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Republic Act No. 10963, otherwise known as the Tax Reform for Acceleration and Inclusion Act or the TRAIN Act, was signed into law and subsequently took effect on 01 January 2018. The following table summarizes the major changes introduced by the TRAIN Act vis-à-vis Republic Act No. 8424, otherwise known as the National Internal Revenue Code of the Philippines (“NIRC”), as amended:
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| TRAIN | NIRC | |
| Administration, Collection and Payment | ||
| Deadline for filing of returns for final and creditable withholding tax | On or before the last day of the month following the close of each calendar quarter | On or before the 25th day from the close of each calendar quarter |
| Deadline for the filing of declaration of income for self-employed individuals | 15 May | 15 April |
| Deadline for filing of estate tax returns | Within one (1) year from the decedent’s death | Within six (6) months from the decedent’s death |
| Payment in installments of estate taxes | Estate taxes may be paid in installments | Estate taxes may not be paid in installments |
| Period to grant or deny creditable input tax refund | The CIR has 90 days to grant a refund for creditable input taxes Consequence of failure to act within 90 days: criminal penalty | The CIR had 120 days to grant a refund for creditable input taxes Consequence of failure to act within 120 days: taxpayer may immediately elevate the matter to the CTA |
| Individual Income Taxes | ||
| Claim of personal and additional exemptions for dependents | Not allowed | Allowed |
| Exemption from income tax | Income of up to PhP250,000.00 per year | Income of minimum wage earners |
| Amount of 13th month pay excluded from gross income | PhP90,000.00 | PhP82,000.00 |
| Income tax rate for self-employed individuals | Either 8% tax on gross sales or gross receipts and other non-operating income in excess of PhP250,000.00; or
Graduated rates |
Graduated rates only |
| Income tax rate for mixed income earners | Compensation: graduated rates
Business/professional income:
|
Graduated rates only |
| Exemption from 20% final tax on winnings | PCSO and Lotto winnings of up to PhP10,000.00 | Any amount of PCSO and Lotto winnings |
| Tax on interest income under the expanded foreign currency deposit system | 15% | 7½% |
| Tax on sale of shares of stock not traded in the stock exchange | 15% | 5% for gains not over PhP100,000.00 and 10% on any amount in excess of PhP100,000.00 |
| Fringe benefit taxes | 35% | 32% |
| Estate Tax | ||
| Rate | 6% | Graduated rates |
| Standard deduction | PhP5,000,000.00 | PhP1,000,000.00 |
| Donor’s Tax | ||
| Rate | 6% | Graduated rates, 30% if donee is a stranger |
| Exemption | PhP250,000.00
Dowries are no longer exempt |
PhP100,000.00
Dowries are exempt up to PhP10,000.00 |
| DST | Donation of real estate is now subject to DST | Donation of real estate was not subject to DST |
| Value-Added Tax | ||
| 0% VAT | Gradually limits the transactions subject to 0% VAT | Extensive list of transactions |
| VAT threshold for exemption | PhP3,000,000.00 | PhP1,919,500.00 |
| VAT threshold for exemption for lease of a residential unit | PhP15,000.00 per month | PhP10,000.00 per month |
| VAT threshold for exemption for sale of residential house and lot | PhP2,500,000.00 (PhP2,000,000.00 by 2021) | PhP3,199,200.00 |
| Excise Tax | ||
| Cigarettes, whether packed by hand or by machines | PhP32.50 – January 2018 to June 2018 PhP35.00 – July 2018 to December 2019 PhP37.50 – January 2020 to December 2021 PhP40.00 – January 2022 to December 2023 4% annual increase effective on January 2024 |
PhP31.20 per pack with 4% increase annually |
| Unleaded premium gasoline | PhP7.00/liter – 2018 PhP9.00/liter – 2019 PhP10.00/liter – 2020 |
PhP4.35/liter |
| Diesel | PhP2.50/liter – 2018 PhP4.50/liter – 2019 PhP6.00/liter – 2020 |
PhP0.00/liter |
| Liquefied Petroleum Gas | PhP1.00/liter – 2018 PhP2.00/liter – 2019 PhP3.00/liter – 2020 |
PhP0.00/liter |
| Mandatory marking of all fuel products | Prescribed | Not prescribed |
| Automobiles | 4% – up to PhP600,000.00 10% – over PhP600,000.00 to PhP1,000,000.00 20% – over PhP1,000,000.00 to PhP4,000,000.00 50% – over PhP4,000,000.00 |
2% – up to PhP600,000.00 PhP12,000.00 + 20% in excess of PhP600,000.00 – over PhP600,000.00 to PhP1.1 Million PhP112,000.00 + 40% in excess over PhP1.1 Million – over PhP1.1 Million to PhP2.1 Million PhP512,000.00 + 60% in excess over PhP2.1 Million – over 2.1 Million |
| Hybrid vehicles | 50% of applicable tax rates above | No counterpart provision |
| Purely electric vehicles | Exempt | No counterpart provision |
| Invasive cosmetic procedures, surgeries, and body enhancements for aesthetic purposes | 5% on gross receipts | None |
| Sweetened beverages | PhP6.00/liter – caloric and non-caloric sweeteners PhP12.00/liter – high-fructose corn syrup |
None |
| Domestic or imported coal and coke | PhP50.00/metric ton effective 01 January 2018 PhP100.00/metric ton effective 01 January 2019 PhP150.00/metric ton effective 01 January 2020 |
PhP10.00/metric ton |
| Nonmetallic minerals and quarry resources | 4% based on actual market value of gross output | 2% based on actual market value of gross output |
| Copper and other metallic minerals | 4% based on actual market value of gross output | 2% based on actual market value of gross output |
| Gold and Chromite | 4% based on actual market value of gross output | 2% based on actual market value of gross output |
| Indigenous Petroleum | 6% of fair international market price | 3% of fair international market price |
| Documentary Stamp Tax | ||
| Original Issue of Shares of Stock | PhP2.00 on each PhP200.00 of the par value of such shares | PhP1.00 on each PhP200.00 of the par value of such shares |
| Sales, Agreements to Sell, Memoranda of Sales, Deliveries or Transfer of Shares or Certificates of Stock | PhP1.50 on each PhP200.00 pesos of the par value of such stock | PhP0.75 on each PhP200.00 pesos of the par value of such stock |
| Certificates of Profits or Interest in Property or Accumulations | PhP1.00 on each PhP200.00 of the face value of such certificate or memorandum | PhP0.50 on each PhP200.00 of the face value of such certificate or memorandum |
| Bank Checks, Drafts, Certificates of Deposit not Bearing Interest | PhP3.00 for every check | PhP1.50 for every check |
| Debt Instruments | PhP1.50 on each PhP200.00 of the issue price of any debt instrument | PhP1.00 on each PhP200.00 of the issue price of any debt instrument |
| Bills of Exchange or Drafts, Acceptance of Bills of Exchange or Drafts, and Foreign Bills of Exchange and Letters of Credit | PhP0.60 on each PhP200.00 of the face value of the bill of exchange or draft | PhP0.30 on each PhP200.00 of the face value of the bill of exchange or draft |
| Life Insurance Polices | Graduated | PhP0.50 on each PhP200.00 of the amount of premium collected |
| Annuities | PhP1.00 on each PhP200.00 of the premium or installment payment | PhP0.50 on each PhP200.00 of the premium or installment payment |
| Pre-Need Plans | PhP0.40 on each PhP200.00 of the premium or contribution collected | PhP0.20 on each PhP200.00 of the premium or contribution collected |
| Certificates | PhP30.00 on each certificate | PhP15.00 on each certificate |
| Warehouse Receipts | PhP30.00 on each warehouse receipt | PhP15.00 on each warehouse receipt |
| Jai-alai, Horse Race, Tickets, Lotto or Other Authorized Numbers Games | PhP0.20 on each ticket | PhP0.10 on each ticket |
| Bills of Lading or Receipts for Any Goods Shipped | PhP2.00 on each set if the value of the goods exceeds PhP100.00 and does not exceed PhP1000.00 PhP20.00 on each set if the value exceeds PhP1000.00 |
PhP1.00 on each set if the value of the goods exceeds PhP100.00 and does not exceed PhP1000.00 PhP10.00 on each set if the value exceeds PhP1000.00 |
| Proxies | PhP30.00 on each proxy | PhP15.00 on each proxy |
| Powers of Attorney | PhP10.00 each | PhP5.00 each |
| Leases and Other Hiring Agreements | PhP6.00 for the first PhP2,000.00, and an additional PhP2.00 for every PhP1,000.00 in excess of the first PhP2,000.00 | PhP3.00 for the first PhP2,000.00, and an additional PhP1.00 for every PhP1,000.00 in excess of the first PhP2,000.00 |
| Mortgages, Pledges and Deeds of Trust | PhP40.00 when the amount does not exceed PhP5,000.00 Additional PhP20.00 on each PhP5,000.00 in excess of the first PhP5,000.00 |
PhP20.00 when the amount does not exceed PhP5,000.00 Additional PhP10.00 on each PhP5,000.00 in excess of the first PhP5,000.00 |
| Deeds of Sale, Conveyances and Donations of Real Property | No change on the DST rate. Donation of real property is now subject to DST. |
PhP15.00 when the amount does not exceed PhP1,000.00. Additional PhP15.00 on each PhP1,000.00 in excess of the first PhP1,000.00 |
| Compliance Requirements | ||
| Threshold amount to have books of account audited by independent Certified Public Accountants | PhP3,000,000.00 | PhP150,000.00 |
| Administrative Provisions | ||
| Threshold amount in the determination of whether or not a person is required to register for VAT | PhP3,000,000.00 | PhP1,500,000.00 |
| When to issue receipt based on the value of the sale | PhP100.00 | PhP25.00 |
| Sales reporting | Electronic point of sales reporting by taxpayers engaged in export of goods and services, and Large Taxpayers | No counterpart provision. |
| Interest rate | Double the legal interest rate per annum | 20% per annum |
| Penalty for tax evasion | Fine of not less than PhP500,000.00 but not more than PhP10,000,000.00, and imprisonment of not less than 6 years but not more than 10 years | Fine of not less than PhP30,000.00 but not more than PhP100,000.00, and imprisonment of not less than 2 years but not more than 4 years |
A Primer on its salient provisions vis-à-vis the provisions of the National Internal Revenue Code, as amended, is available upon request by e-mailing [email protected].
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