December 19, 2017 — Tuesday — After being ratified by both the Senate and House of Representatives, the first package of the Tax Reform for Acceleration and Inclusion (TRAIN) has now been signed into law by President Rodrigo Duterte. As expected, this tax package is set to be implemented by January of 2018.
In Ratifying the Bill
Despite many differences between the proposed bill versions by both the Senate and House of Representatives, the main goal in ratifying the provisions of this act were focused not only in restructuring the Philippine’s tax system, but also in providing simple yet fair taxes for Filipinos.
The government is also expected to achieve an estimated revenue of about ₱130 billion with this approved version of TRAIN law, now also known as Republic Act 10963.
Major changes were added to this new version of the comprehensive tax reform package:
Personal Income Taxes
This version of the tax reform bill is still exempting tax from the P250,000 annual income, and this time this would hopefully increase take home pays for workers under the compensation-based and self-employed section.
Also, the ₱82,000 tax exemption for 13th month pay, as well as other types of bonuses had been raised for up to P90,000.
Income Tax (Self-Employed)
The bill had also approved an 8% flat tax when it comes to gross sales as well as receipts for self-employed individuals.
Tax Imposed on Sweetened Beverages
Yet another controversial issue since the passing of this tax bill is the excise taxes levied on sweetened beverages.
Under this provision, taxes will be imposed on drinks using artificial sweeteners (both caloric and non-caloric) (P6/liter), as well as beverages using high fructose corn syrup (P12/liter).
In the meantime, other beverages like milk, 3-in-1 coffee and any other forms of natural juices are tax-exempt.
Excise Tax on Fuel
Changes were also made when it comes to excise taxes imposed on petroleum, as new tax brackets were made for products such as diesel, LPG and gas.
Other tax rates were imposed as follows:
- Aviation Gas – P4/liter
- Asphalts – P8/kg
- Bunker fuel – P2.50/liter
- Kerosene – P3/liter
- Lubricating Oil – P8/liter
- Naptha – P7/liter
- Paraffin wax – P8
- Petcoke – P2.50
Others exempted in this new provision are products which are used for feedstock, replacement fuel and raw material (petrochemical) purposes.
Auto Excise Tax
New tax rates were also implemented when it comes to excise taxes imposed on automobiles:
Under the TRAIN act, 4% of taxes are imposed on cars with net manufacturer’s price of P600,000, 10% for cars over P600,000 to P1 million, 20% for cars over P1 million to P4 million and finally 50% for automobiles worth over P4 million, while half of those taxes are imposed for hybrid cars.
Cars exempted from this provision are pick-up trucks and electric vehicles.
Coal Excise Tax
This version of TRAIN also has it’s eyes set for a new bracket of tax rates imposed on coal:
- P50 (first year)
- P100 (2nd year)
- P150 (3rd year)
Tobacco Excise Tax
The provision also suggests that taxes for tobacco should be raised for up to P32.50 by January to June 2018, P35 once it hits July to December 2018-2019, P37.50 in 2020-2021, P40 by 2022-2023 and a 4% annual increase by 2023 up to succeeding years.
Exemptions in VAT
VAT exemptions will be maintained for the following taxpayers/business Industries:
- Business Process Outsourcing (BPO) Companies
- Food Production
- Healthcare, as well as sales on prescription drugs and medicines
- PWDs (Persons with Disabilities)
- Raw food
- Agricultural Products
- Senior Citizens
- Leases on housing units below P15,000 a month, as well as Socialized Housing
- Small businesses with annual sales of goods/services of ₱3 million and below.
- Tourism enterprises
Other Provisions of the Bill
- Donor’s tax to be simplified into a flat tax rate of 6% (gifts exceeding P250,000)
- Doubling tax rates levied on documentary stamps to P3 (from P1.50)
- Cosmetic procedures, surgeries and other forms of body enhancements will be levied with an excise tax of 5%.
- Estate tax – Same rates still goes for estate taxes, as the Senate adopted the 6% flat tax rate.