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TAXATION LAW 1

Atty. Vicente V. Cañoneo

AMENDMENTS ON R.A. No. 8424 OR THE NATIONAL INTERNAL REVENUE CODE


OF 1997 AND IMPOSITION OF NEW TAXES ACCORDING TO R.A. No. 10963 OR
THE TAX REFORM FOR ACCELERATION AND INCLUSION (TRAIN) LAW OF 2018

I. Amendments

SUBJECT MATTER NIRC TRAIN

Personal Income An individual employee or self- An individual with a taxable


employed taxpayer would income of P250,000 or less is
normally have to pay income exempted from income tax.
tax at the rate of 5% to 32% Those with taxable income of
depending on one’s bracket. above P250,000 will be subject
to the rate of 20% to 35%
effective 2018, and 15% to
35% effective 2023.
The deductible 13th month pay The deductible 13th month pay
and other benefits amount to and other benefits amount to
P82,000. P90,000.
Personal exemption of P50,000, Personal exemption of P50,000,
and additional exemption of and additional exemption of
P25,000 per dependent child, P25,000 per dependent child,
and the premium for health and and the premium for health and
hospitalization insurance of hospitalization insurance of
P2,400 per year. P2,400 per year are no longer
available.
Estate 5% to 32% of the net estate. Flat rate of 6%.
Deductions from gross estate Deductions from gross estate
includes: P1,000,000 as includes: P5,000,000 as
standard deduction, and standard deduction, and
P1,000,000 for family home. P10,000,000 for family home.
Donation Donor’s tax is 2-15% if the Single rate of 6% regardless of
donor and donee are related; the relationship between the
30% if not. donor and the donee.
Donation of real property is not Donation of real property is
subject to Documentary Stamp subject to Documentary Stamp
Tax. Tax of P15 for every P1,000.
Value-Added Tax VAT threshold of P1,919,500. VAT threshold of P3,000,000.
(VAT) VAT is imposed on the sale of By 2019, sale of drugs and
drugs and medicines for medicines for diabetes, high
diabetes, high cholesterol, and cholesterol, and hypertension
hypertension. will be VAT-exempt.
VAT exemption of residential VAT exemption of residential
unit amounts to P12,800. unit amounts to P15,000.
VAT is imposed on association Association dues, membership
dues, membership fees, and fees, and other assessments
other assessments and charges and charges collected by
collected by homeowners homeowners associations and

GEMMA F. TIAMA
2nd Sem SY 2017-18, Sunday Class 9:00AM-12:00PM
Page 1 of 3
TAXATION LAW 1
Atty. Vicente V. Cañoneo

associations and condominium condominium corporations are


corporations. expressly VAT-exempt.
Passive Income Interest income from foreign Interest income from foreign
currency deposits is 7.5%. currency deposits is 15%.
Interest income from pre- Interest income from pre-
terminated long-term deposits terminated long-term deposits
is 5.20%. is 20%.
PCSO winnings are exempted. PCSO winnings are taxed by
20% if more than P10,000.
Sale of Shares of Sale of shares of stock not Sale of shares of stock not
Stock traded through stock exchange traded through stock exchange
is taxed by 5-10%. is taxed by 15%.
Sale of shares of stock listed Sale of shares of stock listed
and traded through Local Stock and traded through Local Stock
Exchange is taxed by 1/2 of Exchange is taxed by 6/10 of
1%. 1%.
Excise Tax Imposition of higher excise tax
on cigarettes, manufactured
oils (petroleum products),
mineral products and
automobiles.
Hybrid vehicles, electric Hybrid vehicles is subject to
vehicles, and pick-ups are 50% of the applicable excise
subject to exemption from tax rates. Purely electric
excise tax. vehicles and pick-ups are
exempted from excise tax.
Documentary Increased DST on the following
Stamp Tax (DST) taxable documents: original
issue of shares of stock; sales
agreement to sell, memoranda
of sales, deliveries or transfer
of due-bills, certificate of
obligation, or shares of
certificate of stock; stamp tax
on certificates of profits or
interest in property or
accumulations; bank checks,
drafts, certificates of profits or
interest in property or
accumulations; debt
instruments; bills of exchange
or drafts; acceptance of bills of
exchange; foreign bills of
exchange and letters of credit;
life insurance policies; policies
of annuities; pre-need plans;
certifications; warehouse
receipts; Jai-Alai, horse racing
tickets, lotto, or other
authenticated numbers of

GEMMA F. TIAMA
2nd Sem SY 2017-18, Sunday Class 9:00AM-12:00PM
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TAXATION LAW 1
Atty. Vicente V. Cañoneo

games; bills of ladings or


receipts; proxies; powers of
attorney; lease or other hiring
agreements; mortgages,
pledges, and deeds of trust;
deeds of sale and conveyance
of real property; and charter
parties and similar instruments.

II. New Tax Provisions

SUBJECT MATTER TRAIN

Excise tax on P6.00 per liter on the use of purely caloric sweeteners, and purely
sweetened non-caloric sweeteners, or a mix of the two sweeteners.
beverages P12.00 per liter on the use of purely high fructose corn syrup or
in combination with any caloric or non-caloric sweetener.
Non-essential Excise tax of 5% is imposed on invasive cosmetic procedures
services (invasive directed solely towards improving, altering, or enhancing the
cosmetic patient’s appearance.
procedures)
Simplified tax Income Tax Returns (ITR) shall not be more than four (4) pages.
compliance The Tax Return for final and creditable withholding taxes shall be
filed quarterly instead of monthly.
Some measures for estate tax were adopted to simplify the
computation and payment which includes the following:
a. Standard deduction on actual funeral and medical
expenses were increased from P1,000,000 to P5,000,000.
b. Notice of death is no longer required.
c. CPA certification is now required only if the gross estate is
above P5,000,000 (up from P2,000,000).
d. Deadline from filing of estate tax return is now one year
from death (before, 6 months from death)
e. Bank deposits left by the decedent may be withdrawn by
the heirs subject only to 6% withholding tax. Before
certification from the BIR that estate tax has been paid
was required.
f. Beginning January 01, 2023, the filing of VAT Return and
payment of tax shall be done quarterly instead of monthly.
g. The BIR is required to act on application for VAT refund
within 90 days. Otherwise, the BIR official, agent, or
employee will be criminally liable.
h. The Financial Statements of a taxpayer should be audited
if the gross annual sales, earnings, receipts, or output
exceed P3,000,000 (up from P150,000,000).

GEMMA F. TIAMA
2nd Sem SY 2017-18, Sunday Class 9:00AM-12:00PM
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