PRIMER ON REPUBLIC ACT NO.

10963

TAX REFORM FOR ACCELERATION AND INCLUSION (TRAIN) LAW

PERSONAL INCOME TAX

Starting January 1, 2018, compensation income earners, self-employed
and professional taxpayers (SEPs) whose annual taxable incomes are P250,000
or less are exempt from the personal income tax (PIT).
The 13th month pay and other benefits amounting to P90,000 are
likewise tax-exempt.
Tax schedule effective January 1, 2018 until December 31, 2022 is as
follows:

AMOUNT RATES

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

Tax schedule effective January 1, 2023 and onwards:

AMOUNT RATES

Not Over P250,000 0%

Over P250,000 but not over P400,000 15% of the Excess Over P250,000

Over P400,000 but not over P800,000 P22,500 + 20% of the Excess over P400,000

Over P800,000 but not over P2,000,000 P102,500 + 25% of the Excess over P800,000

Over P2,000,000 but not over P8,000,000 P402,500 + 30% of the Excess over P2,000,000

Over P8,000,000 P2,202,500 + 35% of the Excess over P8,000,000

SEPs who are also earning compensation income shall be subject to:
• On Compensation Income — graduated income tax (IT) schedule

1
 • On Income from Business or Practice of Profession —
o If Gross Sales and/or Gross Receipts and other Non-Operating
Income do not exceed P3,000,000 — either 8% fixed tax
or graduated IT schedule.
o If Gross Sales and/or Gross Receipts and other Non-Operating
Income exceed P3,000,000 — graduated IT schedule.
EXAMPLES:
1. For a CALL CENTER AGENT who receives a monthly salary of
P21,000 with mandatory annual deductions of P15,166.00 consisting of SSS,
Philhealth, and Pag-ibig contributions, the income tax is computed as:

A. Annual Basic Salary P252,000.00

B. 13th Month Pay and Other Benefits 21,000.00

C. Mandatory Contributions 15,166.00

Computation of Income Tax

Annual Gross Income (A+B) P273,000.00

Deductions and Exemptions (B+C) 36,166.00

Net Taxable Income P236,834.00

Income Tax Rate:

Over 0-P250,000 = 0%

TAX DUE P0.00

====

2. For a public school TEACHER (SG14, Step1) who receives a

monthly salary of P26,494.00 with mandatory annual deductions of P34,185.00
consisting of GSIS, Philhealth, and Pag-ibig contributions, the income tax is
computed as:

A. Annual Basic Salary P317,928.00

B. 13th Month Pay and Other Benefits 26,494.00

C. Mandatory Contributions 34,185.00

Computation of Income Tax

2
 Annual Gross Income (A+B) P344,422.00

Deductions and Exemptions (B+C) 60,679.00

Net Taxable Income P283,743.00

Income Tax Rate:

Over 0-P250,000 = 0%

Over P250,000-P400,000 = 20% of Excess over P250,000

TAX DUE: P250,000.00 = P0.00

33,743.00 x 20% = P6,748.60

=======

TAX ON PASSIVE INCOME TAX

• Interest on FCDU deposits — 15%
• Sale of Unlisted shares — 15%
• Sale of Listed shares — 0.6 of 1%
• Pre-terminated long-term time deposits — 20%
FRINGE BENEFITS
A final tax of 35% is imposed on the grossed up monetary value of
fringe benefit granted to the employee (except rank and file employees) by the
employer, whether an individual or a corporation. Such tax is payable by the
employer. aScITE

OPTIONAL STANDARD DEDUCTION (OSD)

A general professional partnership and the partners comprising such
partnership may avail of the OSD only once, either by the general professional
partnership or the partners.
FILING OF INCOME TAX RETURNS (ITR) AND PAYMENT OF
TAXES
• An individual whose taxable income does not exceed P250,000 is not
required to file an income tax return.
• The ITR shall be composed of a maximum of four (4) pages in paper
or electronic form.
• Substituted filing of ITR by employees receiving purely compensation
income by respective employers will be evidenced by the Certificate of
Withholding filed and duly stamped "received" by the BIR. It shall be
tantamount to the substituted filing of ITRs by the said employees.
• The rate of withholding of tax at source shall not be less than 1% but
not more than 15% of the income payment beginning January 1, 2019.

3
ESTATE TAX
The rate of estate tax to be paid upon the transfer of the net estate of
decedent to his heir or beneficiary is fixed at 6% of the value of net estate.
• Deductions allowed to the estate of a Citizen or Resident —
o Standard deduction equivalent to P5,000,000;
o Claims against the estate;
o Claims of the deceased against insolvent persons where the
value of the decedent's interest therein is included in the
value of the gross estate;
o Unpaid mortgages upon, or any indebtedness in respect to
property of the decedent;
o Property previously taxed;
o Transfers for public use;
o The Family home equivalent to current fair market value of the
decedent's family home not exceeding P10,000,000; and
o Amount received by heirs under RA 4917.
• Deductions allowed to the estate of a Non-Resident Citizen —
o Standard deduction equivalent to P5,000,000;
o Proportion of the following deductions:
a) Claims against the estate;
b) Claims of the deceased against insolvent persons,
and
c) Unpaid mortgages upon, or any indebtedness in
which the value of such part bears to the value
of his entire gross estate wherever situated;
o Property previously taxed;
o Transfers for public use;
o The family home equivalent to current fair market value of the
decedent's family home not exceeding P10,000,000; and
o Amount received by heirs under RA 4917.
• The net share of the surviving spouse in the conjugal partnership
property diminished by the obligations properly chargeable to
such property is deducted from the net estate of the decedent.
• The estate tax returns showing a gross value exceeding P5,000,000
shall be supported with a statement duly certified to by a
Certified Public Accountant (CPA).
• The estate tax returns shall be filed within one (1) year from the
decedent's death.
• In case the available cash of the estate is insufficient to pay the total
estate tax due, payment by installment shall be allowed within
two (2) years from the statutory date for its payment without civil
penalty and interest.

4
 • Withdrawals from the bank deposit account of the decedent are
allowed subject to a final withholding tax of six (6%) percent.
DONOR'S TAX
The tax payable by a donor for each calendar year shall be fixed at 6%
based on the total gifts in excess of P250,000.00.
• Any contribution in cash or in kind to any candidate, political party or
coalition of parties for campaign purposes shall be governed by
the Election Code as amended.
• Exemption of gifts made by a resident:
o Gifts made to or for the use of the National Government or any
entity created by any of its agencies which is not
conducted for profit, or to any political subdivision of the
said Government.
o Gifts in favor of an educational and/or charitable, religious,
cultural or social welfare corporation, institution,
accredited nongovernment organization, trust or
philanthropic organization or research institution or
organization: Provided, That not more than 30% of said
gifts shall be used by such donee for administration
purposes.
VAT:
• The threshold gross sales/receipts is Php3 Million.
• A purely self-employed individual and/or professional who is VAT
registered but whose gross sales/receipts now fall below the new VAT
threshold may change his status to NON-VAT and avail of:
i. The graduated income tax rates under Sec. 24 (A) (2) (a) of the NIRC,
as amended; or
ii. An 8% tax on gross sales/receipts and other non-operating income in
excess of P250,000 in lieu of the graduated income tax rates and
the percentage tax under Sec. 116 of the NIRC, as amended.
NOTE: Once the option is made, such is already irrevocable for that
particular taxable year.
• Coverage is expanded to include:
o Electric cooperatives;
o Domestic shipping importation;
o Power transmission;
o Low-cost housing (price more than Php2 Million) and socialized
housing (price more than Php450,000) until 2020;
o Lease of residential units (exceeding Php15 thousand);
o Boy Scouts of the Philippines;
o Philippine Sports Commission;
o PTV Network;
o Philippine Postal Corporation;

5
 o Bangko Sentral ng Plipinas;
o PhilHealth;
o GSIS; and
o SSS.
• Additional Exemptions include:
o Sale of medicines prescribed for diabetes, high cholesterol, and
hypertension beginning January 1, 2019;
o Sale of gold to the Bangko Sentral ng Pilipinas;
o Transfer of property under a de facto merger or consolidation; and
o Condominium and homeowners association dues, membership fees
and other charges.
• Indirect Exporters are still VAT zero rated until the establishment and
implementation of an enhanced VAT refund system.
• Criteria of an enhanced VAT refund system:
o All applications filed from 1 January 2018 shall be processed and
must be decided within 90 days from the filing of the VAT
refund application (NOTE: Failure on the part of the BIR official,
agent or employee to act on the application within the 90 day
period is punishable under Sec. 269 of the NIRC, as amended);
and
o All pending VAT refund claims as of December 31, 2017 shall be
fully paid in cash by December 31, 2019.
• Official Development Assistance (ODA) projects are not subject to the
final withholding VAT [Sec. 114 (C)].
CIGARETTE EXCISE TAX
• The tax rates, per pack of 20s, on cigarettes packed by hand or by
machine are:
o January 1, 2018-June 30, 2018 — 32.50
o July 1, 2018-December 31, 2019 — 35.00
o January 1, 2020-December 31, 2021 — 37.50
o January 1, 2022-December 31, 2023 — 40.00
o January 1, 2024 onwards — 4% annual increase
PETROLEUM EXCISE TAX
• The tax rates are:

2020
Petroleum product Unit 2018 2019
onwards

Lubricating oils & greases Liter/kilogram 8.00 9.00 10.00

Processed gas Liter 8.00 9.00 10.00

Waxes & petrolatum Kilogram 8.00 9.00 10.00

6
Denatured alcohol Liter 8.00 9.00 10.00

Naphtha, regular gasoline, Liter 7.00 9.00 10.00

pyrolysis gasoline

Unleaded premium gasoline Liter 7.00 9.00 10.00

Aviation turbo jet fuel Liter 4.00 4.00 4.00

Kerosene Liter 3.00 4.00 5.00

Diesel fuel oil Liter 2.50 4.50 6.00

Liquefied petroleum gas Kilogram 1.00 2.00 3.00

Asphalts Kilogram 8.00 9.00 10.00

Bunker fuel oil Liter 2.50 4.50 6.00

Petroleum coke Metric ton 2.50 4.50 6.00

AUTOMOBILE EXCISE TAX

• The Tax Rates, imposed on the importer's or manufacturer's price, net
of the excise and value-added taxes are:

Rate (in percent)

Net Price (in Php)
Traditional Hybrid

Not more than 600,000 4 2

Over 600,000 to 1 Million 10 5

Over 1 Million to 4 Million 20 10

Over 4 Million 50 25

• A hybrid vehicle is a motor vehicle powered by electric energy in

combination with gasoline, diesel or any motive power, that can propel itself
from a stationary condition using solely electric motor.
• Additional tax-exempt vehicles include pick-up trucks & electric
vehicles.
EXCISE TAX ON COSMETIC PROCEDURES
• Tax rate and base: 5% of the gross receipts on invasive cosmetic
procedures, surgeries & body enhancements for aesthetic purposes. HEITAD

• Exempt procedures include: 1) Procedures necessary to ameliorate a

deformity arising from a congenital or developmental defect or abnormality, a
personal injury resulting from an accident or trauma, or disfiguring disease,

7
 tumor, virus or infection, 2) Cases or treatments covered by the National
Health Insurance Program.
SWEETENED BEVERAGE TAX

Type of Sweetened Beverage Rate (Php)

• sweetened beverages using purely caloric and purely non- ⇒ 6.00 per liter
caloric sweeteners, or a mix of caloric and non-caloric
sweetener

• sweetened beverages using purely high fructose corn syrup ⇒ 12.00 per liter
(HFCS) in combination with any caloric or non-caloric
sweeteners

• Taxable non-alcoholic beverages include:

✓ Sweetened juice drinks ✓ Flavored water ✓ Cereal & grain beverages

✓ Sweetened tea ✓ Energy sports drinks ✓ Other non-alcoholic

beverages with sugar
added

✓ Carbonated beverages ✓ Other powdered drinks not classified as milk, juice, tea, &
coffee

• The list of exempt beverages includes:

✓ All milk products ✓ Meal replacement & medically indicated beverages

✓ 100% natural fruit juices ✓ Ground coffee, instant soluble coffee, & pre-packaged
powdered coffee products (3-in-1, etc.)

✓ 100% natural vegetable

juices

EXCISE TAX ON MINERAL PRODUCTS

The tax rates are:
• Coal & coke, per metric ton:

Jan 1, 2018 Jan 1, 2019 Jan 1, 2020 onwards

Php50 Php100 Php150

• Metallic & non-metallic minerals & quarry resources: 4% of the actual

market value of the gross output at the time of removal or the
BOC valuation for determining tariff and customs duties, net of
the excise and value-added taxes
• Indigenous petroleum: 6% of the fair international market price

8
 DOCUMENTARY STAMP TAX
The tax rates are:

Document/Transaction Rate & Base

Original issue of shares of stock Php2.00 per Php200 or fractional part thereof,
of the par value

Sales, agreements to sell, memoranda of sales, Php1.50 per Php200 or fractional part thereof,
deliveries or transfer of shares or certificates of of the par value of the stock
stock

Certificates of profits or interest in property or Php1.00 per Php200 or fractional part thereof,
accumulations of the face value

Bank checks, drafts, certificates of deposit not Php3.00 per check, draft or certificate
bearing interest and other instruments

Debt instruments Php1.50 per Php200 or fractional part thereof,

of the issue value

Bills of exchange or drafts; Acceptance of bills Php0.60 per Php200 or fractional part thereof,
of exchange & others; Foreign bills of exchange of the face value
and letters of credit

Life insurance policies Amount of insurance

Rate (Php)
(in Php)

Not more than 100,000

More than 100,000 up to 20.00

300,000

More than 300,000 up to 50.00

500,000

More than 500,000 up to 100.00

750,000

More than 750,000 up to 150.00

1,000,000

More than 1,000,000 200.00

Annuities Php1.00 per Php200 or fractional part thereof, of

the premium or instalment payment

Pre-need plans Php0.40 per Php200 or fractional part thereof, of

the premium or contribution

Certificates; Warehouse receipts; Proxies Php30.00

Jai-alai and horse race ticket, lotto or other Php0.20 per Php1.00 or fractional part thereof, of
authorized numbers games the cost of the ticket

9
Bills of lading or receipts Value of goods Rate (Php)

Php100-Php1,000 2.00

More than Php1,000 20.00

Powers of attorney Php10.00

Leases and other hiring agreements Value of agreement/lease Rate

(in Php)

First Php2,000 6.00

For every Php1,000 or 2.00

fractional part thereof, in
excess of the first
Php2,000

Mortgages, pledges and deeds of trust Amount secured Rate

(Php)

First Php5,000 40.00

For every Php5,000 or 20.00

fractional part thereof, in
excess of the first
Php5,000

Leases and other hiring agreements Value of agreement/lease Rate

(in Php)

First Php2,000 6.00

For every Php1,000 or 2.00

fractional part thereof, in
excess of the first
Php2,000

Mortgages, pledges and deeds of trust Amount secured Rate

(Php)

First Php5,000 40.00

For every Php5,000 or 20.00

fractional part thereof, in
excess of the first
Php5,000

Deeds of sale, conveyances and donation of real Php15.00 per Php1,000 or fractional part
property, except those exempt from the donor's tax thereof, of the consideration or value

Charter parties and similar instruments Registered tonnage Rate (Php)

Not more than 1,000 tons Php1,000 on the

first 6 months, and
Php100 for each
month/fractional

10
 part in excess of 6
months

1,000 tons-10,000 tons Php2,000 on the

first 6 months, and
Php200 for each
month/fractional
part in excess of 6
months

More than 10,000 tons Php3,000 on the

first 6 months, and
Php300 for each
month/fractional
part in excess of 6
months

ADMINISTRATIVE MEASURES
• Mandatory marking of all fuel products and imposition of fines for
related offences.
• Use of appropriate counting or metering devices to determine volume
of fuel importation and production.
• Issuance of receipts or sales or commercial invoices on the sale and
transfer of merchandise or for services rendered valued at Php100 or more.
• By 2023, those engaged in the export of goods and services, taxpayers
engaged in e-commerce and those belonging to the Large Taxpayers Service
are required (1) to issue electronic receipts or sales or commercial invoices and
(2) to electronically report their sales data to the Bureau of Internal Revenue
(BIR).
• Fine for attempt to evade or defeat tax is set at not less than
Php500,000 but not more than Php10,000,000 and imprisonment of not less
than 6 years but not more than 10 years.
• Fine for printing of (a) receipts without authority of the BIR, (b)
double or multiple sets, or (c) unnumbered receipts is set at not less than
Php500,000 but not more than Php10,000,000 and imprisonment of not less
than 6 years but not more than 10 years.
• Penalty for failure to transmit sales data to the BIR's electronic sales
reporting system is 1/10 of 1% of the annual income or Php10,000, for each
day.
• Fine for the purchase/use/possession/sale-or-offer-to-
sell/installation/transfer/update/upgrade/maintenance of sales suppression
devices is set at not less than Php500,000 but not more than Php10,000,000
and imprisonment of not less than 2 years but not more than 4 years.
EARMARKING OF INCREMENTAL REVENUES FROM THE TRAIN
• Not more than 70% for infrastructure projects such as the Build, Build,
Build Program
• Not more than 30% for:

11
o the sugarcane industry;
o social mitigating measures and investments in education, health, social
protection, employment and housing; and
o social welfare and benefits program.
— such as unconditional cash transfer of Php200 monthly on the
first year and Php300 monthly on the next 2 years;
— for fuel vouchers to qualified public utility jeepney
operators/drivers; and
— for minimum wage earners/unemployed/poor.
* fare discounts,
* free TESDA skills training, and
* discounted purchase of NFA rice.

12