Bir Train-Income Tax

Briefing on RA 10963: Tax
Reform for Acceleration and

Inclusion (TRAIN) – Income Tax
NIRC Provision NIRC TRAIN
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 1,
citizen and 2018 to December 31, 2022
individual resident Not over P10,000 5%
alien of the Not over 0%
Over P10,000 but not P500 + 10% of the
Philippines P250,000
over P30,000 excess over P10,000
Over P30,000 but not P2,500 + 15% of the

TRAIN Briefing – Income Tax

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

NIRC Provision NIRC TRAIN
Section 24 For 2023 onwards:

Income tax rates Tax Schedule effective January 1, 2018 to
on individual December 31, 2022
citizen and Not over P250,000 0%
individual resident
Over P250,000 but not 15% of the excess over
alien of the
over P400,000 P250,000
Philippines
Over P400,000 but not P22,500 +20% of the
over P2,000,000 excess over P800,000
Over P2Million but not P402,500 + 30% of the
over P8Million excess over P2Million
Over P8Million P2,202,500 + 35% of the
excess over P2Million
NIRC NIRC TRAIN
Provision
Section 24 Refer to Revenue Memorandum Circular (RMC)
Income tax rates on Nos. 105-2017 and 1-2018, Revised Withholding
individual citizen and Tax on Compensation Table
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 operational 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 other
percentage tax; OR
2. Income tax based on the graduated income
tax rates for individuals
NIRC NIRC TRAIN
Provision
Section 24 Taxable income is subject to For mixed income earners (earning both compensation
Income tax of mixed the same graduated rates income and income from business or practice of
income earners profession, their income taxes shall be:
1. For income from compensation – Graduated
income tax rates fro individuals, AND
2. For income from business 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 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 – graduated income tax rates for
individuals
Illustration 1: Mr. CSO, works for G.O.D., Inc. He is not engaged in business 
nor has any other source of income other than his employment. For 2018, Mr. 
CSO earned a total taxable compensation income of ₱1,060,000.00. 
 
Compute for the Income Tax Due of Mr. CSO.
His income tax liability will be computed as follows: 

Taxable Compensation Income ₱ 1,060,000.00 
Tax Due: 
On P800,000.00 ₱ 130,000.00 
On excess (P1,060,000.00 - P800,000.00) x 30%
78,000.00 
Tax Due ₱ 208,000.00 
 

Illustration 2: Ms. EBQ operates a convenience store while she offers bookkeeping 
services to her clients. In 2018, her gross sales amounted to P800,000.00, in addition 
to her receipts from bookkeeping services of ₱300,000.00. She already signified her 
intention to be taxed at 8% income tax rate in her 1st quarter return. 
 
Her income tax liability for the year will be computed as follows: 
Gross Sales – Convenience Store ₱ 800,000.00 
Gross Receipts – Bookkeeping 300,000.00 
Total Sales/Receipts ₱ 1,100,000.00 
Less: Amount allowed as deduction under Sec. 24(A)(2)(b) 250,000.00 
Taxable Income ₱ 850,000.00 
Tax Due: 
8% of P850,000.00 ₱ 68,000.00 
 
 
* The total of gross sales and gross receipts is below the VAT threshold of ₱3,000,000.00. 
* Income tax imposed herein is based on the total of gross sales and gross receipts. 
* Income tax payment is in lieu of the graduated income tax rates under subsection (A) hereof and
percentage tax due, by express provision of law. 
 

Illustration 3: Ms. EBQ above, failed to signify her intention to be taxed at 8% income 
tax rate on gross sales in her 1st Quarter Income Tax Return, and she incurred cost 
of sales and operating expenses amounting to ₱600,000.00 and ₱200,000.00, 
respectively, or a total of ₱800,000.00, the income tax shall be computed as follows: 
 
  Gross Sales/Receipts ₱ 1,100,000.00 
Less: Cost of Sales 600,000.00 
Gross Income ₱ 500,000.00 
Less: Operating Expenses 200,000.00 
Taxable Income ₱ 300,000.00 
Tax Due: 
On excess (P300,000 - P250,000) x 20% ₱ 10,000.00 
 
 
* Aside from income tax, Ms. EBQ is likewise liable to pay business tax. 
 
 

Illustration 4: Mr. JMLH signified her intention to be taxed at 8% income tax rate on 
gross sales in her 1st Quarter Income Tax Return. However, her gross sales during the 
taxable year has exceeded the VAT threshold.
Q1 Q2 Q3 Q4 
(8% Rate) (8% Rate) (8% Rate) 
 
Total Sales ₱ 500,000.00 ₱ 500,000.00 ₱ 2,000,000.00 ₱ 3,000,000.00 
Less: Cost of Sales 300,000.00 300,000.00 1,200,000.00 1,200,000.00 
Gross Income ₱ 200,000.00 ₱ 200,000.00 ₱ 800,000.00 ₱ 1,800,000.00 
Less: Operating  
Expenses 120,000.00 120,000.00 480,000.00 720,000.00 
Taxable Income ₱ 80,000.00 ₱ 80,000.00 ₱ 320,000.00 ₱ 1,080,000.00 
 
 

Tax due shall be computed as follows: 
Total Sales ₱ 6,000,000.00 
Less: Cost of Sales 3,000,000.00 
Gross Income ₱ 3,000,000.00 
Less: Operating Expenses 1,440,000.00 
Taxable Income ₱ 1,560,000.00 
Income Tax Due 
Tax Due under the graduated rates ₱ 358,000.00 
Less: 8% income tax previously paid (Q1 to Q3) 220,000.00 
Annual Income Tax Payable ₱ 138,000.00 
 
* The gross receipts exceeded the VAT threshold of P3,000,000.00. Taxpayer shall be liable to pay income
tax under graduated rates pursuant to Section 24(A)(2)(a) of the Tax Code, as amended. 
* Taxpayer shall be allowed an income tax credit of quarterly payments initially made under the 8%
income tax option. 
* Taxpayer is likewise liable for business tax(es), in addition to income tax. A percentage tax pursuant to
Section 116 of the Tax Code, as amended, shall be imposed on the first P3,000,000.00. The excess of the
threshold shall be 
subject to VAT. 
*Percentage tax due on the P3,000,000.00 shall be collected without penalty, if timely paid on the due
date immediately following the month the threshold was breached. 
 
Illustration 5: Ms. RPSV, a prominent independent contractor who offers architectural 
and engineering services. Since her career flourished, her total gross receipts 
amounted to ₱4,250,000.00 for taxable year 2018. Her recorded cost of service and 
operating expenses were ₱2,150,000.00 and ₱1,000,000.00, respectively. 
 
Her income tax liability will be computed as follows: 
Gross Receipts – (Arch. and Eng’g Services) ₱ 4,250,000.00 
Less: Cost of Service 2,150,000.00 
Gross Income ₱ 2,100,000.00 
Less: Operating Expenses 1,000,000.00 
Tax Due: 
On ₱800,000.00 ₱ 130,000.00 
On excess (P1,100,000.00 - P800,000.00) X 30% 90,000.00 
Income Tax Due ₱ 220,000.00 
 
* The gross receipts exceeded the VAT threshold of P3,000,000.00. She is

liable for 
business tax/es, in addition to income tax. 
 
Illustration 6: In 2018, Mr. GCC owns a nightclub and videoke bar, with gross 
sales/receipts of ₱2,500,000.00. His cost of sales and operating expenses are 
₱1,000,000.00 and ₱600,000.00, respectively, and with non-operating income of ₱100,000.00. 
 
His tax due for 2018 shall be computed as follows: 
Taxable Income from Business: 
Gross Sales ₱ 2,500,000.00 
Gross Income ₱ 1,500,000.00 
Net Income from Operation ₱ 900,000.00 
Add: Non-operating Income 100,000.00 
Tax Due: 
On ₱800,000.00 ₱ 130,000.00 
On excess (₱1,000,000.00 - ₱800,000.00) x 30% 60,000.00 
Total Income Tax ₱ 190,000.00 
 
* The taxpayer has no option to avail of the 8% income tax rate on his income from business since his business income is subject to
Other Percentage Tax under Section 125 of the Tax Code, as amended. 
* Aside from income tax, taxpayer is liable to pay the prescribed business tax. 
 
Illustration 7: In 2018, Mr. MAG, a Financial Comptroller of JAB Company, earned 
annual compensation of ₱1,500,000.00, inclusive of 13th month and other benefits in 
the amount of ₱120,000.00 but net of mandatory contributions to SSS and 
Philhealth. Aside from employment income, he owns a convenience store, with gross 
sales of ₱2,400,000. His cost of sales and operating expenses are ₱1,000,000.00 and 
₱600,000.00, respectively, and with non-operating income of ₱100,000.00. 
 
a. His tax due for 2018 shall be computed as follows if he opted to be taxed at eight percent (8%)
income tax rate of his gross sales for his income from business: 
Total compensation income ₱ 1,500,000.00 

Less: Non-taxable 13th month pay and other benefits ____ 90,000.00 
Tax due: 
1. On Compensation: 
On ₱800,000.00 ₱ 130,000.00 
On excess (P1,410,000 – P800,000) x 30% 183,000.00 
Tax due on Compensation Income ₱ 313,000.00 
 
 
 
2. On Business Income: 
Gross Sales ₱ 2,400,000.00 
Add: non-operating income of 100,000.00 
Taxable Business Income ₱ 2,500,000.00 
Multiplied by income tax rate 8% 
Tax Due on Business Income ₱ 200,000.00 
Total Income Tax Due (Compensation and Business) ₱ 513,000.00 
 
 
  * The option of 8% income tax rate is applicable only to taxpayer’s income from 
  business and the same is in lieu of the income tax under the graduated income 
  tax rates and the percentage tax under Section 116 of the Tax Code, as 
amended. 
* The amount of ₱250,000.00 allowed as deduction under the law for taxpayers 
earning solely from self-employment/practice of profession, is not applicable 
for mixed income earner under the 8% income tax rate option. 
 

b. His tax due for 2018 shall be computed as follows if he did not opt for the eight percent (8%) income
tax based on gross sales/receipts and other nonoperating income: 
Less: Non-taxable 13th month pay and other benefits 90,000.00 
Add: Taxable Income from Business – 
Gross Sales ₱ 2,400,000.00 
Gross Income ₱ 1,400,000.00 
Net Income from Operation ₱ 800,000.00 
Add: Non-operating Income 100,000.00 
Total Taxable Income ₱ 2,310,000.00 
Tax Due: 
On ₱2,000,000.00 ₱ 490,000.00 
On excess (₱2,310,000 - 2,000,000) x 32% 99,200.00 
Total Income Tax ₱ 582,200.00 
 
  * The taxable income from both compensation and business shall be combined for purposes of computing the income tax due if the
taxpayer chose to be subject under the graduated income tax rates. 
* In addition to the income tax, Mr. MAG is likewise liable to pay percentage tax of ₱72,000.00, which is 3% of ₱2,400,000.00 
 
Illustration 8: In 2018. Mr. WBV, an officer of AMBS International Corp. earned annual compensation of
₱1,200,000.00, inclusive of 13 th month and other benefits in the amount of ₱120,000.00. Aside from
employment income, he owns a farm, with gross sales of ₱3,500,000. His cost of sales and operating
expenses are ₱1,000,000.00 and ₱600,000.00, respectively, and with non-operating income of
₱100,000.00. 
His tax due for 2018 shall be computed as follows: 
 
Less: Non-taxable 13th month pay and other benefits (max)
90,000.00 
Add: Taxable Income from Business – 
Gross Sales ₱ 3,500,000.00 
Gross Income ₱ 2,500,000.00 
Net Income from Operation ₱ 1,900,000.00 
Add: Non-operating Income 100,000.00 2,000,000.00 
Total Taxable Income ₱ 3,110,000.00 
Tax Due: 
On ₱2,000,000.00 ₱ 490,000.00 
On excess (₱3,110,000 - ₱2,000,000) x 32% 355,200.00 
Total Briefing
TRAIN income– tax dueTax
Income ₱ 845,200.00 
 
Illustration 12: Ms. RPSV is a prominent independent contractor who offers architectural and
engineering services. Since her career flourished, her total gross receipts amounted to ₱4,250,000.00
for taxable year 2018. Her recorded cost of service and operating expenses were ₱2,150,000.00 and
₱1,000,000.00, respectively. 
OSD will be computed as follows: 
 
Gross Receipts – Architectural and Engineering Services ₱ 4,250,000.00 
Multiply by Rate 40% 
Optional Standard Deduction ₱ 1,700,000.00 
Her Net Taxable Income will be computed as follows: 
Gross Receipts – Architectural and Engineering Services ₱ 4,250,000.00 
Less: OSD 1,700,000.00 
Net Taxable Income ₱ 2,550,000.00 
Her income tax liability will be computed as follows: 
On ₱2,000,000.00 ₱ 490,000.00 
On Excess (₱2,550,000.00 – ₱2,000,000.00) x 32%
176,000.00 
Income Tax Due ₱ 666,000.00 
* The individual taxpayer elected OSD in the computation of her income tax and the election is irrevocable for the
  taxable year for which the return was made. 
* Taxpayer is not required to submit his financial statements with his tax return. 
* The gross receipts exceeded the VAT threshold of ₱3,000,000.00, thus, the taxpayer is subject under the graduated
income tax rates and liable for business tax, in addition to income tax. 
 
 

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Bir Train-Income Tax

Hochgeladen von

Copyright:

Verfügbare Formate

Briefing on RA 10963: Tax

Reform for Acceleration and

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

TRAIN Briefing – Income Tax

Over P2Million but P490,000 + 32% of the

TRAIN Briefing – Income Tax

Section 24 For 2023 onwards:

His income tax liability will be computed as follows:

TRAIN Briefing – Income Tax

TRAIN Briefing – Income Tax

TRAIN Briefing – Income Tax

TRAIN Briefing – Income Tax

* The gross receipts exceeded the VAT threshold of P3,000,000.00. She is

Total compensation income ₱ 1,500,000.00

TRAIN Briefing – Income Tax

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