Module 1 - Cherry Alfuerte - Train Law

TRAIN LAW
(Tax Reform For Acceleration and

Inclusion – RA 10963)
C- CREATES – 8 sections
A-AMENDS- 69 sections
R-REPEALS – 3 sections
SUMMARY OF THE
PROVISIONS
AFFECTING INCOME
TAX
PERSONAL EXEMPTION Removed under
ADDITIONAL EXEMPTION the TRAIN LAW
Exemption for PWD’s
Other Benefits
Increased to
P 82,000 P 90,000
IMPACT OF THE CHANGE
IN INCOME TAX RATES and
the removal of the allowable
deductions ON THE
INDIVIDUAL TAXPAYERS
Filing of Quarterly ITR
1st Qtr. APRIL 15 MAY 15
Same
2 Qtr.
nd AUG. 15 AUG. 15
Same
3 Qtr.
rd NOV. 15 NOV. 15
ANNUAL ITR
April 15 of succeeding year Same

ANNUAL INCOME TAX
RETURN FOR 2018 TO Additional provision:
ANNUAL
BE FILED INCOME TAX
2019 SHALL  Personal profile and
RETURN FOROF
CONSIST 2018
A TO information
BE FILED OF
MAXIMUM 2019 SHALL
4 PAGES  Gross sales receipts or
CONSIST OF A income from
MAXIMUM OF 4 PAGES compensation, from
business, or from
exercise of profession
(except income subject to
final tax
 Allowable deductions
 Taxable income
 Income tax due and
payable
2nd Installment in the
payment of taxes OCTOBER
Deadline JULY 15 15
NO more simplified Books of

KEEPING OF BOOKS OF accounts
ACCOUNTS
Quarterly Sales P150,000 All taxpayers are required to
Simplified Bookkeeping keep and use relevant &
appropriate set of
Bookkeeping records
Keeping of Books of Accounts
Corporations, Companies, Partnerships or Persons Required to Keep Books

of Accounts. – All corporations, companies, partnerships or persons required
by law to pay internal revenue taxes shall keep and use relevant and
appropriate set of bookkeeping records duly authorized by the Secretary of
Finance wherein all transactions and results of operations are shown and
from which all taxes due the Government may readily and accurately be
ascertained and determined any time of the year: Provided, That
corporations, companies, partnerships or persons whose gross annual sales,
earnings, receipts or output exceed Three million pesos (P3,000,000), shall
have their books of accounts audited and examined yearly by independent
Certified Public Accountants and their income tax returns accompanied with a
duly accomplished Account Information form (AIF) which shall contain, among
others, information lifted from certified balance sheets, profit and loss
statements, schedules listing income-producing properties and the
corresponding income therefrom and other relevant statements.
Minimum Wage Earner
Exempted from Income Tax
Holiday
Pay
Overtime
Pay OTHER SOURCE OF
Hazard Night INCOME
Pay Shift
Differential HE SHALL LOSE HIS
pay RIGHT TO BE AN MWE
RULES ON 8% OPTION FOR
TAXPAYERS ENGAGED IN
BUSINESS OR PRACTICE OF
PROFESSION
DEFINITION OF TERMS
Contract Price
Compensation
Service Fee
GROSS
Rental or Royalty
RECEIPTS Amount charged for materials
supplied with the services
Deposits
Advance Payments
In the case of VAT taxpayer, this shall exclude the VAT component.
DEFINITION OF TERMS
For purpose of availing the 8%.
Sales Return and

Allowances
(SRA)
GROSS
SALES
Discounts
DEFINITION OF TERMS
Practice of Profession (not under E-E)
SELF – EMPLOYED Contract Service
Taxpayer opens his own Business

DEFINITION OF TERMS
Directors Promotional Talent fees

Doctors
Producers Lawyers
Insurance
Engineers
Agents Professional
Insurance Architects
Adjusters
CPA’s
Management &
Technical Consultant Professional
Bookkeeping Other recipients of Athletes
Agents Professional
DEFINITION OF TERMS
Gross Receipts – refers to the ceiling set to
determine VAT registrable taxpayers, currently set at
three million (P3,000,000.00) pesos; same threshold
to be used to determine the income tax liability of
self- employed and/or professionals under Sections
24(A)(2)(b) and 24(A)(2)(c)(2) of the Tax Code, as
amended.
INCOME TAX RATES ON INDIVIDUAL CITIZEN
AND INDIVIDUAL RESIDENT ALIEN
In general, the income tax on the individual’s taxable income shall computed
based on the following schedules as provided under Sec. 24(A)(2)(a):
Effective January 1, 2018 until December 31, 2022:

RANGE OF TAXABLE INCOME TAX DUE = a + (bxc)
BASIC ADDITIONAL OF OVER
OVER NOT 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
Not over P10,000 5%
Over P10,000 but not over P30,000 P500+10% of the excess over P10,000
Over P30,000 but not over P70,000 P2,500+15% of the excess over P30,000
Previous rate
Over P70,000 but nor over P140,000 P8,500+20% of the excess over P70,000
Over P500,000 P125,000+32% of the excess over P500,000
RANGE OF TAXABLE INCOME TAX DUE = a + (bxc)

BASIC ADDITIONAL OF OVER
OVER NOT OVER
(a) (b) (c)
- 250,000.00 -
250,000.00 400,000.00 - 20% 250,000.00
Effective January 1, 2018
400,000.00 800,000.00 30,000.00 25% 400,000.00
until December 31, 2022:
800,000.00 2,000,000.00 130,000.00 30% 800,000.00
2,000,000.0 8,000,000.00 490,000.00 32% 2,000,000.00
0
8,000,000.0 - 2,410,000.00 35% 8,000,000.00
0
GENERAL RULE:
Taxpayer is subject to GRADUATED Rates (Sec. 24)
EXCEPT
1st Qtr. Income Tax Return
Taxpayer Signified his (May 15)
Intention to avail the 8%
option
Option shall be:
 Irrevocable
 No Amendment of
option shall be made
within the taxable year.
INDIVIDUAL TAXPAYER
 Taxpayer who did not qualify for the 8% income tax rate
shall be subject to the graduated income tax rate, and
shall also be subject to the applicable business tax/es,
if any.
 Taxpayers who cannot avail of the 8% income tax rate:
• Those subject to Other Percentage Taxes under Title V of the
Tax Code, as amended, except those subject under Section
116 of the same Title
• Partners of a General Professional Partnership (GPP) since
their distributive share from GPP is already net of cost and
expenses.
Features of Graduated Income Tax (IT) rates and 8% IT rates
PARTICULARS GRADUATED IT RATES 8% IT RATES

Applicability In general, applicable to all May be availed by qualified individuals
individual taxpayers engaged in business / practice of profession
whose gross sales/ receipts and other non-
operating income did not exceed
P3,000,000.00
Basis of IT Net Taxable Income Gross sales/receipts and other non-operating

income
Allowed Allowable itemized Allowed deduction of P250,000.00 from the
Deductions deductions or OSD gross, only for individual whose income
comes purely from business/practice of
profession; otherwise, no reduction /
deduction allowed
Business Tax Percentage Tax or VAT if qualified: Not subject to PT

When does a taxpayer use the graduated income tax
rates or the option of 8% income tax rate?
When does a taxpayer use the graduated income tax
rates or the option of 8% income tax rate?
SUMMARY
PURELY COMPENSATION
INCOME EARNERS
Salary ALWAYS
Graduated Rates
8% Option
Employer Employee 250,000

Self Employed/Practice
Profession OPTION:
1. Income below 3M 8%
2. 250,000 deduction
Or
Store Doctor
3. Graduated Rates
MIXED INCOME EARNER
COMPENSATION
Compensation
Income plus Always graduated Rates
Income from
Business BUSINESS INCOME TAXPAYER HAS THE
OPTION TO AVAIL THE 8%
If the taxpayer availed of the 8%
Compensation
Business
Tax Due X Graduated
Income X 8%
Rates
If the taxpayer do not avail the 8%
Income from Compensation

+ Income from Business
Tax Due
Total
X Graduated Rates
TRAIN LAW PROVISION
VETO MESSAGE
More TAXES for
COMMODITIES
TRAIN LAW ANTI - POOR

ISSUES
Improve Tax
Administration
Give Decent Jobs
Make economic environment more
attractive for investors
THANK YOU!
CHERRY P. ALFUERTE
Discussant

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TRAIN LAW

(Tax Reform For Acceleration and

1st Qtr. APRIL 15 MAY 15

April 15 of succeeding year Same

NO more simplified Books of

Corporations, Companies, Partnerships or Persons Required to Keep Books

Sales Return and

SELF – EMPLOYED Contract Service

Taxpayer opens his own Business

Directors Promotional Talent fees

Effective January 1, 2018 until December 31, 2022:

RANGE OF TAXABLE INCOME TAX DUE = a + (bxc)

Taxpayer is subject to GRADUATED Rates (Sec. 24)

PARTICULARS GRADUATED IT RATES 8% IT RATES

Basis of IT Net Taxable Income Gross sales/receipts and other non-operating

Business Tax Percentage Tax or VAT if qualified: Not subject to PT

Employer Employee 250,000

If the taxpayer availed of the 8%

Income from Compensation

TRAIN LAW ANTI - POOR

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