from date of death

Payment by Installments 2 years in case of insufficient cash without civil penalty and interest

CPA certification 5M

Withdrawal on deposits of decedent 6% Final Tax

SALIENT FEATURES OF THE TRAIN (TAX REFORM
FOR ACCELERATION AND INCLUSION) / RA 10963

DONOR’S TAX RA 10963 (TRAIN

RATE

Relative 6%

First P250,000.00 - Exempt

Stranger 6%

Exemption None

Dowries or gifts on account of marriage

SALIENT FEATURES OF THE TRAIN (TAX REFORM
FOR ACCELERATION AND INCLUSION) / RA
10963
EXCISE TAX-PRODUCT TYPE 2017 R.A. NO. 10963

On all non-metallic mineral and quarry resources

1. Locally extracted or produced, 2% 4%

based on actual market value

2. In the case of importation based 2% 4%

on value used by Bureau of Customs

in determining tariff and customs

duties, net of excise tax and VAT

3. Locally-extracted natural gas and P0.00 Exempt

liquefied natural gas

1. SUGAR-SWEETENED BEVERAGES

-P6 per liter for drinks using sugar and artificial sweeteners
-P12 per liter for drinks using high fructose corn syrup
-All kinds of milk, 3-in-1 coffee, natural fruit and vegetable
juices and medically indicated beverages are exempted.

2. PETROLEUM EXCISE TAX FUEL PER LITER

2018-2020: Diesel P2.50, P4.50 and P6
: LPG P1/kg, P2/kg and P3/kg
UNLEADED PREMIUM GASOLINE
P7, P9 and P10
3. COSMETIC TAX
A 5% tax will be imposed on cosmetic surgery or
medical procedures for purely aesthetic purposes
HERE’S HOW THE TRAIN LAW WILL
AFFECT EVERYONE…
1. INCREASE TAKE-HOME MONEY AND
BONUSES
-Under the law, workers with annual salary of
P250,000.00 is exempted from tax. Salaries that were
once deducted 5% to 32% in tax rate now have 0% tax
deduction.
- Tax exemption also includes the mandated 13th
month bonus and other bonuses. This means every
employee can now take home more than they did the
previous years.
2. EXCISE ON SUGAR-SWEETENED BEVERAGE
AND CIGARETTES
- 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 vegetable juices, and ground,
instant, and pre-packaged coffee products.
3. INCREASE ON PETROLEUM AND AUTOMOBILE TAX
- The law imposes an P8 increase in petroleum products per liter
this year. For diesel and kerosene, the once non-existent excise tax
will now be at P2.50-P3.0/ liter. Household gas LPG will have an
added P1/liter. Taxes in petroleum and gas will gradually increase
until 2020.

- If you’re planning on buying a car in the near future, do it as soon

as possible because automobiles are not exempt from excise tax.
Vehicles worth P600,000.00 and below will have a 4% tax rate.
Vehicles over P600,000.00 up to 1 million will have a 10% increase, a
20% increase for vehicles priced above P1 million to P4million, and
50% for vehicles above P4million.
- 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’S TAX AND HIGHER
DOCUMENTARY STAMP TAX
-Under the law, a flat rate of 6% will be imposed on both estate and
donor’s tax. In the old law, the net estate value last year went up to
20% if the estate was worth P200,000.00 and above. With the TRAIN
Law, estates worth P5 million and below will have zero tax rate, but the
P5 million and above will have 6% of the excess over P5million.

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

- Under the law, almost all of the documentary stamp taxes have
doubled.
WHAT ARE THE BENEFITS OF THE TRAIN LAW?
In the next five years, the tax reform can fund P629,
120 public school classrooms or 2, 685,101 public
school teachers;
In the next five years, the tax reform can fund 60,483
rural health units or 484, 326 barangay health stations,
or 1,324 provincial hospitals;
Additional funds from the tax reform will be used for
the projects of the DPWH which consists of major
highways, expressways, and flood control projects. In
the next five years, the tax reform can fund: 35, 745 km
of paved roads or 786, 400 km of temporary bridge
upgrades or 2.6 million hectares of irrigated lands.