On December 19, 2017, President Rodrigo Duterte signed the much-awaited tax reform program that plans to shift the tax burden from the low-income earners to the higher-earning ones.
This new law exempts individuals whose annual income does not exceed PhP250,000 from paying personal income taxes.
Workers who are earning 400,000 to 800,000 will “be paying income tax at ₱30,000 plus 25% of the excess over ₱400,000.” Before those who are earning more than 500,000 annually pay “₱125,000 plus 32% of the excess over ₱500,000.”
Also, the tax exemption for bonuses such as 13th-month pay is raised from 82,000 to 90,000.
Another change introduced by the Tax Reform for Acceleration and Inclusion (TRAIN) is the optional flat tax for the SEPs of the self-employed and professionals. If they would not opt for the flat tax, they may choose a single rate of income tax.
What this means is for these individuals is that if their gross sales or gross receipts do not exceed 3,000,000, they may follow the new tax schedule or get an 8% flat tax for sales exceeding PhP250,000. Choosing the latter will exempt them from the 3% percentage tax. However, if their gross sales or receipts are below 500,000, they are still exempted from the 3% percentage tax whether they choose the flat tax rate or the single rate of income tax.
The estate tax rate is also lowered and “can be paid within a year and an installment within two years.” Instead of the multiples rates, there will be a single rate of 6%. There will also be a standard deduction and a family home exemption of PhP5,000,000 and PhP10,000,000 respectively.
However, the increased tax on several commercial products including petroleum, beverages, coal, and others may mean higher fees and prices for each of them.
For more information on how TRAIN affects you, visit the link provided below. For a more comprehensive list of the changes, check out our other post here.
References:
http://cnnphilippines.com/life/culture/2017/12/18/what-does-the-tax-reform-bill-mean-for-me.html
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