Train Tax

What’s in the approved
TRAIN Tax Reform of 2018?

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What taxes are included in the Philippine tax reform

program to be implemented starting 2018?
We summarize below a list of revised and brand-

new taxes that are part of the Tax Reform for
Acceleration and Inclusion or TRAIN program
initiated by the Department of Finance (DOF) and
recently ratified by Congress. Implementation of
said new taxation has begun on January 1, 2018
after being signed into law by Pres. Rodrigo Duterte
in December 2017.
Let’s take an in-depth look at what’s included in this
tax reform program.
UPDATE: We compiled all articles related to the

TRAIN law on this page: TRAIN Law and BIR Tax
Implementing Guidelines. Click the link to access
BIR’s implementing rules and regulations and
examples of how to compute applicable taxes.
* * * UPDATED resources on the approved TRAIN
Tax Reform below:
 Everything about TRAIN Law and BIR Tax
Implementing Guidelines
 What’s included in the approved Philippine Tax Reform
of 2018?
 New Personal Income Tax Rates and Income Tax Tables
in the Philippines (2018)
 BIR Sample Computations: How to Compute Taxes
under TRAIN
1. New Personal Income Tax Rates
Personal income tax rates will be lowered, while
salaried employees earning annual income
of P250,000 or below will be exempted from paying
income taxes.
Full details of the New Personal Income Tax Rates

and Income Tax Tables can be found here.
2. Lower Tax Rates for Professionals
With the revised personal income tax table, salaried
employees will surely benefit from the lower tax
rate. Self-employed professionals, meanwhile, can
expect to pay lower taxes as well with the
reduced tax rates for professionals, as follows:
ANNUAL SALES OR GROSS
TAX RATE
RECEIPTS
P250,000 and below 0%
Below P3 million May choose either 8% flat tax on gro

tax table
Above P3 million Subject to personal income tax table
Professionals will no longer have to file and pay the

percentage tax; instead they will be charged
a withholding tax of 8% flat rate on gross sales or
receipts.
Self-employed professionals earning annual income
of P3 million and below may choose to pay the 8%
flat tax or follow the personal income tax table.
3. Tax on 13th Month Pay and Other Bonuses

The threshold for tax exemption on 13th month pay
and other bonusesreceived by salaried employees
has been raised from the current P82,000 to
P90,000. This means 13th month pay and bonuses
paid to employees that amount to P90,000 or below
will not be taxed.
4. Tax on Drinks using Sugar and Caloric / Non-Caloric
Sweeteners
Beverages that use sugar and other sweeteners will
be taxed effective January 2018. These include
softdrinks and other cola drinks, fruit juices, and
powdered drinks, among others.
The sugar tax is as follows:

 P6.00 per liter of drink that uses caloric and non-caloric
sweeteners
 P12.00 per liter of drink that uses high fructose corn
syrup (HFCS)
5. Tax exemption of milk, 3-in-1 coffee, medicines for
diabetes, etc.
Exempted from the sugar tax are milk, 3-in-1 coffee,
100% natural fruit juice or vegetable juice,
medically-indicated beverages, and drinks and
beverages that use natural sweeteners such as
coco sugar or stevia.
Meanwhile, drugs and medicines prescribed
for diabetes, high cholesterol, or hypertension will
also be exempted from the 12% VAT.
6. Taxes on LPG, Diesel, Gasoline, and other fuel
products
Liquefied Petroleum Gas or LPG is currently not
taxed, but will be charged excise tax as follows:
 P1.00 tax per liter in 2018
Diesel is also currently not taxed, but will have new
taxes, as follows:
Gasoline, both regular and unleaded, will have the
following excise taxes raised from the current P4.35
per liter:
Other fuels and oil products will be taxed as follows:
 Aviation gas – P4.00 per liter
 Asphalts – P8.00 per kilo
 Kerosene – P3.00
 Naphtha – P7.00
 Bunker fuel – P2.50
 Lubricating oil – P8.00
 Paraffin wax – P8.00
 Petcoke – P2.50
UPDATE: Pres. Duterte has vetoed the exemption
from excise taxes of petroleum products used as
input, feedstock, or as raw material in the
manufacturing of petrochemical products, or in the
refining of petroleum products, or as replacement
fuel for natural gas fired combined cycle power
plants.
7. Taxes on Cars and Automobiles
The new excise taxes for cars will follow a four-tier
scheme:
Excise Tax on Cars and Automobiles

NET MANUFACTURER'S TAX RATE ON HYBRID TAX R
PRICE CARS CARS
P600,000 and below 2% 4%
Above P600,000 to P1 million 5% 10%
Above P1 million up to P4 million 10% 20%
Above P4 million 25% 50%
Pick-up trucks and electric vehicles will be

exempted from additional taxes. Hybrid cars, as
seen in the table above, will be charged 1/2 (half)
the taxes imposed on non-hybrid automobiles.
8. Tax on Coal
The approved excise tax on coal is as follows
(currently P10.00 tax per metric ton):
 P50.00 tax per metric ton in 2018
9. Tax on Tobacco Products
Excise taxes on tobacco products will be increased
to P32.50 initially during the first six months of
2018, then will rise to P35.00 from the rest of 2018
until 2019.
From 2020 to 2021, the tobacco tax will rise to
P37.50, followed by a fixed tax of P40.00 to be
imposed from 2022 to 2023. From 2023
onwards, tobacco taxes will rise 4% annually.
10. Donor’s Tax
Donations or gifts with at least P250,000 worth will
be charged a donor’s tax of 6% flat rate. This will be
charged regardless of the relationship between the
donor and the donee.
11. Estate Tax
The estate tax, or tax levied on the properties or
estate of lawful heirs and beneficiaries inherited
from a deceased person, will now be subject to a
flat rate of 6% on the amount in excess of P5
million.
Estates with a net value of P5 million and below will
be exempted from paying the estate tax. Family
homes that are valued at P10 million or less will
also be exempted from estate tax. Under existing
tax laws, only family homes worth P1 million are
exempted.
12. Tax on Cosmetic Surgery and other Aesthetic

Procedures
Starting 2018, there will be a 5% tax on cosmetic
surgeries, aesthetic procedures, and body
enhancements.
13. Documentary Stamp Tax
The documentary stamp tax (DST) charged on
some legal or business transactions will double
from P1.50 to P3.00 beginning 2018.
14. Stock Transaction Tax

Stock trading in the Philippines might be affected
with the revised taxes on stock market activity.
The stock transaction tax — a tax charged on stock

sellers when a buy or sell transaction is made —
will be increased to 0.6% of the gross trade amount
from the current 0.5% rate.
Stock-related transactions of companies not listed
in the Philippine Stock Exchange (PSE) will be
slapped with a higher stock transaction tax of 15%,
an increase from the current 5% or 10%.
15. Foreign Currency Interest Income Tax

The tax on interest income on foreign currency
deposits is currently pegged at 7.5%. This will
increase to 15% of the interest on foreign currency
deposit unit (FCDU) under the TRAIN tax reform.
List of Vetoed Items by Pres. Duterte
Here are five (5) items in the tax reform bill that was
vetoed by Pres. Duterte when he signed the bill into
law.
1.Veto on the 15% special tax rate for employees

of Regional Headquarters (RHQ), Regional
Operating Headquarters (ROHQ), Offshore Banking
Units, and Petroleum Service Contractors and
Subcontractors. Thes employees will be taxed using the
regular income tax table as shown in Item No. 1 above.
2.Veto on the exemption of self-employed professionals,
with gross sales or receipts not exceeding P500,000,
from the payment of the 3% percentage tax.
3.Veto on the excise tax exemption of petroleum products
used as input, feedstock, or as raw material in the
manufacturing of petrochemical products, or in the
refining of petroleum products, or as replacement fuel
for natural gas fired combined cycle power plants (see
Item No. 6 above).
4.Veto on the zero rating of sales of goods and
services to separate customs territory and tourism
enterprise zones, specifically, the areas under the
Tourism Infrastructure Enterprise Zone Authority
(Tieza).
5.Veto on the earmarking of incremental tobacco taxes
You must read these other awesome articles!
 Everything about TRAIN Law and BIR Tax
Implementing Guidelines
 What’s included in the approved Philippine Tax Reform
of 2018?
 New Personal Income Tax Rates and Income Tax Tables
in the Philippines (2018)
 BIR Sample Computations: How to Compute Taxes
under TRAIN

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What’s in the approved

TRAIN Tax Reform of 2018?

What taxes are included in the Philippine tax reform

We summarize below a list of revised and brand-

UPDATE: We compiled all articles related to the

Full details of the New Personal Income Tax Rates

P250,000 and below 0%

Below P3 million May choose either 8% flat tax on gro

Above P3 million Subject to personal income tax table

Professionals will no longer have to file and pay the

3. Tax on 13th Month Pay and Other Bonuses

The sugar tax is as follows:

Excise Tax on Cars and Automobiles

P600,000 and below 2% 4%

Above P600,000 to P1 million 5% 10%

Above P1 million up to P4 million 10% 20%

Above P4 million 25% 50%

Pick-up trucks and electric vehicles will be

12. Tax on Cosmetic Surgery and other Aesthetic

14. Stock Transaction Tax

The stock transaction tax — a tax charged on stock

15. Foreign Currency Interest Income Tax

1.Veto on the 15% special tax rate for employees

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