Tax Reform for Acceleration and Inclusion (TRAIN) - PwC

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Tax Reform for

Acceleration and

Inclusion (TRAIN)

Isla Lipana & Co.

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Tax Reform for Acceleration and Inclusion (TRAIN)

Revised income tax table for individuals

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Income tax

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Effective:

1 January 2018

1 January 2023

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Effective:

0%

0%

Over PHP250,000 but not

over PHP400,000

20% of the excess over

PHP250,000

15% of the excess over

PHP250,000

Over PHP400,000 but not

over PHP800,000

PHP30,000+25% of the

excess over PHP400,000

PHP22,500+20% of the

excess over PHP400,000

Over PHP800,000 but not

over PHP2m

PHP130,000+30% of the

excess over PHP800,000

PHP102,500+25% of the

excess over PHP800,000

Over PHP2m but not over

PHP8m

PHP490,000+32% of the

excess over PHP2m

PHP402,500+30% of the

excess over PHP2m

Over PHP8m

PHP2,410,000+35% of the

excess over PHP8m

PHP2,202,500+35% of the

excess over PHP8m

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Not over PHP250,000

Optional taxation for self-employed and

professionals (SEPs)

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SEPs whose gross sales/receipts and other non-operating income do

not exceed PHP3m (new VAT threshold) may opt to be taxed at:

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Graduated rates; or

8% based on gross sales and/or gross receipts and other non-operating

income in excess of PHP250,000 in lieu of graduated rates and

percentage tax

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Failure to signify the intention to elect the 8% optional taxation in the 1st

quarter of the taxable year shall be considered as having availed of the

graduated rates and such shall be irrevocable for the taxable year.

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Taxation of mixed income earners

Mixed income earners are subject to:

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Graduated rates on their compensation income;

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If their gross sales/receipts and other non-operating income

Isla Lipana & Co./PwC Philippines

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do not exceed PHP3m ¨C at the taxpayer¡¯s option, either:

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exceed PHP3m ¨C graduated rates

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8% based on gross sales and/or gross receipts and other non-operating

income in lieu of graduated rates and percentage tax; or

graduated rates

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Other amendments to income taxation

Employees of RHQs, ROHQs, OBUs, and Petroleum Service Contractors

and Subcontractors

The 15% preferential tax rate shall not apply to employees of ROHQs,

RHQs, OBUs, and Petroleum Service Contractors and Subcontractors which

registered with the Securities and Exchange Commission after 1 January 2018.

Vetoed

Present and future qualified employees of existing RHQs/ROHQs, OBUs,

or Petroleum Service Contractors and Subcontractors shall be entitled to

the 15% preferential rate.

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Revenue Regulations (RR) No. 8-2018 provides that employees of RHQs,

ROHQs, OBUs, and Petroleum Service Contractors and Subcontractors shall

be subject to graduated tax rates.

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Vetoed

New passive income tax rates

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PCSO and lotto winnings exceeding PHP10,000

of citizens and resident aliens

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Interest income on FCDU deposits of citizens,

resident aliens, and domestic corporations

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Capital Gains Tax (CGT) on sale of unlisted

shares by citizens, resident aliens, non-resident

aliens, and domestic corporations

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Exempt 13th-month pay and other

benefits increased to PHP90,000

Fringe benefits tax rate increased to

35%

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15%

15%

Deletions

Escalations

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20%

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Personal and additional exemptions

Deductions for premiums paid

on health and/or hospitalization

insurance

Exemption of PCSO from corporate

income tax

Tax Reform for Acceleration and Inclusion (TRAIN)

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Simplified individual and corporate income tax returns (ITR), i.e., max. of 4

pages

Individuals earning purely compensation income from only one employer

are not required to file annual ITR

BIR Form No. 2316 stamped ¡°received¡± by the Bureau of Internal Revenue

(BIR) tantamounts to substituted filing of ITR of employees

Quarterly Alphabetical List of Payees (QAP) shall accompany BIR Form

Nos. 1601-EQ and 1601-FQ1

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Miscellaneous provisions

Filing deadlines

Final (FWT) and expanded/creditable (EWT/CWT) withholding taxes

- last day of the month following the close of the quarter during which taxes

were withheld thru BIR Form Nos. 1601-EQ (for EWT/CWT) and 1601-FQ

(for FWT)1

- remittance every 10th and 15th of the following month (for manual and

electronic filers, res pectively) during which taxes were withheld,

regardless of the amount withheld, thru BIR Form Nos. 0619-E (for EWT/

CWT) and 0619-F (for FWT)1

For individuals

- Second installment payment of the income tax due ¨C 15 October

- Filing of declaration of estimated income tax ¨C 15 May

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Filing of annual ITR - 15 April (unchanged) [Sec. 51(C), Tax Code]1

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Amendments to the existing withholding

tax regulations1

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An individual whose gross income exceeds PHP3m or is VAT-registered,

regardless of the gross income amount, is subject to 10% CWT rate on his/

her gross professional fees, or any other form of remuneration for services

rendered.

Sworn declarations regarding the income payees¡¯ gross sales/receipts are

required to be submitted by income payee to income payors/withholding

agents and by income payors/withholding agents to the BIR.

Inclusion of identified top 5,000 individuals and taxpayers identified as

medium taxpayers, and those under the Taxpayer Account Management

Program to ¡°top withholding agents¡± who shall withhold 1% and 2%

withholding tax on income payments on supplies of goods and services,

respectively

Adjustment on the thresholds for certain de minimis benefits

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RR No. 11-2018

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