RA 10963: Tax Reform for

Acceleration and Inclusion

(TRAIN) – BIR Training of
Trainers
National Training Center – BIR, NOB
06 – 08 February 2018
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Background on the Tax Reform

 The Tax Reform for Acceleration and inclusion amends certain
provisions of Republic Act No. 8424 (The National Internal
revenue Code of 1997), as amended.
 The enrolled bill was sent to President Duterte for approval and
was signed into law as Republic Act No. 10963 on December
19, 2017. The law takes effect January 1, 2018 following its
complete publication in the Official Gazette last December 27,
2017.
 The President has issued a separate letter vetoing five
provisions of the signed TRAIN law.
 The law is just the first tax reform package. The second
package (reduction of corporate income tax and rationalization
of fiscal incentives) is estimated to be released by early 2018.
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Key amendments
1. Individual Income Tax 9. Excise Tax on:
2. Final Income Tax  Tobacco
3. Estate Tax  Automobiles
4. Donor’s Tax  Petroleum products
5. Value Added Tax  Sweetened beverages
6. Documentary Stamp Tax  Mineral products
7. Some administrative  Cosmetic procedures
provisions (non-essential
8. Penalties services)
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What is the purpose of TRAIN?

The purpose of TRAIN is to make
our country’s tax system
The purpose of TRAIN is to make
our country’s tax system
The purpose of TRAIN is to make
our country’s tax system
 It is the first package in the Comprehensive
Tax Reform Program (CTRP) which is expected
to generate

Php 130 Billion

in revenues for the government.
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What is TRAIN?
The goal of the first package of the CTRP or
TRAIN is to create a simpler, fair, and more
efficient system, as per the constitution,
where the rich will have a bigger contribution
and the poor will benefit more from the
government’s programs and services.
 “The benefits to be derived from this tax reform
measure will sustainably finance the government’s
envisioned “BUILD, BUILD, BUILD, CAMPAIGN”,
that pushes for massive investments in
infrastructure thereby encouraging economic
activity and job creation, as well as fund the
desired increase in the public budget for health,
education and social programs to alleviate poverty.
 Briefing on RA 10963: Tax
Reform for Acceleration and
Inclusion (TRAIN) – Personal
Income Tax
 NIRC NIRC TRAIN
Provision
Section 24 Taxable income of individuals are subject to the Revised personal income tax
Income tax rates following graduated rates: brackets of 2018-2022:
on individual Tax Schedule Tax Schedule effective January
citizen and 1, 2018 to December 31, 2022
Not over P10,000 5%
individual resident
alien of the Over P10,000 but not P500 + 10% of the
Not over 0%
Philippines over P30,000 excess over P10,000 P250,000

Over P30,000 but not P2,500 + 15% of the

over P70,000 excess over P30,000

Over P70,000 but not P8,500 + 20% of the

over P140,000 excess over P70,000

Over P140,000 but not P22,500 + 25% of the

over P250,000 excess over P140,000

TRAIN Briefing – Income Tax

VER 1.0 – January 2018
 NIRC NIRC TRAIN
Provision
Section 24 Taxable income of individuals are Revised personal income tax brackets of
Income tax subject to the following graduated 2018-2022:
rates on rates: Tax Schedule effective January 1, 2018 to
Tax Schedule
individual December 31, 2022
citizen and Over P250,000 P50,000 + 30% of Over P250,000 but 20% of the excess over
individual but not over the excess over not over P400000 P250,000
resident alien of P500,000 P250,000 Over P400,000 but P30,000 + 25% of the
the Philippines Over P500,000 P125,000 + 32% not over P800,000 excess over P400,000
of the excess Over P800,000 but P130,000 + 30% of the
over P500,000 not over P2million excess over P800,000

Over P2Million but P490,000 + 32% of the

not over P8Million excess over P2Million
Over P8Million P2,410,000 + 35% of
the excess over
P8Million
TRAIN Briefing – Income Tax
VER 1.0 – January 2018
 NIRC NIRC TRAIN
Provision
Section 24 For 2023 onwards:
Income tax rates Tax Schedule effective January 1, 2023
on individual onwards
citizen and Not over P250,000 0%
individual resident
Over P250,000 but 15% of the excess over
alien of the
not over P400,000 P250,000
Philippines
Over P400,000 but P22,500 +20% of the
not over P800,000 excess over P400,000
Over P800,000 but P102,500 + 25% of the
not over P2,000,000 excess over P800,000
Over P2Million but P402,500 + 30% of the
not over P8Million excess over P2Million
Over P8Million P2,202,500 + 35% of the
excess over P2Million

TRAIN Briefing – Income Tax

VER 1.0 – January 2018
 NIRC NIRC TRAIN
Provision
Section 24 Refer to Revenue Memorandum Circular
Income tax rates (RMC) Nos. 105-2017 and 1-2018, Revised
on individual Withholding Tax on Compensation Table
citizen and
individual resident
alien of the
Philippines
Section 24 Taxable income is subject to the For purely self-employed and/or professionals
Income tax of self- same graduated rates whose gross sales/receipt and other non-
employed and/or operating income do not exceed the VAT
professionals threshold of P3Million, the tax shall be, at the
taxpayer’s option, either:
1. 8% income tax on gross sales or gross
receipts in excess of P250,000 in lieu of the
graduated income tax rates and the
percentage tax under Sec. 116; OR
2. Income tax based on the graduated income
TRAIN Briefing – Income Tax tax rates for individuals
VER 1.0 – January 2018
 NIRC NIRC TRAIN
Provision
Section 24 Taxable income is subject For mixed income earners (earning both
Income tax of to the same graduated compensation income and income from business
mixed income rates and/or practice of profession), their income taxes
earners shall be:
1. For income from compensation: based on
graduated income tax rates for individuals, AND
2. For income from business and/or practice of
profession:
a. Gross sales/receipts which do not exceed the
VAT threshold of P3Million – 8% income tax
on gross sales/receipts and other non-
operating income OR income tax based on
graduated income tax rates on taxable
income, at the taxpayer’s OPTION
b. Gross sales/receipts and other non-operating
income which exceeds the VAT threshold of
P3Million – income tax based on graduated
tax rates for individuals
TRAIN Briefing – Income Tax
VER 1.0 – January 2018
 NIRC NIRC TRAIN
Provision
Section 24 (C) The capital gains tax on net The final tax rate of 15% for net capital
Capital gains tax capital gains realized from sale, gains realized during the taxable year
on sale of shares barter, or exchange or other from the sale, barter, exchange or other
not traded disposition of shares of stock in disposition of shares of stock in a
through the stock a domestic corporation not domestic corporation except shares
exchange traded through the stock sold or disposed of through the stock
exchange is: exchange

Not over P100,000 – 5%

On any amount in excess of

P100,000 – 10%

TRAIN Briefing – Income Tax

VER 1.0 – January 2018
 NIRC NIRC TRAIN
Provision
Section 24 (C) The capital gains tax on net The final tax rate of 15% for net capital
Capital gains tax capital gains realized from sale, gains realized during the taxable year
on sale of shares barter, or exchange or other from the sale, barter, exchange or other
not traded disposition of shares of stock in disposition of shares of stock in a
through the stock a domestic corporation not domestic corporation except shares
exchange traded through the stock sold or disposed of through the stock
exchange is: exchange

Not over P100,000 – 5%

On any amount in excess of

P100,000 – 10%

TRAIN Briefing – Income Tax

VER 1.0 – January 2018
 NIRC NIRC TRAIN
Provision
Section 32 (B) The amount of tax-exempt 13th The amount of tax-exempt 13th month pay
Tax exempt 13th month pay and other benefits is and other benefits is increased to
month pay P82,000. P90,000.

Section 33 (A)  Fringe benefits given to non-
Tax on fringe rank and file employees are
benefits given to subject to 32% final tax
non-rank and file  The grossed up monetary value
employees of the fringe benefit given to
non-rank and file employees
shall be determined by dividing
the actual monetary value by
68%
 The Fringe Benefits Tax is
increased to 35% effective January
1, 2018
 The grossed up monetary value of
the fringe benefit given to non-rank
and file employees shall be
determined by dividing the actual
monetary value by 65%

TRAIN Briefing – Income Tax

VER 1.0 – January 2018
 NIRC NIRC TRAIN
Provision
Section 34 (M) The allowable deduction for Allowable deduction for premium
Allowable premium payments on health payments on health and/or
deduction for and/or hospitalization insurance hospitalization insurance of an
premium of an individual taxpayer is P2400 individual taxpayer is removed.
payments on per year or P200 per month,
health and/or subject to a gross family income
hospitalization threshold of P250,000.
insurance
Section 51 An individual whose gross Individual taxpayers whose taxable
Filing of individual income does not exceed his total income is subject to zero percent
income tax return personal and additional under the new graduated tax table
exemptions for dependents are (i.e., does not exceed P250,000) shall
not required to file income tax not be required to file an income tax
return (ITR). return.

TRAIN Briefing – Income Tax

VER 1.0 – January 2018
 NIRC NIRC TRAIN
Provision
Additional provision:
The ITR shall consist of a maximum
of four (4) pages in paper OR
electronic form. It shall only contain
the following information:
 Personal profile and information
 Gross sales receipts or income
from compensation, from business,
or from exercise of profession
(except income subject to final tax)
 Allowable deductions
 Taxable income
 Income tax due and payable

TRAIN Briefing – Income Tax

VER 1.0 – January 2018
 NIRC NIRC TRAIN
Provision
Section 51-A No provision Substituted filing or ITRs is available for
Substituted Filing individual taxpayers:
of income tax  Receiving purely compensation
returns by income, regardless of amount
employees  From only one employer in the
receiving purely Philippines for he calendar year
compensation  The income tax of which has been
income from only correctly withheld by the employer
one employer in (i.e., tax due = tax withheld)
the Philippines The Certificate of Withholding filed by
the employers duly stamped
“RECEIVED” by the BIR shall be the
substituted filing by such employers

TRAIN Briefing – Income Tax

VER 1.0 – January 2018
NIRC Provision NIRC TRAIN
Section 56 (A) (2) When tax due exceeds ₱2,000, the The new deadline of payment of
Installment taxpayer (other than a corporation) second installment is October 15
Payment of tax due may elect to pay the tax in two following the close of the calendar
for individuals and equal installments. Payment of year.
corporations installments:
 First installment – time of filing of
return
 Second installment – on or
before July 15 following the
close of the calendar year.
Section 62 There is allowed personal The exemption for estates and
Exemption for exemption of ₱50,000 from the trusts is removed.
estates and trusts income of the estate or trust.

TRAIN Briefing – Income Tax

VER 1.0 – January 2018
NIRC Provision NIRC TRAIN
Section 56 (A) (2) When tax due exceeds ₱2,000, the The new deadline of payment of
Installment taxpayer (other than a corporation) second installment is October 15
Payment of tax due may elect to pay the tax in two following the close of the calendar
for individuals and equal installments. Payment of year.
corporations installments:
 First installment – time of filing of
return
 Second installment – on or
before July 15 following the
close of the calendar year.
Section 62 There is allowed personal The exemption for estates and
Exemption for exemption of ₱50,000 from the trusts is removed.
estates and trusts income of the estate or trust.

TRAIN Briefing – Income Tax

VER 1.0 – January 2018