1

LET’S TALK:
BIR & YEAR-END
ESSENTIALS
SPEAKERS:

ERICA I. NICOLASURA CPA CTT

2 TOPIC OUTLINES

KPI Dashboard
TRAIN LAW PACKAGE 1 AND RELATED BIR
ISSUANCES (2018 AND 2019)
Your great subtitle in this line

TRAIN LAW PACKAGE 2 TRABAHO LAW

UPDATES

BIR YEAR-END REPORTORIAL

REQUIREMENTS AND DEADLINES

SEC UPDATES AND YEAR-END

COMPLIANCE
3
COMPREHENSIVE TAX REFORM PACKAGE (CTRP)

PACKAGE COVERAGE KPI Dashboard

Your great subtitle in this line

Personal income tax, vehicle and oil excise tax, reduction

Lorem in donor’s
Ipsum is simply dummy textand estate
of the printingtax
and typesetting industry.
1 Lorem Ipsum has been the industry's standard dummy text ever RA 10963
since the 150.
and sugar-sweetened beverages.

Corporate income tax and rationalization of fiscal incentives. Foregone revenues

2 from the 2nd package is expected to be offset by revenues from fiscal HB NO. 7458
rationalization.

3 Rationalization of property valuation closer to market values. HB NO. 7458

Capital income tax, reduction of interest income on peso deposit, increase in tax
4 rates on dollar and investment; and increase in tax on stock transaction to 1% of RA 10963
gross selling price.

5 Health, environment (coal levies and carbon tax) and luxury items. RA 10963
4

Our goal is to correct our tax system’s

problems to become….

SIMPLER

FAIRER

MORE EFFICIENT

“We will lessen the OVER-ALL TAX

BURDEN of the poor and the middle
class.”
5
“For two decades, we have been
constrained by the OUTDATED
PROVISIONS of our tax laws under the
National Internal Revenue Code, as
amended. In particular, the high
personal income tax rates that have
placed a significant burden to our
Pres. Rodrigo
laborers. Today, a major breakthrough
in the legislative history has taken
Duterte
place, where we not only break this
trend but provide for additional
resources that we will use to fund the
social and economic infrastructure that
will benefit the poor.”

- Pres. Rodrigo Duterte

6

T E S O N
UP DA
BIR ISSUANCES RELATED TO INCOME TAX 2018 AND 2019
7

NO. OF ISSUANCE SUBJECT MATTER DATE OF ISSUE

RMC No. 1-2018 Prescribes the procedures on the use of Withholding Tax Table on 05/01/2018
Compensation Income and advises on the change of Creditable Withholding Tax
Rate on certain income payments to individuals
RMC No. 2-2018 Provides the transition procedures for all taxpayers filing tax returns affected 08/01/2018
by the revised tax rates pursuant to the provisions of RA No. 10963 (Tax Reform
for Acceleration and Inclusion or TRAIN Law)
RR No. 6-2018 Revokes Revenue Regulations (RR) No. 12-2013 relative to the requirements for 19/01/2018
deductibility of certain expenses, thereby reinstating the provisions of Section
2.58.5 of RR No. 14-2002, as amended by RR No. 17-2003
RR No. 8-2018 Implements the amended provisions on Income Tax pursuant to RA No. 10963 20/02/2018
(TRAIN Law)
RMC No. 17-2018 Amends certain provisions of RMC Nos. 89-2017 and 54-2014 on the processing 08/03/2018
of claims for issuance of tax refund/Tax Credit Certificate in relation to
amendments made in the NIRC of 1997, as amended by RA No. 10963, known as
the TRAIN
BIR ISSUANCES RELATED TO INCOME TAX 2018 AND 2019
8

NO. OF ISSUANCE SUBJECT MATTER DATE OF ISSUE

RMO No. 14-2018 Creates the Alphanumeric Tax Code (ATC) for the remittance of 09/03/2018
Creditable/Final Income Taxes withheld under the TRAIN Law
RR No. 11-2018 Amends certain provisions of RR No. 2-98, as amended, to implement further 15/03/2018
amendments pursuant to RA No. 10963 (TRAIN Law) relative to withholding of
Income Tax
RR No. 14-2018 Amends certain provisions of RR No. 11-2018, particularly Sections 2 and 14 05/04/2018
RMO No. 23-2018 Prescribes the policies, guidelines and procedures in the availment of the eight 21/05/2018
percent (8%) Income Tax Rate option for individuals earning from self-
employment and/or practice of professions
RMC No. 50-2018 Provides clarifications on certain provisions of RR Nos. 8-2018 and 11-2018 08/06/2018
implementing the Income Tax provisions of RA No. 10963 (TRAIN Act)
RMO No. 28-2018 Creates and modifies the Alphanumeric Tax Codes (ATCs) for Individual Income 03/07/2018
Tax under RA No. 10963 (TRAIN Act)

RR No. 21-2018 Implements Section 249 (Interest) of the National Internal Revenue Code of 14/09/2018
1997, as amended under Section 75 of RA No. 10963 (TRAIN Law)
RMC No. 96-2018 Clarifies the provisions to be included in RMC No. 50-2018 for the 29/11/2018
implementation of RA No. 10963 (TRAIN Law)
BIR ISSUANCES RELATED TO INCOME TAX 2018 AND 2019
9

NO. OF ISSUANCE SUBJECT MATTER DATE OF ISSUE

RMC No. 17-2019 Prescribes the new BIR Form No. 1701A - Annual Income Tax Return for 24/01/2019
Individuals Earning Purely from Business/Profession (those under the
graduated Income Tax rates with Optional Standard Deduction as mode of
deduction or those who opted to avail of the 8% flat Income Tax rate) January
2018 version
RR No. 1-2019 Further amends certain provisions of RR No. 2-98 as amended by RR No. 11- 08/02/2019
2018, which implemented the provisions of RA No. 10963 (TRAIN Law), relative
to some changes in the rate of Creditable Withholding Tax on certain income
payments
RMC No. 24-2019 Clarifies the amending provisions of RR No. 11-2018 prescribing the submission 14/02/2019
of BIR Form No. 2316 and Certified List of Employees Qualified for Substituted
Filing of Income Tax Return (ITR)
10
PERSONAL INCOME TAX
What is INCOME TAX?
“Is a tax on a person's income, emoluments,
profits arising from property, practice of
profession, conduct of trade or business or
on the pertinent items of gross income
specified in the Tax Code of 1997 (Tax
Code), as amended, less the deductions, if
any, authorized for such types of income, by
the Tax Code, as amended, or other special
laws.” (As amended RA 10963, Sec. 8)
11
GROSS INCOME (But not limited to the following)
A. Compensation for services; H. Annuities;
B. From conduct of trade or business or I. Prizes and Winnings
the exercise of profession;
J. Pensions; and
C. Gains derived from dealings in property; K. Partner’s distributive share from the net income
of the general professional partnership
D. Interest;

E. Rents;

F. Royalties;

G. Dividends;
12
EXCLUSIONS FROM GROSS INCOME
A. Life Insurance G. Miscellaneous Items
> Income derived by Foreign Government
B. Amount received by insured as > Income derived by the Government or its
RETURN OF PREMIUM Political Subdivision
> Prizes and Awards
C. Gifts, Bequests and Devises > Prizes and Awards in Sports Competition
> 13th Month Pay and Other Benefits (P 90,000)
D. Compensation for Injuries or Sickness > GSIS,SSS, Medicare and Other Contributions;
> Gains from the Sale of Bonds, Debentures or
E. Income Exempt under Treaty other Certificate of Indebtedness with a maturity of more
than 5 years; and
F. Retirement Benefits, Pensions, Gratuities etc. > Gains from Redemption of Shares in Mutual
Fund
13
DEDUCTIONS FROM GROSS INCOME
A. Expenses G. Depletion of oil and gas wells and mines
B. Interest H. Charitable and Other Contributions
C. Taxes I. Research and Development; and
D. Losses J. Pension Trusts
E. Bad Debts
F. Depreciation
14
PERSONAL INCOME TAX CHANGES UNDER
TRAIN
The first PHP 250,000 of annual taxable income will be exempt from
income tax, thus removal of PERSONAL EXEMPTION and
ADDITIONAL EXEMPTION.

In addition, THE FIRST PHP 90,000 OF THE 13TH MONTH PAY AND
OTHER BONUSES WILL BE EXEMPT FROM INCOME TAX.

Futhermore, the effective TAX RATES WILL LOWERED FOR 99%

taxpayers EXCEPT THE RICHEST WITH TAXABLE INCOME
ABOVE PHP 8 M, WHO WILL FACE A TAX RATE OF 35%.

Minimum Wage Earners (MWE) remains EXEMPT FROM INCOME

TAX.
15
PERSONAL INCOME TAX CHANGES UNDER
TRAIN

OPTION OF 8% IS IN LIEU OF THE 3% PERCENTAGE TAXES

under SEC 116 based on gross receipts.
Self Employed Professional (SEP) now HAVE AN OPTION TO BE
TAXED 8% flat rate on gross receipts NOT EXCEEDING PHP 3M or
be taxed on their taxable income using the regular graduated tax rates.

OPTION FOR 2ND INSTALLMENT HAS BEEN MOVED TO OCT 15

FROM JULY 15
16

INCOME EXEMPTED FROM TAX

 13TH MONTH PAY AND OTHER BENEFITS MAXIMUM
OF P 90,000
 GSIS, SSS, MEDICARE AND OTHER CONTRIBUTIONS
 COMPENSATION INCOME OF MINIMUM WAGE
EARNERS
 COMPENSATION DURING THE YEAR NOT EXCEEDING P
250,000.00
17

DE MINIMIS BENEFITS
Monetized unused vacation leave credits of private employees “De Minimis benefits
not exceeding ten (10) days during the year; are not subject to
Monetized value of vacation and sick leave credits paid to income tax as well as
government employees; withholding tax on
Medical cash allowance to dependents of employees, not compensation income
exceeding P 1,500 per employee per semester of P 250 per for both managerial
month; and rank and file
Rice subsidy of P 2,000 or one sack of 50kg rice per month employees”
amounting to not more than P 2,000;

Uniform and clothing allowance not exceeding P 6,000 per

annum.
18
PERSONAL INCOME TAX TABLE
Previous Tax Schedule:
ANNUAL TAXABLE INCOME TAX RATE

0 - 10,000 5%
Over 10,000 - 30,000
+Second
500 + 10% of the excess over 10,000
+First +Third
Over 30,000 - 70,000 2,500 + 15% of the excess over 30,000
Over 70,000 - 140,000 8,500 + 20% of the excess over 70,000
Over 140,000 - 250,000 22,500 + 25% of the excess over 140,000
Over 250,000 - 500,000 50,000 + 30% of the excess over 250,000
Over 500,000 125,000 + 32% of the excess over 500,000

Tax Schedule 2018 to 2022:

ANNUAL TAXABLE INCOME TAX RATE % of Taxpayers
0 - 250,000 0% 83%
Over 250,000 - 400,000 20% of the excess over 250,000 8%
Over 400,000 - 800,000 30,000 + 25% of the excess over 400,000 6%
Over 800,000 - 2,000,000 130,000 + 30% of the excess over 800,000 2%
Over 2,000,000 - 8,000,000 490,000 + 32% of the excess over 2,000,000 1%
Over 8,000,000 2,410,000 + 35% of the excess over 8,000,000 0.1%
19
PERSONAL INCOME TAX TABLE
Tax Schedule 2023 Onwards:

ANNUAL TAXABLE INCOME +Second TAX RATE

+First +Third
0 - 250,000 0%
Over 250,000 - 400,000 15% of the excess over 250,000
Over 400,000 - 800,000 22,500 + 20% of the excess over 400,000
Over 800,000 - 2,000,000 102,500 + 25% of the excess over 800,000
Over 2,000,000 - 8,000,000 402,500 + 30% of the excess over 2,000,000
Over 8,000,000 2,202,500 + 35% of the excess over 8,000,000

“The simplified tax system will INCREASE THE TAKE-HOME PAY of the
most individuals thereby putting more money in people’s pockets. This will
make the system fairer and more equitable.”

- Department of Finance
20
IMPACT ON TAXPAYER’S PERSONAL INCOME TAX
CALL CENTER AGENT (Monthly Income: P 21,000.00)
A.Annual Basic Salary: D. Personal Exemption:
PHP 252,000.00 PHP 50,000.00
B. 13th Month Pay: E. Allowance for Dependents (2) :
PHP 21,000.00 PHP 50,000.00
C. Mandatory Contributions:
PHP 11,641.00

OLD TAX SYSTEM TRAIN

TAX SAVINGS:
ANNUAL GROSS INCOME: ANNUAL GROSS INCOME:
A+B
273,000
A+B
273,000
Total of P 22,590
DEDUCTION AND EXEMPTIONS DEDUCTION AND EXEMPTIONS
B+C 32,641
B+C
TAXABLE INCOME 240,359 32,641
LESS EXEMPTION AND
ALLOWANCE 100,000 NET TAXABLE INCOME
NET TAXABLE INCOME 140,359
Income bracket: Over 140,000 to 250,000 240,359
(22,500 + 25% of the excess over 140,000)
TAX DUE : P 22,590 TAX DUE : P 0
Income bracket: Over 0 to 250,000 (0%)
21
MONTHLY WITHHOLDING TAX ON COMPENSATION
Revenue Regulation No. 11-2018 issued January 31, 2018

Requirement of Withholding
Every Employer MUST WITHHOLD FROM
COMPENSATION paid an amount computed in
accordance with the new RA 10963, WHETHER THE
EMPLOYEE IS A CITIZEN OR AN ALIEN,
EXCEPT NON-RESIDENT ALIEN NOT ENGAGED
IN TRADE OR BUSINESS. Provided, that no
withholding of tax shall be required on the SMW,
including holiday pay, overtime pay, night shift
differential and hazard pay of MWEs in the private/public
sectors as defined in theses regulations.
22
MONTHLY WITHHOLDING TAX ON COMPENSATION
Revenue Regulation No. 11-2018 issued January 31, 2018

Third Title
02 Third Title
23
MONTHLY WITHHOLDING TAX ON COMPENSATION

ROSE
Receiving SEMI-MONTHLY income of P 15,500 net of mandatory
contributions.

Computation:
Third Title
02 Third Title

1. Use the semi-monthly withholding tax table.

2. Check the pre-determined tax range:
Taxable Compensation P 15,500
Less: Compensation range 10,417
Excess P 5,083
Predeterminded tax on P 10,417 P 0
Add: Tax on the excess (P 5,083 x 20%) 1,016
Total semi-monthly withholding tax P 1,016
24
MONTHLY WITHHOLDING TAX ON COMPENSATION

LYN
Receiving MONTHLY income of P 165,000 net of mandatory
contributions with supplemental compensation of P 5,000 for the
month.
Computation:
Third Title
02 Third Title

1. Use the monthly withholding tax table.

2. Check the pre-determined tax range:
Taxable Compensation P 165,000
Less: Compensation range 66,667
Excess P 98,333
Add: Supplemental Income 5,000
Total
Predeterminded Ptax103,000
on P 66,667 P 10,833.33
Add: Tax on the excess (P 103,333 x 30%) 30,999.90
Total semi-monthly withholding tax P 41,833.23
25
MONTHLY WITHHOLDING TAX ON COMPENSATION
CLASSIFICATION OF TAXABLE INCOME:

REGULAR COMPENSATION – includes salary, fixed allowances for representation,

02
transportation and other allowances paid to employee per payroll period.
Third Title Third Title

SUPPLEMENTARY COMPENSATION – includes payments to an employee in addition to

the regular compensation, such as commission, overtime pay, taxable retirement, taxable bonus,
and other taxable benefits with or without regard to a payroll period.
EMPLOYEES
26 WITHHOLDING STATEMENT (BIR FORM 2316)
BIR Form 2316 is distributed as follows: “Every employer or other person
required to deduct and withhold tax
1. Original – Employee’s Copy on compensation shall furnish every
employee from whom taxes were
2. Duplicate – BIR’s Copy; and withheld a Certificate of
Compensation Payment and Tax
3. Triplicate – Employer’s copy which shall be retained Withheld (BIR Form 2316) on of
for a period of TEN (10) years. before January 31 of the
succeeding year, on the day on
which the last payment of
compensation is made.”
PROCEDURES
27 FOR THE FILING OF THE APPLICATION FOR REGISTRATION BIR FORM
1902 AND UPDATE BIR FORM 1905

All employers shall require their concerned employees to

accomplish in TRIPLICATE the BIR form 1902
(Employees with NO existing TIN) and BIR form 1905 In case of changes in the information
(Employees with existing TIN) distributed as follows: BIR Form 1905 reflecting the changes,
together with the required documentary
a. Original Copy – RDO evidence of changes must be submitted
b. Duplicate – Employer to the employer within 10 days after
c. Triplicate – Employee such change.

New employee with no TIN shall submit the above forms

to their employers. The employers shall file the above
and attachments to the BIR within ten (10) days from the
date of employment or secure TIN of new employee
usging eRegistration System.
28 Individuals earning income purely from self-
employment and/or practice of profession
whose gross sales/receipts and other non-
operating income DOES NOT EXCEED
THE P 3M shall have the option to avail of:

SELF EMPLOYED
INDIVIDUALS The graduated rates under graduated
EARNING INCOME individual income tax table; or

PURELY FROM SELF-

EMPLOYMENT OR
PRACTICE OF An 8% tax on gross sales or receipts
and other non-operating income IN
PROFESSION EXCESS of P 250,000 in lieu of the
graduated income tax rates.
29

SELF EMPLOYED
INDIVIDUALS Sec. 5 of RA 10963

EARNING INCOME
“(a) Self-employed individuals and/or
PURELY FROM SELF- professionals shall have the option to avail of
EMPLOYMENT OR an eight percent (8%) tax on gross sales or
gross receipts and other non-operating
PRACTICE OF income in excess of Two Hundred Fifty
PROFESSION Pesos (P 250,000) in lieu of the graduated
income tax rates.”
 30SELF EMPLOYED INDIVIDUALS EARNING
INCOME PURELY FROM SELF- EMPLOYMENT
OR PRACTICE OF PROFESSION
 Unless the taxpayer SIGNIFIES THE INTENTION TO ELECT 8%
INCOME TAX RATE IN THE 1ST QUARTER, OR ON THE INITIAL
QUARTER RETURN of the taxable year after commencement of a new
business/ practice of profession, THE TAXPAYER SHALL BE
CONSIDERED AS HAVING AVAILED THE GRADUATED TAX
RATES.
 Such election shall be IRREVOCABLE AND NO AMENDMENT OF
OPTION shall be made for the said taxable year.

 8% income tax rate is NOT AVAILABLE TO A VAT REGISTERED

TAXPAYER AND GENERAL PROFESSIONAL PARTNERSHIP (GPP)
regardless of the amount of receipt.

8%
31 SELF EMPLOYED INDIVIDUALS EARNING
INCOME PURELY FROM SELF- EMPLOYMENT
OR PRACTICE OF PROFESSION
 A taxpayer availing the 8% income tax rate is NOT REQUIRED TO
ATTACH FINANCIAL STATEMENTS IN FILING THE INCOME
TAX RETURN. However, existing rules and regulations on bookkeeping
and invoicing/receipting shall still apply.
 A taxpayer shall automatically be subject to the graduated rates even if flat
rate of 8% was selected when taxpayer’s gross sales/receipts and other non-
operating income EXCEEDED THE P3M THRESHOLD AND SHALL
PAY APPLICABLE BUSINESS TAX. In such case, the income tax shall
be computed under the graduated income tax rates and SHALL BE
ALLOWED A TAX CREDIT FOR THE PREVIOUS QUARTER/S
INCOME TAX PAYMENT/S UNDER THE 8% INCOME TAX RATE
OPTION.

8%
32
8% INCOME TAX RATE SAMPLE COMPUTATION
MR. VIC
Operates a convenience store while he offers bookkeeping services
to his clients. In 2018, his gross sales amounted to P 800,000, in
addition to his receipts from bookkeeping services of P 300,000.

02
He already signified his intention to be taxed at 8% income tax
rate in his 1st quarter. Third Title Third Title
Computation:
Gross Sales – Convenience Store
P 800,000
Gross Sales – Bookkeeping
TOTAL SALES/RECEIPTS 300,000
Less: P 1,100,000
Amount allowed as deduction (Sec 24.A.2.b)
250,000
TAXABLE INCOME P
850,000
TAX DUE:
8% of P 850,000 P 68,000
33
8% INCOME TAX RATE SAMPLE COMPUTATION
MR. BAE
Failed to signify his intention to be taxed at 8% income tax rate on
gross sales in his initial Quarterly Income Tax Return, and he
incurred cost of sales and operating expenses amounting to P

02
600,000 and P 200,000, respectively, or a total of P 800,000.
Third Title Third Title
Computation:
Gross Sales/ Receipts
Less: Cost P 1,100,000
of Sales
GROSS INCOME600,000 P
500,000
Less: Operating Expenses
200,000
TAXABLE INCOME P
300,000
TAX DUE:
On excess (P 300,000 – P 250,000) x 20% P 10,000
34
8% INCOME TAX RATE SAMPLE COMPUTATION
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
(8% Rate) (8% Rate) (8% Rate) TOTAL
Total Sales ₱ 500,000.00 ₱ 500,000.00 ₱ 2,000,000.00 ₱ 3,500,000.00 ₱ 6,500,000.00
Less: Cost of Sales ₱ 300,000.00 ₱ 300,000.00 ₱ 1,200,000.00 ₱ 1,200,000.00 ₱ 3,000,000.00
Gross Income

Less: Operating Expenses ₱

₱ 200,000.00
Third Title
02
₱ 200,000.00 ₱ 800,000.00 ₱ 2,300,000.00 ₱ 3,500,000.00

120,000.00 ₱ 120,000.00 ₱ 480,000.00 ₱ 720,000.00 ₱ 1,440,000.00

Third Title

Taxable Income ₱ 80,000.00 ₱ 80,000.00 ₱ 320,000.00 ₱ 1,580,000.00 ₱ 2,060,000.00

Income Tax Due:

Tax Due under the Graduated Rates

Less: 8% incomePtax509,200
previously paid (Q1 to Q3)
( P 3,000,000 – P 250,000) x 8% 220,000
Annual Income Tax Payable
P 289,200
****Taxpayer is likewise liable for business tax(es), in addition to income tax. For this purpose, the taxpayer is required to
update his registration from Non-VAT to VAT taxpayer.

****Percentage tax due on the Non-VAT portion of the sales /receipt shall be collected without penalty, if timely paid
on the due date immediately following the month/ quarter when taxpayer ceases to be a non-VAT.
35
Mixed income earners – business or practice
of profession:

The compensation income – subject

to the tax rates prescribed under Sec.
INDIVIDUALS 24 (A)(2)(a) of the Tax Code, as
amended.
EARNING INCOME
BOTH FROM Business Income:
COMPENSATION AND
 Graduated Income Tax Rates
SELF-EMPLOYMENT  8% Income Tax Rate based on
gross sales/receipt

If business Income exceeds the P

3M threshold, the individual shall be
subject to the graduated income tax
rates.
36 Sec. 5 of RA 10963

(b) Taxpayers earning both compensation income

and income from business or practice of
professional shall be subject to the following rates:

(1) All income from compensation – The rates

INDIVIDUALS prescribed under Subsection (A)(2)(a) of this
section.
EARNING INCOME (2) All income from Business of Practice of
BOTH FROM Profession –
(a) If total gross sales and/ or gross
COMPENSATION AND receipts and other non-operating income do not
exceed the VAT threshold as provided in Section
SELF-EMPLOYMENT 109 (BB) of this Code – The rates prescribed under
Subsection (A)(2)(a) of this Section on taxable
income, or eight percent (8%) income tax based on
gross sales or gross receipts and other non-
operating income in lieu of the graduated income
tax rates under Subsection (A)(2)(a) of this Section
and the percentage tax under Section116 of this
code.
37

INDIVIDUALS Sec. 5 of RA 10963

EARNING INCOME (b) If total gross sales and/or gross receipts and
BOTH FROM other non-operational income exceeds the VAT
threshold as provided in Section 109 (BB) of this
COMPENSATION AND code – the rates prescribed under subsection (A)(2)
SELF-EMPLOYMENT (a)
38 INDIVIDUALS EARNING INCOME BOTH FROM
COMPENSATION AND SELF-EMPLOYMENT
The P 250,000 tax exempt IS AVAILABLE ONLY TO PURELY SELF
EMPLOYED INDIVIDUALS AND/OR PROFESSIONALS.

The P 250,000 mentioned IS NOT APPLICABLE TO MIXED

INCOME EARNERS since it is already incorporated in the first tier of
the graduated income tax rates applicable to compensation income.
39
MIXED INCOME EARNER SAMPLE COMPUTATION
MR. GAM
A financial Controller at JAB Company, earned annual compensation in 2018 of P
1,500,000, inclusive of 13th month and other benefits in the amount of P 120,000 but net
of mandatory contributions to SSS and Philhealth. He owns a convenience store with
gross sales of P2.4M. His cost of sales and operating expenses are P 1M and P 600,000,

Computation:
respectively, and with non-operating income
Third Title of P
02
100,000. Third Title

A. His tax due for 2018 if he opted to be taxed at 8% income tax rate on his gross sales for his
income from business:
Total Compensation Income P 1,500,000
Less: Non Taxable 13th Month and Other Benefits 90,000
Taxable Compensation Income P 1,410,000
Tax Due:
1. On Compensation: 2. On Business:
TOTAL INCOME TAX DUE
On P 800,000 Gross Sales P 2,400,000
(COMPENSATION AND
P 130,000 Add Non Operating Inc. 100,000 BUSINESS)
On Excess x 30% 183,000 Taxable Business Income P 2,500,000
Tax Due on Compensation Tax due at 8% P 200,000 P 513,000
Income
40
MIXED INCOME EARNER SAMPLE COMPUTATION
MR. GAM
Computation:
B. If he did not opt to for the 8% income tax:

02
Total Compensation Income P 1,500,000
Less: Non Taxable 13th MonthThird
and Other
Title Benefits 90,000
Third Title
Taxable Compensation Income P 1,410,000
Add: Taxable Income from Business -
Gross Sales
P 2,400,000
Less: Cost of Sales 1,000,000
Gross Income P
1,400,000
Less: Operating Expenses 600,000 900,000
Net Income
TOTAL from Operation
TAXABLE INCOME P 800,000 P 2,310,000
Add: Non Operating Income 100,000
Tax Due:
On P 2,000,000 P
490,000
On excess x 32% 99,200
41
FREQUENTLY ASKED QUESTIONS ON INCOME AND
WITHHOLDING TAX PROVISIONS OF 22 Nos. 8-2018 AND
11-2018

Third Title
02 Third Title
42 INCOME PAYMENTS SUBJECT TO FINAL
WITHHOLDING TAX

FINAL WITHHOLDING TAX

Under the final withholding tax system the amount of
income tax withheld by the withholding agent is
constituted as a FULL AND FINAL PAYMENT OF
THE INCOME TAX DUE FROM THE PAYEE
OF THE SAID INCOME. The liability for payment
of the tax rests primarily on the payor as withholding
agent. The payee is NOT required to file an income
tax return for the particular income.
43
INCOME PAYMENTS SUBJECT TO FINAL WITHHOLDING TAX
A. Interests from any currency bank deposit and yield or any other monetary benefit from deposit
substitutes and from trust funds and similar arrangements. 20%
B. Interest Income received by an individual taxpayer (except a non-resident individual) from a 15%
depository bank under expanded foreign currency deposit system,
C. Proceeds of pre-terminated long-term deposit or investment in the form of savings, common or 4 Years < 5 Years 5%
individual trust funds, deposit substitutes, investment management accounts and other investment 3 Years < 4 Years 12%
evidenced by certificates in such form as prescribed by the Bangko Sentral ng Pilipinas (BSP). Less than 3 Years 20%

D. Royalties (except royalties on books and other literary works and musical compositions) 20%
E. Royalties on books and other literary works and musical compositions 10%
F. Prizes (Except prizes amounting to P 10,000 or less) 20%
44
INCOME PAYMENTS SUBJECT TO FINAL WITHHOLDING TAX
G. Winnings (except Philippine Charity Sweepstakes and Lotto winnings amounting to P 10,000 or less)
20%
H. Cash or Property Dividends 10%
I. Capital Gains from Sale of Shares of Stock Not Traded in the Stock Exchange 15%
J. Capital Gains from sale of Real Property located in the Philippines 6%
45
INCOME PAYMENTS SUBJECT TO FINAL WITHHOLDING TAX
 46 INCOME TAX RATES ON NON-RESIDENT
ALIEN INDIVIDUAL
A. ENGAGED IN TRADE OR BUSINESS WITHIN THE PHILIPPINES

In genera, the income tax rates applicable to this taxpayer

SHALL BE THE RATES INPOSED ON INDIVIDUAL CITIZEN
AND A RESIDENT ALIEN INDIVIDUAL

B. NOT ENGAGED IN TRADE OR BUSINESS WITHIN THE PHILIPPINES

ALL income received from ALL sources within the Philippines

– 25%
“A non-resident alien individual who shall come to the Philippines and stay therein
for an aggregate period of more than ONE HUNDRED EIGHTY (180) DAYS
during the calendar year shall be deemed a NON RESIDENT ALIEN DOING IN
BUSINESS IN THE PHILIPPINES”
 47 INCOME TAX RATES ON NON-RESIDENT
ALIEN INDIVIDUAL
Alien individuals employed by Regional or Area Headquarters and Regional
Operating Headquarters and Regional Operating Headquarters of
Multinational Company

Alien individual employed by Offshore Banking Units

Alien individual employed by Petroleum Service Contractor and

Subcontractor

The preferential tax rate of 15% will no longer apply to above

companies registering with Securities and Exchange
Commission (SEC) after January 1, 2018. The existing
companies registered shall continue to avail the preferential
tax rates for present and future qualified employees. (RA
10963 Sec. 6.F)
48
FRINGE BENEFIT:

Means any goods, services or other benefit

furnished or granted in cash or in kind by an
employer to an individual employee (except
rank and file)

SPECIAL TREATMENT 35% shall be imposed on the

OF FRINGE BENEFITS grossed-up monetary value of fringe
benefits furnished or granted to an
employee.

The grossed up monetary value of

the fringe benefit shall be
determined by dividing the actual
monetary value by 65%.
49
EXAMPLE OF FRINGE BENEFITS
A. Housing G. Expense for foreign travel
B. Expense Account H. Holiday and Vacation Expenses
C. Vehicle of any kind I. Educational Assistance to the employee
D. Household personnel J. Life or health insurance excess of what the
law requires.
E. Interest on loans at less than
market value
F. Membership fees, dues and other expenses borne
by the employer fort the employee
50 OPTIONAL STANDARD DEDUCTION:

Allowable expenses is based on 40% of Gross

Sales/ Receipts.

The OSD is allowed to individual

taxpayers, except non-resident aliens
OPTIONAL STANDARD
DEDUCTION (OSD)
An individual who is entitled to and
claimed for the OSD shall NOT BE
REQUIRED TO SUBMIT
FINANCIAL STATEMENTS.

A General Professional Partnership

(GPP) may avail of the OSD only
once, either by the GPP or the
partners comprising the partnership.
51OPTIONAL STANDARD DEDUCTION FOR
GENERAL PROFESSIONAL PARTNERSHIP
 GPP is not subject to income tax imposed pursuant to Sec.26 of the Tax
Code, as amended. It is only acting as a “pass through” entity where its
income is ultimately taxed to the partners comprising it.

 Partners are liable to pay income tax on their separate and individual
capacities for their respective distributive share in the net income of the
GPP.
 For purposes of computing the distributive share of the partners, the net
income of the GPP shall be computed in the same manner as a
corporation.
 A GPP may claim either the itemized deductions allowed or in lieu
thereof, it can opt to avail of the OSD allowed to corporation in claiming
the deductions in an amount not exceeding 40% of its gross income.
52 CREDITABLE WITHHOLDING TAX
Taxes withheld on certain income payments
are intended to equal or at least approximate
the tax due of the payee on said income. The
income recipient is still required to file an
income tax return.

OPTIONAL STANDARD
Certificate of Creditable
DEDUCTION (OSD) Withholding Tax (BIR Form 2307)
is issued in lieu of the amount
deducted.
INCOME PAYMENTS
SUBJECT TO
CREDITABLE Rates are specified for each class of
WITHHOLDING TAX payee.
53 INCOME PAYMENTS SUBJECT TO CREDITABLE WITHHOLDING TAX
54

PROFESSIONAL FEES, On the gross professional,

promotional, and talent fees or any
TALENT FEES ETC. other form of remuneration for the
FOR SERVICE services rendered:
RENDERED
OPTIONAL STANDARD
DEDUCTION (OSD) INDIVIDUAL PAYEE:

Gross Income < P 3M for the Current Year - 5%

Gross Income > P 3M for the Current Year - 10%
INCOME PAYMENTS
NON-INDIVIDUAL PAYEE:
SUBJECT TO
Gross Income < P 3M for the Current Year - 10%
CREDITABLE Gross Income > P 3M for the Current Year - 15%
WITHHOLDING TAX
55

PROFESSIONAL FEES,
Individual payees whose gross
TALENT FEES ETC.
receipts did not exceed P 3M are
FOR SERVICE required to submit a SWORN
RENDERED
OPTIONAL STANDARD DECLARATION of his/her gross
receipts/ sales, together with the copy
DEDUCTION (OSD) of Certificate of Registration (COR),
to all the income payor/ withholding
INCOME PAYMENTS agent not later that Jan. 15 of each
year in order for them to be subject to
SUBJECT TO
5%, if the payee failed automatic 10%
CREDITABLE will be applied.
WITHHOLDING TAX
56

RENTAL
5% On the gross rental fee of:

OPTIONAL STANDARD  Real Properties

DEDUCTION (OSD)  Personal Properties (In excess of
P 10,000)
 Poles, satellites and transmission
INCOME PAYMENTS facilities
SUBJECT TO  Billboards
 Cinematographic film rentals
CREDITABLE
and other payments
WITHHOLDING TAX
57
INCOME PAYMENTS 2% On the gross payments to
TORENTAL
CERTAIN following whether individual or
CONTRACTORS corporate:

OPTIONAL STANDARD
DEDUCTION (OSD)  General Engineering Contractors
 General Building Contractors
INCOME PAYMENTS  Specialty Contractors
 Other Contractors
SUBJECT TO
CREDITABLE
WITHHOLDING TAX
58

RENTAL 15% on income:

OPTIONAL STANDARD
DEDUCTION (OSD)
 To the beneficiaries of estates and trust as
determined under Sec. 60 of the Code, except such
INCOME PAYMENTS income subject to final withholding tax and tax
exempt income.
SUBJECT TO
CREDITABLE
INCOME PAYMENTS
WITHHOLDING TAX
TO BENEFICIARIES
59 INCOME PAYMENTS TO
PARTNERS OF GENERAL Income payment made periodically or
RENTAL
PROFESSIONAL at the end of taxable year:
PARTNERSIP

OPTIONAL STANDARD
DEDUCTION (OSD) 15% - if the gross income for the current
year exceeds P 720,000

10% - if the income for the current year did

not exceed P 720,000
60
Based on the selling price, total amount of
consideration or the fair market value
RENTAL whichever is higher:

A. If the seller is exempt from creditable

withholding tax - Exempt
OPTIONAL STANDARD
B. If seller is engaged in real estate business:
DEDUCTION (OSD)
P 500,000 or less - 1.5%
P 500,000 not more than P 2M - 3.0%
More than P 2M
- 5.0%
SALE, EXCHANGE OR
C. Seller is not habitually engaged in the real
TRANSFER OF REAL estate business. - 6.0%
PROPERTY CLASSIFIED AS
ORDINARY ASSET
61
ADDITIONAL INCOME
On gross additional payments by:
RENTALTO
PAYMENTS
GOVERNMENT
PERSONNEL
OPTIONAL STANDARD
DEDUCTION (OSD) Importers, shipping and airline companies,
or their agents to government personnel for
overtime services as authorized by the law.
– 15%
62
PAYMENT TO CREDIT On one-half of the gross amounts paid by any
credit card company in the Philippines::
CARD COMPANIES
RENTAL

OPTIONAL STANDARD
DEDUCTION (OSD) Payment to any business entity, whether a
natural or a juridical person, representing
the sales of goods/ services made by the
aforesaid business entity to cardholders –
1%
63
Income payments made by any top
withholding agents, as determined by the
RENTAL Commissioner:
INCOME
PAYMENTS
MADE BY TOP
OPTIONAL STANDARD
WITHHOLDING
DEDUCTION (OSD)
AGENTS Regular Supplier of Goods 1%

Regular Supplier of Services 2%

64
Top withholding agents shall include the
RENTAL following:
INCOME
1. Classified and duly notified by the
PAYMENTS Commissioner as either any of the
MADE BY TOP following:
OPTIONAL STANDARD
WITHHOLDING  Large Taxpayer under RR No. 1-98
DEDUCTION (OSD)
AGENTS  Top 20,000 private corporations
 Top 5,000 corporations.

2. Taxpayer identified and included as

Medium Taxpayers, and those under the
Taxpayer Account Management Program
(TAMP)
65 Top withholding agents shall include the
following:
RENTAL
INCOME As a general rule, this term does not include
a casual purchase of goods/ services that is
PAYMENTS purchase made from a non-regular supplier
MADE BY TOP oftentimes involving a SINGLE
OPTIONAL STANDARD
WITHHOLDING
PURCHASE.
DEDUCTION (OSD)
AGENTS However, a single purchase which involves
P 10,000 or more shall be subject to
withholding tax. The term “REGULAR
SUPPLIER” refer to suppliers who are
engaged in business with whom the
taxpayer has transacted at least 6
transactions, either in previous year or
current year.
66 On the income payments made by a
INCOME PAYMENTS government office, or their attached agencies
RENTAL
MADE BY A or bodies, and government-owned or
controlled corporations to its local supplier of
GOVERNMENT OFFICE, goods and services :
NATIONAL OR LOCAL
OPTIONAL STANDARD Regular Supplier of Goods 1%
DEDUCTION (OSD)
Regular Supplier of Services 2%

A government owned or controlled

corporations shall withhold the tax in its
capacity as a government owned or
controlled rather than a corporation.
67
INCOME PAYMENTS
RENTAL
MADE BY A On the gross processing/ tolling fees paid for:
GOVERNMENT OFFICE,
NATIONAL
TOLLING ORPAID
FEES LOCAL
TO
REFINERIES
OPTIONAL STANDARD
DEDUCTION (OSD)
The conversion of molasses to its by-
products and raw sugar to refined sugar
– 5%
68
INCOME PAYMENTS
PAYMENTSRENTAL
TO PRE-
MADE BY A On the gross payments made by pre-need
NEED COMPANIES
GOVERNMENT TO
OFFICE, companies to:
FUNERALOR
NATIONAL PRALORS
LOCAL
AND EMBALMERS
OPTIONAL STANDARD
DEDUCTION (OSD) Funeral Parlors for funeral service
rendered – 1%

Embalmers for embalming services

rendered to funeral companies – 1%
69
INCOME PAYMENTS
RENTAL
MADE BY A Income payments made to agricultural
suppliers such as those, but not limited to:
GOVERNMENT OFFICE,
NATIONAL OR LOCAL
Payments made by hotels, restaurants,
OPTIONAL STANDARD resorts, caterers, food processors,
DEDUCTION (OSD) canneries, supermarkets, live stocks,
INCOME PAYMENTS poultry, fish and marine product dealers,
MADE TO SUPPLIER OF hardware, factories, furniture shops, and
AGRICULTURAL all other establishments, in excess of
cumulative amount of P 300,000
PRODUCTS within the same taxable year.
70 INCOME PAYMENTS ON
INCOME PAYMENTS
PURCHASE OF
MINERALS RENTAL
MADE BY A Income payments on purchases of minerals,
mineral products and quarry resources such
GOVERNMENT OFFICE, as but not limited to:
NATIONAL OR LOCAL
OPTIONAL STANDARD
Purchase of silver, gold, marble, granite,
DEDUCTION (OSD) gravel, sand, boulders and other
material products – 5%

However, BSP is required to withheld

1% of gross payment made, and remit
the same to government.
71
INCOME PAYMENTS
RENTAL
MADE BY A Income payments made by political parties
and candidates of local and national
GOVERNMENT OFFICE, elections:
NATIONAL OR LOCAL
OPTIONAL STANDARD On all their purchases of goods and
services related to campaign
DEDUCTION (OSD)
expenditures, and income payments
made by individuals or juridical persons
for their purchases of goods and
services intended to be given as
campaign contribution to political
INCOME PAYMENTS parties and candidates – 5%
MADE BY POLITICAL
PARTIES AND
CANDIDATES
72
INCOME PAYMENTS
RENTAL
MADE BY A Interest income derived from:
GOVERNMENT OFFICE,
NATIONAL OR LOCAL
OPTIONAL STANDARD
Any other debt instruments not within
DEDUCTION (OSD) the coverage of “deposit substitute”
20%

INTEREST INCOME
DERIVED FROM ANY
OTHER DEBT
INSTRUMENT
73 INCOME PAYMENTS TO
INCOME
REAL PAYMENTS
ESTATE
RENTAL
MADE BY A
INVESTMENT TRUST Income payments made to:
GOVERNMENT OFFICE,
NATIONAL OR LOCAL
OPTIONAL STANDARD Corporate taxpayers duly registered
DEDUCTION (OSD) with LTS- Regular LT Audit Division as
REIT for purposes of availing the
incentive provisions of RA No. 9856,
otherwise known as “The Real Estate
Investment Trust Act of 2009”

INCOME PAYMENTS TO
REAL ESTATE INVESTMENT
TRUST (REIT)
74

Any income subject to income

tax may be subject to
withholding tax; however,
OPTIONAL STANDARD income exempt from income
DEDUCTION (OSD) tax is consequently exempt
from withholding tax. Further,
income not subject to
withholding tax does not
INCOME PAYMENTS necessarily mean that it is not
SUBJECT TO subject to income tax.
CREDITABLE
WITHHOLDING TAX
75
EXEMPTION FROM WITHHOLDING TAX
A. A National Government and its instrumentalities, including provincial, city or municipal governments and barangays
except government owned and controlled corporations.

B. Persons enjoying exemption from payment of income taxes pursuant to the provisions of any law, general or special,
such as but not limited to the following:

1. Sale of Real Property by a 3. GSIS, SSS, PHIC and Local

corporation registered under Water Districts
Housing and Land Use Regulatory
Board (HLURB) or the Housing 4. General Professional Partnership
Urban Development Coordinating (GPP)
Council (HUDCC).
5. Joint Ventures or consortium
formed (Sec. 4.B.5)
2. Corporation registered with
Board of Investments, Philippine 6. Individuals who earn P 250,000
Export Processing Zones and Subic and below
Bay Metropolitan Authority
76
OTHERS

REVENUE REGULATION NO. 6-

2018

Revokes Revenue Regulations (RR) No.

12-2013 relative to the requirements for
deductibility of certain expenses, thereby
reinstating the provisions of Section 2.58.5
of RR No. 14-2002, as amended by RR
No. 17-2003
77
OTHERS
REVENUE REGULATION NO. 21-2018

Implements Section 249 (Interest) of the National Internal Revenue Code of 1997, as amended under
Section 75 of RA No. 10963 (TRAIN Law)

- Regarding the imposition of surcharge, interest and compromise penalty for filing of an amended return.
– 25% Surcharge

REVENUE MEMMORANDUM CIRCULAR NO. 17-2019

Prescribes the new BIR Form No. 1701A - Annual Income Tax Return for Individuals Earning Purely from
Business/Profession (those under the graduated Income Tax rates with Optional Standard Deduction as
mode of deduction or those who opted to avail of the 8% flat Income Tax rate) January 2018 version
78

UPDAT
E S ON
79
BIR ISSUANCES RELATED TO VAT 2018 AND 2019
NO. OF ISSUANCE SUBJECT MATTER DATE OF ISSUE
RR No. 13-2018 Prescribes the Regulations implementing the Value-Added Tax (VAT) 15/03/2018
RR No. 15-2018 provisions
Amends RRunder RA No.particularly
No. 8-2018 10963 (TRAIN Law),
on the duewhich
date further
for the amends
updatingRR
ofNo. 16- 05/04/2018
registration from VAT to Non-VAT
RMC No. 39-2018 Reiterates the imposition of Value-Added Tax on goods disposed of or existing 24/05/2018
as of the date of change in or cessation of status of a person as VAT-Registered
taxpayer
RMC No. 53-2018 Amends RMC No. 17-2018, specifically the deadline for the processing of 21/06/2018
pending VAT Refund/Credit Claims filed prior to the effectivity of RMC No. 54-
2014
RR No. 19-2018 Amends RR No. 13-2018 particularly on the use of invoices/receipts of 09/08/2018
previously-registered VAT taxpayers who are now non-VAT taxpayers
RMC No. 102-2018 Amends further RMC No. 17-2018, specifically the deadline for processing of 11/12/2018
pending VAT refund/credit claims filed prior to effectively of RMC No. 54-2014

RR No. 25-2018 Prescribes the regulations implementing VAT exemption on the sale of drugs 27/12/2018
and medicines prescribed for diabetes, high cholesterol and hypertension
provided under the TRAIN Law
RR No. 26-2018 Amends certain provisions of RR No. 13-2018 to implement the 90-day 27/12/2018
processing of claim for VAT refund under Section 112 ( C ) of the Tax Code of
1997, as amended by RA No. 10963 (TRAIN Law)
80
BIR ISSUANCES RELATED TO VAT 2018 AND 2019
NO. OF ISSUANCE SUBJECT MATTER DATE OF ISSUE
RMC No. 2-2019 Publishes the full text of Joint Administrative Order No. 2-2018 entitled 10/01/2019
"Implementing Guidelines on the Value-Added Tax (VAT) Exemption of the
Sale of Drugs Prescribed for Diabetes, High-Cholesterol and Hypertension
under Republic Act No. 8424 Otherwise Known as the National Internal
Revenue Code of 1997, as Amended by Republic Act No. 10963"
RMC No. 3-2019 Publishes the full text of Joint Circular No. 001-2018 of the DOF, DBM, BTr, BIR, 10/01/2019
BOC and COA re Value-Added Tax Refund Claims
Publishes the full text of the letter from the Food and Drug Administration
RMC No. 4-2019 containing the "List of VAT-Exempt Diabetes, High-Cholesterol and 15/01/2019
Hypertension Drugs" pursuant to Joint Administrative Order No. 2-2018
Clarifies the validity of the Certifications on the existence of Outstanding Tax
RMC No. 16-2019 Liabilities and Certification on the Status of Cases Pending legal or judicial 24/01/2019
resolution of taxpayers claiming for VAT refund.
Grants Value-Added Tax (VAT) privileges to resident foreign missions, their
RMO No. 10-2019 qualified personnel and the dependents of the latter 12/02/2019
81 The following export sales continue to be
CHANGES IN VAT subject to VAT at a 0 percent rate:
THRESHOLD UNDER > The sale of raw materials or packaging
THE TRAIN LAW materials to a non-resident buyer for delivery
to a resident local export-oriented enterprise
to be used in manufacturing, processing,
packing or repacking in the Philippines of the
said buyer’s goods, paid for in acceptable
OPTIONAL STANDARD foreign currency, and accounted for in
DEDUCTION (OSD) accordance with the rules and regulations of
the Bangko Sentral ng Pilipinas (BSP);

> The sale of raw materials or packaging

materials to an export-oriented enterprise
whose export sales exceeds 70 percent of total
annual production;
>Transactions considered “export sales under
the Omnibus Investments Code of 1987and
other special laws;
82 The following export sales continue to be
CHANGES IN VAT subject to VAT at a 0 percent rate:
THRESHOLD UNDER > Processing, manufacturing or repacking
goods for other persons doing business
THE TRAIN LAW outside the Philippines, which goods are
subsequently exported, where the services are
paid for in acceptable foreign currency and
accounted for in accordance with the rules
OPTIONAL STANDARD and regulations of the BSP;

DEDUCTION (OSD) > Services performed by subcontractors

and/or contractors in processing, converting,
or manufacturing goods for an enterprise
whose export sales exceeds 70 percent of the
total annual production;
Note that the above export sales shall be subject to 12 percent VAT
upon the happening of the following conditions:
The successful establishment and implementation of an enhanced
VAT refund system that grants and pays refunds of creditable input
tax within 90 days from the filing of the VAT refund application with
the Bureau of Internal Revenue (BIR); and
83 The following are VAT-exempt transactions
CHANGES IN VAT under RR No. 13-2018:
THRESHOLD UNDER > Importation of professional instruments,
tools, and personal effects belonging to
THE TRAIN LAW persons coming to settle in the Philippines
shall be VAT-exempt. However, the
importation of vehicles, machineries and
other similar goods for use in manufacture,
OPTIONAL STANDARD shall be subject to duties, taxes and other
charges
DEDUCTION (OSD)
> Sale of a residential lot valued at
P1,500,000 and below, or house and lot
valued at P2,500,000 and below, as adjusted
in 2011 using the 2010 Consumer Price Index
values (P1,919,500 for residential lot and
P3,199,200 for house and lot) shall be VAT-
exempt.
84 The following are VAT-exempt transactions
CHANGES IN VAT under RR No. 13-2018:
THRESHOLD UNDER > Lease of residential units with a monthly
rental per unit exceeding P15,000, but the
THE TRAIN LAW aggregate rentals do not exceed P3,000,000 is
VAT-exempt, and shall instead be subject to
the 3 percent percentage tax. If the lessor has
several residential units, and the rentals do not
OPTIONAL STANDARD exceed P15,000 per month per unit, it shall be
exempt from VAT and 3 percent percentage
DEDUCTION (OSD) tax regardless of the amount of the aggregate
annual rentals.

>The sale or lease of goods and services to

senior citizens and persons with disabilities is
VAT-exempt.

>Transfer of Property pursuant to Section

40(C)(2) of the Tax Code, as amended, is
exempt from VAT.
85 The following are VAT-exempt transactions
CHANGES IN VAT under RR No. 13-2018:
THRESHOLD UNDER > Association dues, membership fees, and other
assessments and charges collected on a purely
THE TRAIN LAW reimbursement basis by homeowners’ associations
and condominium corporations is VAT-exempt.

>Beginning January 1, 2019, the sale of medicine

OPTIONAL STANDARD prescribed for diabetes, high cholesterol, and
hypertension as determined by the Department of
DEDUCTION (OSD) Health shall be VAT-exempt.
>Also exempt from VAT is the sale or lease of goods
or properties or the performance of services other
than the transactions mentioned above, whose gross
annual sales do not exceed P3,000,000.

>Self-employed individuals and professionals

availing of the 8 percent tax on gross sales and/or
receipts and other non-operating income are exempt
from VAT.
86 The following are VAT-exempt transactions
CHANGES IN VAT under RR No. 13-2018:
THRESHOLD UNDER > A VAT-registered taxpayer may claim input VAT on
depreciable goods provided that the amortization of
THE TRAIN LAW the input VAT shall only be allowed until December
31, 2021. Taxpayers who still have unutilized input
VAT on capital goods purchased or imported shall be
allowed to apply the same as scheduled until fully
OPTIONAL STANDARD utilized.

DEDUCTION (OSD) > Beginning January 1, 2023, the filing and payment
of VAT returns shall be done within 25 days
following the close of each taxable quarter.

> An existing VAT-registered taxpayer whose gross

sales/receipts did not exceed P3,000,000 may
continue to be VAT-registered taxpayer and avail of
the “Optional Registration for Value-Added Tax of
Exempt Person.” Once availed, the taxpayer shall
not be entitled to cancel the VAT registration for the
next 3years.
87

Amends RR No. 13-2018

particularly on the use of
invoices/receipts of previously-
registered VAT taxpayers who are
now non-VAT taxpayers
88
INVOICING BOOKKEEPING

Books of accounts with gross annual sales, earnings, Taxpayers engaged in export, e-commerce and those
receipts or output exceeding P 3M must be audited by an under the jurisdiction of the Large Taxpayers Services
independent CPA. shall issue electronic receipts or invoices within five years
after the TRAIN law’s effectivity, on or before January
Each sale of merchandise or services valued at P100 or 2023.
more must be issued duly registered receipts or invoices.
89
CHANGES IN
DOCUMENTARY
STAMP TAX UNDER Most of the DST rates have
doubled except DST on debt
THE TRAIN LAW instruments which increased by
only 50% and DST on real
OPTIONAL STANDARD properties which remained
unchanged.
DEDUCTION (OSD)

DST shall also be collected in

donations of real property except
for transfers exempt from donor’s
tax.
90 DOCUMENTARY STAMP TAX
91
TAX AMNESTY 2019

Under the new law, the government will only collect six Among those provisions which were vetoed were those
percent of the net undeclared estate tax for those who died which granted an amnesty tax of two percent of taxpayer’s
before Jan. 1, 2018. It also granted amnesty on other total assets and five percent of P75,000 whichever is
general tax delinquencies, so that only 50 percent of the higher of an individual, trust, or estate’s net worth as of
basic tax excluding interest and surcharges will be Dec. 31, 2017; and five percent or between P100,000 to
collected. But taxpayers facing criminal charges will have P1 million, whichever is high, for juridical entities
to pay 80 percent of the basic tax. depending on their subscribed capital, and five percent or
P75,000 for other juridical entities such as cooperatives
The amnesty on delinquent taxes would cover national and foundations.
internal revenues taxes including income tax, withholding
tax, capital gains tax, donor’s tax, value-added tax, other
percentage taxes, excise taxes and donor’s tax collected
by the Bureau of Internal Revenue, and VAT and excise
taxes collected by the Bureau of Customs for 2017 and
prior years.
92
CORPORATE INCOME TAX AND INCENTIVES REFORM –
ACT PACKAGE 2
Corporate Income Tax rate for domestic corporation, Income tax rate on interest income derived by RFCs from
resident foreign corporations (RFCs), and non-resident depository bank under the expanded foreign currency
foreign corporations (NFRCs) shall be reduced by 1% deposit system shall be increased from 7 ½ to 15%.
point every year beginning 1 January 2019 but shall not
be lower than 20%. Capital Gains Tax rate on sale of shares of stocks not
traded in the stock exchange by RFC and NFRCs shall be
Preferential income tax rate of 10% for proprietary adjusted from 5%/10% to a flat rate of 15%
education institutions and hospitals and the income tax
exemption for local water districts shall be removed. Special income tax rate granted to non-resident
cinematographic film owners, lessors or distributors,
Preferential income tax rate of 10% for the offshore owners/ lessors of vessels chartered by Philippine
banking units (OBUs) and regional operating headquarters nationals, and owners/lessors of aircraft, machineries and
(ROHQs) and the income tax exemption for regional other equipment shall be removed.
headquarters shall be removed. .
93
CORPORATE INCOME TAX AND INCENTIVES REFORM –
ACT PACKAGE 2
The optional standard deduction (OSD) rate shall be
adjusted from 40% to 20% of gross income for
individuals (except non-resident aliens) and corporations
(excepts NFRCs).

The option to apply for the issuance of tax credit

certificate on the refund of input VAT attributable to zero-
rated sales shall be removed.

The 10M gross receipts threshold for franchise tax under

Section 119 of the Tax Code shall be removed, and the
telecommunication companies shall be included in the
scope of the 30% franchise tax. Radio and/ or television
broadcasting and telecommunication companies shall also
be required to VAT register.
94

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