Tax Reform

Acceleration
and Inclusion
A personal guide
What is TRAIN
 TRAIN stands for “Tax Reform Acceleration
and Inclusion Act” or R.A. 10963 a law
passed to amend certain provisions of
R.A. 8424 or the National Internal Revenue
Act of 1997
What is TRAIN
 TRAINwas signed into law on December
19, 2017 and put in effect starting January
1, 2018.
TRAIN Highlights
 TRAIN implements a simplified Personal
Income Tax System, by adjusting brackets
to correct income creeping, and
reducing the maximum rate to 25% over
time, except for the highest income
earners to maintain progressivity.
TRAIN Highlights
 TRAINrestructures the tax for micro
businesses to a flat rate of 8% (in lieu of
VAT and percentage taxes) for businesses
with gross sales below P3 million
TRAIN Highlights
 TRAINreduces and restructures the
donor’s tax to a single tax rate of 6% on
net donations for gifts exceeding P100,000
annually, regardless of the relationship
between the donor and the donee.
TRAIN Highlights
 TRAIN reduces and restructures the estate
tax to a single tax rate of 6% based on net
value of the estate. Standard Deduction
of P1 Million and up to 3 Million for family
homes is exempted.
TRAIN Highlights
 TRAIN broadens the VAT system by limiting
exemptions to raw food and other
necessities (e.g. Education, Healthcare)
 TRAIN implements a staggered increase
of excise tax on all Petroleum products
and index to inflation.
 TRAIN updates excise tax on Automobiles
TRAIN Highlights
 TRAINintroduces a tax on sugar
sweetened beverages (SSB) with
adjustments every 3 years based on
cumulative inflation.
Simplifying the Income Tax
System
 TRAINsimplifies the new income tax
brackets by decreasing it to 6. Tax rates
for 99% of taxpayers will gradually
decrease over the next few years.
Simplifying the Income Tax System
Previous Tax Table
Annual Taxable Income Tax Rate
0 – 10,000 5%
Over 10,000 – 30,000 500 + 10% of excess over
10,000
Over 30,000 – 70,000 2,500 + 15% of excess over
30,000
Over 70,000 – 140,000 8,500 + 20% of excess over
70,000
Over 140,000 – 250,000 22,500 + 25% of excess over
140,000
Over 250,000 – 500,000 50,000 + 30% of excess over
250,000
Over 500,000 125,000 + 32% of excess over
500,000
Simplifying the Income Tax System
TRAIN Tax table for 2018
Annual Taxable Income Tax Rate
0 – 250,000 0%
Over 250,000 – 400,000 20% of excess over 250,000

Over 400,000 – 800,000 30,000 + 25% of excess over

400,000
Over 800,000 – 2,000,000 130,000 + 30% of excess over
800,000
Over 2,000,000 – 5,000,000 490,000 + 32% of excess over
2,000,000
Over 5,000,000 1,450,000 + 35% of excess
over 5,000,000
Simplifying the Income Tax System
TRAIN Tax table for 2022 onwards
Annual Taxable Income Tax Rate
0 – 250,000 0%
Over 250,000 – 400,000 15% of excess over 250,000

Over 400,000 – 800,000 22,500 + 20% of excess over

400,000
Over 800,000 – 2,000,000 102,500 + 25% of excess over
800,000
Over 2,000,000 – 5,000,000 402,500 + 30% of excess over
2,000,000
Over 5,000,000 1,302,500 + 35% of excess
over 5,000,000
Impact on the Taxpayer
 Juan is Medical Records Head in a
Hospital. He is not married. His monthly
salary is P12,000. SSS, Philhealth and
Pagibig Contributions are P 545, P 206,
and P100, respectively
Impact on the Taxpayer
Tax Table
Previous Tax Current Tax
System System under
TRAIN
Tax Due 1,538.08 0.00
Net Pay after Tax 13,461.92 15,000.00
Total Contributions 851.25 851.25
Net Take home 12,610.67 14,148.75
pay
Tax Savings 1,538.08
Impact on the Taxpayer
 Medusa is a Senior Executive for a local
company. She is married with 2 children.
Her monthly salary is P50,000. Her SSS,
Philhealth and Pagibig contributions are
P581.30, P550, and P100 respectively. Her
husband’s monthly salary is P12,000. SSS,
Philhealth and Pagibig Contributions are P
581.30, P 481.25, and P100, respectively.
Impact on the Taxpayer
Tax Table
Previous Tax Current Tax
System System under
TRAIN
Tax Due 18,173.89 8,984.87
Net Pay after Tax 66,826.11 76,015.13
Total Contributions 2,393.85 2,393.85
Net Take home 64,432.26 73,621.28
pay
Tax Savings 9,189.01
Tax on Sugar Sweetened
Beverages (SSB)
 The
proposed tax on SSBs is a health
measure, meant to discourage the
consumption of high sugar levels, while
encouraging industry players to develop
healthier product alternatives
Products covered by the SSB
Tax
 Sweetened Juice Drinks
 Sweetened Tea and Coffee
 Carbonated Beverages with added
sugar, including caloric and non caloric
sweeteners
 Flavored water
 Energy Drinks
 Sports Drinks
Products covered by the SSB
Tax
 Powdered drinks not classified as milk,
juice, tea or coffee
 Cereal and other grain beverages
 Other non-alcoholic beverages that
contain added sugar.
Products NOT covered by the
SSB Tax
 Milk
 Powdered Tea
 Powdered Coffee (including 3-in 1 coffee)
 Natural Fruit and Vegetable Juices
 Medically Indicated Beverages
Petroleum Excise Tax
 One of the major provisions of TRAIN is the
staggered increase in oil excise tax. The
current rates have been unadjusted since
1997 draining P145 Billion annually.
 Under the Proposal rates will be adjusted
gradually starting the second half of 2017
to 2019 and will be indexed annually for
the succeeding years
Petroleum Excise Tax
Pesos/L 1997- 2018 2019 2020 2021*
2017
Diesel P0.00 P3.00 P5.00 P6.00 P6.24
and
essentials
Gasoline P4.35 P7.00 P9.00 P10.00 10.40
and Non-
Essentials

*Annual Indexation by 4% starting 2021

Petroleum Excise Tax
 Notes:
 There shall be no indexation for the year if the
average Dubai Crude oil price in the month
preceding the scheduled indexation exceeds
US$100 per barrel.
 Essentials include: Processed gas, kerosene,
diesel fuel oil, liquefied petroleum gas, asphalt,
and Bunker Fuel oil.
 Non Essentials include: Lubricating oils and
greases, Naptha, regular gasoline, premium
gasoline and aviation turbojet fuel.
Why do we need to increase
oil excise?
 Oil Excise is a highly progressive tax since
those who consume more pay more
compared to those who consume less.
 The top 10 Filipino households (around 2
million households) who earn around
P113,000 and above per month, consume
almost 51% of the fuel.
Why do we need to increase
oil excise?
 Thetop 1% of Filipino households (or
180,00 households) who earn around
P288,000 and above per month, consume
13% of the fuel. This share is equal to what
the poorest 50% consume.
Why do we need to increase
oil excise?
 The consequence of this is:
 72% of newly registered SUV’s are diesel
powered, which is tantamount to
exempting the rich.
Questions?