Train Law

Sangalang & Gaerlan, Business Lawyers
www.paladinslaw.org
What is the Tax Reform for Acceleration and For the poorest 10 million households, the
Inclusion (TRAIN) Act? government is giving them targeted cash transfers of
PHP 200 per month in 2018 and P300 per month in
President Rodrigo Roa Duterte signed into law 2019 and 2020, sourced from higher consumption
Republic Act No. 10963, otherwise known as the Tax taxes that the rich will contribute, as well as better
Reform for Acceleration and Inclusion (TRAIN) Act, social services, healthcare, and education. All these
the first package of the Comprehensive Tax Reform will prepare the people for better job opportunities.
Program (CTRP, on December 19, 2017 in
The TRAIN raises significant revenues to support the
Malacanang.
President’s priority social and infrastructure
The TRAIN will provide hefty income tax cuts for programs, which will help realize his administration’s
majority of Filipino taxpayers while raising additional goal of reducing the poverty rate from 21.6 to 14
funds to help support the government’s accelerated percent by 2022. Some 70 percent of the incremental
spending on its “Build, Build, Build” and social revenues will help fund the government’s
services programs. infrastructure modernization program, while the
balance will go to social services.
This tax reform package corrects a longstanding
inequity of the tax system by reducing personal
income taxes for 99 percent of taxpayers, thereby
Why is there a need for a reform of the tax system?
giving them the much needed relief after 20 years of
non-adjustment of the tax rates and brackets. This is
First, we have a high marginal rate on Personal
the biggest Christmas and New Year gift the
Income tax compared to other ASEAN countries.
government is giving to the people.
Second, we have one of the highest Corporate
Income Tax among ASEAN countries. Third, our Fiscal
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Incentives are redundant and not rationalized and teacher-to-student ratio and classroom-to-student
lastly, there are too many exemptions in our Value ratio:
Added Tax.
 Achieve 100% enrolment and completion
rates.
Key amendments to the 1997 Tax Code  Build 113,553 more classrooms.
 Hire 181,980 more teachers between 2017
 Lowered personal income tax rates and 2020.
 Simplified rates for estate and donor’s taxes
 Expanded value-added tax base 2. Social Services
 Increased excise tax for petroleum products
 Adjusted excise tax for automobiles With tax reform, we can invest more in our country’s
 Introduced excise tax on sugar sweetened healthcare by providing better services and facilities:
beverages & non-essential services
 Upgrade 704 local hospitals and establish 25
local hospitals.
What will the TRAIN fund?  Achieve 100% PhilHealth coverage at higher
quality of services.
1. Education  Upgrade and/or relocate rural and urban units
to disaster resilient facilities.
The tax reform proposal will be able to fund  Build 15,988 new barangay health stations.
investments in education, achieving a more  Build 2,424 new rural health units and urban
conducive learning environment with the ideal health centers.
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 Between 2017 and 2020 hire an additional According to the BIR, the deadline to file
2,424 doctors, 39,466 nurses, 1,114 dentists, the individual ITR specifically BIR forms 1700 and
3,288 pharmacists, 2,862 medical 1701, is still April 15 from year 2018 onwards.
technologists, 911 public health associates and
2,497 UHC implementers. What was moved is the deadline to file BIR Form
1701Q, the quarterly ITR, for the first quarter every
3. Infrastructure year from April 15 to May 15, beginning the year
2018.
The additional revenue raised by the tax reform will
be used to fund the infrastructure program of the
Department of Public Works and Highways (DPWH) Who are the individuals not required to file income
which consists of major highways, expressways, and tax return?
flood control projects.
The following individuals are not required to file
income tax return:
When is the deadline to file an Income Tax Return?
 An individual earning purely compensation
Previously, it was reported that under the TRAIN law income whose taxable income does not exceed
or Republic Act (RA) No. 10963, the deadline to file Two Hundred Fifty Thousand pesos
the annual Income Tax Return (ITR) has been moved (PhP250,000.00);
to May 15. The BIR has issued an official
announcement clarifying this: Deadline to file ITR The Certificate of Withholding filed by the
under TRAIN is still April 15 respective employers, duly stamped
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“Received” by the Bureau, shall be tantamount during the taxable year, are not qualified for
to the substituted filing of income tax returns substituted filing. Thus, they are still required to file a
by said employees. return.1
 An individual whose income tax has been
correctly withheld by his employer, provided
that such individual has only one employer for Can the individual income tax be paid on an
the taxable year – the Certificate of installment basis?
Withholding filed by the respective employers,
duly stamped “Received” by the Bureau shall It depends on the amount of tax. In case that the tax
be tantamount to the substituted filing of due is in excess of Two Thousand pesos
income tax returns by said employees; (PhP2,000.00), the individual may pay the tax in two
 An individual whose sole income has been (2) equal installments. The first installment shall be
subjected to final withholding tax; paid at the time the annual income tax return is filed
 A minimum wage earner as defined in these and the second one be paid on or before October 15
regulations – the Certificate of Withholding following the close of the calendar year.
filed by the respective employers, duly
stamped “Received” by the Bureau, shall be
tantamount to the substituted filing of income What are the new rules on income tax for self-
tax returns by said employees. employed professionals and those earning from
practice of profession?
In all cases, all individuals deriving compensation
income, regardless of the amount, from two (2) or
more concurrent or successive employers at any time
1
Section 9 of BIR RR No. 8-2018
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If you are an individual earning purely from self- profession, otherwise, the taxpayer shall be
employment and/or practice of profession, you need considered as having availed of the graduated rates
to check whether or not your gross sales/receipts and under Section 24(A)(2)(a) of the Tax Code, as
other non-operating income exceeds the value- amended. Once the taxpayer chooses the option that
added-tax (VAT) threshold. If it did not exceed the he will avail, such election is irrevocable and cannot
VAT threshold, you have the option to avail of: be amended for the said taxable year.
1. The graduated rates under Section 24(A)(2)(a)

of the Tax Code, as amended; or What is the 8% Gross Receipts Tax?
2. An eight percent (8%) tax on gross sales or This is a new option for non-VAT taxpayers. Instead
receipts and other non-operating income in of filing the percentage tax and the income tax, they
excess of Php250,000.00 in lieu of the can opt to file 8% Gross Receipts Tax. The
graduated income tax rates under Section computation is very simple:
24(A) and the percentage tax under Section
116, all under the Tax Code, as amended.2 (Gross Income – P250,000) x 0.08 = Tax Due
Please take note the taxpayer must expressly signify

his/her intention to elect the 8% income tax rate in What happens to a taxpayer who initially selected
the 1st Quarter Percentage and/or Income Tax the 8% income tax rate option but his/her gross
Return, or on the initial quarter return of the taxable sales/receipts and other non-operating income
year after the commencement of a new business or exceeded the VAT threshold for the taxable year?
2
Section 3(C) of BIR RR No. 8-2018
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The taxpayer shall be automatically subjected to the Can a taxpayer avail of the 8% income tax rate on
graduated rates under Section 24(A)(2)(a) of the Tax his/her income from business?
Code, as amended.3
No. The business income is subject to Other
Percentage Tax under Sec. 125 of the Tax Code, as
Is there a need to attach the Financial Statement in amended.
filing the final Income Tax Return?
What shall be the tax base for those who opted to
No. The Financial Statement is not required in the be taxed at graduated rates? For those who availed
filing the final Income Tax Return. However, in case of the 8% income tax rate?
that the taxpayer is also subject to a business tax, a
Financial Statement shall be required as an If the taxpayer chooses to be taxed at the graduated
attachment to the annual income tax return even if rates, the tax base is the net income. If the taxpayer
the gross sales/receipts and other non-operating opted to avail the 8% income tax rate, the taxable
income is less than the VAT threshold. In case that base is the gross sales/receipts and other non-
the gross sales/receipts and other non-operating operating income.
income exceeds the VAT threshold, the annual
income tax return shall be accompanied by an Annual Sales or Gross Tax Rates
audited Financial Statement. Receipts
PhP250,000.00 and below 0%
PhP500,000.00 and below Exempt from 3%

3
Section 3(C) of BIR RR No. 8-2018
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percentage tax amount of PhP30,000.00 plus 25% of the excess over

Below PhP3,000,000.00 May choose either 8% PhP400,000.00.
flat tax on gross receipts
Those with yearly salaries between PhP800,000.00
or follow personal
and PhP2 million will be charged a fixed amount
income tax table of PhP130,000.00 plus 30% on the excess over
PhP800,000.00.
Above PhP3,000,000.00 Subject to personal
income tax table High-income earners receiving salaries between PhP2
million and PhP8 million annually will pay a fixed
amount of PhP490,000.00 plus 32% of the excess
over PhP2 million.
What are the new rules on income tax for Finally, the highest income tier receiving salaries of at
employees? least PhP8 million per year will have withholding
taxes of PhP2.41 million plus 35% of the excess over
Under TRAIN Law, those earning an annual salary PhP8 million.
of PhP250,000.00 or below will no longer pay any
income tax. All these will be implemented from 2018 until 2022,
but beginning 2023, the rates will further fall.
Those earning between PhP250,000.00 and
PhP400,000.00 per year will be charged an income
tax rate of 20% on the excess over PhP250,000.00. Income Tax Table (2018-2022)
Those earning annual incomes between Gross Income Per Year Income Tax Rate
PhP400,000.00 and PhP800,000.00 will pay a fixed
PhP250,000.00 and 0%
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below From year 2023 onwards, the income tax rates will be
further adjusted, as follows:
Above PhP250,000.00 to 20% of the excess over
PhP400,000.00 PhP250,000.00 Those earning an annual salary of PhP250,000.00 or
below will continue to be exempted from paying
Above PhP400,000.00 to PhP30,000.00 + 25% of
PhP800,000.00 the excess over income tax.
PhP400,000.00
Those earning between PhP250,000.00 and
Above PhP800,000.00 to PhP130,000.00 + 30% of PhP400,000.00 per year will be charged
PhP2,000,000.00 the excess over a lower income tax rate of 15% on the excess over
PhP800,000.00 PhP250,000.00.
Above PhP2,000,000.00 PhP490,000.00 + 32% of

to PhP8,000,000.00 the excess over Those with annual salaries from PhP400,000.00 to
PhP2,000,000.00 PhP800,000.00 will have withholding taxes
of PhP22,500.00 plus 20% of the excess over
Above PhP8,000,000.00 PhP2,410,000.00 + 35% PhP400,000.00.
of the excess over
PhP8,000,000.00 Salaried employees with annual incomes between
PhP800,000.00 and PhP2 million will be charged a
fixed amount of PhP102,500.00 plus 25% on the
What will be the income tax rate from year 2023 excess over PhP800,000.00.
onwards?
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Those receiving salaries between PhP2 million and Above PhP800,000.00 to PhP102,500.00 + 25% of
PhP8 million per year will be charged PhP402,500.00 PhP2,000,000.00 the excess over
plus 30% of the excess over PhP2 million. PhP800,000.00
Finally, the highest income segment of employees Above PhP2,000,000.00 PhP402,500.00 + 30% of
to PhP8,000,000.00 the excess over
with annual salaries of at least PhP8 million will
PhP2,000,000.00
pay PhP2.2025 million plus 35% of the excess over
PhP8 million. Above PhP8,000,000.00 PhP2,202,500.00 + 35%
of the excess over
PhP8,000,000.00
Income Tax Table (2023 onwards)
Income Per Year Tax Rate

What is the tax base for compensation earners?
PhP250,000.00 and 0%
below It is the gross compensation income less non-taxable
income/benefits such as but not limited to 13th
Above PhP250,000.00 to 15% of the excess over month pay and other benefits, de minimis benefits,
PhP400,000.00 PhP250,000.00 and employee’s share in the SSS, GSIS, PHIC, PagIbig
contributions and union dues.
Above PhP400,000.00 to PhP22,500.00 + 20% of
PhP800,000.00 the excess over
PhP400,000.00 (Gross Compensation Income – Non Taxable Income)
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It doesn’t matter now if the taxpayer has one

Are the personal and additional exemptions dependent or four dependents or no dependent at all
retained?
That means two taxpayers with the same gross
No. Under the tax reform, the personal exemption of income will pay exactly the same tax due —
PhP50,000.00 and additional exemption of regardless if one taxpayer has four children (i.e., four
PhP25,000.00 per dependent, which were enjoyed by dependents) while the other has none.
taxpayers in the old tax system, have now been
removed. In addition to the removal of personal and additional
exemptions, the maximum PhP2,400.00 premium for
In the past, an individual may avail of personal health and hospitalization insurance, which is
exemption (PhP50,000.00) and additional exemption previously deductible from taxable income, has also
(maximum of PhP100,000.00 if there are four been removed.
dependents) to be deducted from the taxable
income. Under TRAIN, the exemption has been
simplified and made more straightforward. This What shall be excluded in the gross income?
simply means:
The following shall be excluded in the gross income,
If the taxpayer’s gross income is P250,000.00 or thus, exempt from income taxation:
below, he or she is automatically exempted from
paying the income tax; and  Life insurance – The proceeds of life insurance
policies paid to the heirs or beneficiaries upon
the death of the insured, whether in a single
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sum or otherwise, but if such amounts are held I. Benefits received by officials and
by the insurer under an agreement to pay employees of the national and
interest thereon, the interest payments shall local government pursuant to
be included in gross income; Republic Act No. 6686;
 Amount received by insured as return of II. Benefits received by employees
premium; pursuant to Presidential Decree
 Gifts, bequests, and devices; No. 851, as amended by
 Compensation for injuries or sickness; Memorandum Order No. 28
 Income exempt under Treaty; dated August 13, 1986;
 Retirement benefits, pensions, gratuities, etc.; III. Benefits received by officials and
 Miscellaneous items – employees not covered by
1. Income derived by foreign government; Presidential Decree No. 851, as
2. Income derived by the Government or amended by Memorandum Order
its political subdivision; No. 28 dated August 13, 1986;
3. Prizes and awards; and
4. Prizes and awards in sports competition; IV. Other benefits such as
5. 13th month pay and other benefits – productivity incentives and
Gross benefits received by officials and Christmas bonus;
employees of public and private  GSIS, SSS, Medicare, and other contributions;
entities: Provided, however, that the  Gains from the sale of bonds, debentures, or
total exclusion under this item shall not other certificates of indebtedness with a
exceed PhP90,000.00 , which shall maturity of more than five (5) years; and
cover:
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 Gains from redemption of shares in mutual has been raised from the current P82,000 to P90,000.
funds.4 This means 13th month pay and bonuses paid to
employees that amount to P90,000 or below will not
be taxed.
Aside from the statutory minimum wage, what are
the other payments given to minimum wage earners
that are exempt from payment of income tax? What are the De Minimis benefits allowed by law?
The following are exempt from payment of income Item Ceiling

tax;
Medical benefits given to Not exceeding
the employees by the PhP10,000.00 per annum
 Holiday pay
employer
 Overtime pay
 Night shift differential pay Employee achievement Annual monetary value
 Hazard pay awards not exceeding
PhP10,000.00
Benefits received by an PhP10,000.00 per

What is the new rule on tax on 13th month pay and
employee by virtue of a employee per taxable
de minimis benefits? collective bargaining year
(CBA) and productivity
The threshold for tax exemption on 13th month pay incentive schemes
and other bonuses received by salaried employees
Gifts given during Not exceeding
4
Section 6 of BIR RR No. 8-2018
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Christmas and Major PhP5,000.00 per private employees

anniversary celebrations employee per annum per
employee
Uniforms and clothing Not exceeding
allowance given to PhP5,000.00 per annum How is Fringe Benefit Tax being treated under the
employees by the
TRAIN law?
employer
Rice subsidy granted by PhP1,500.00 or one sack The tax on fringe benefits at the rate of 35% shall be
an employer to his of 50 kg. rice per month imposed on the grossed-up monetary value of fringe
employees amounting to not more benefits furnished or granted to an employee (except
than PhP1,500.00 rank-and-file employees) by the employer, whether
an individual or a corporation (unless the fringe
Laundry allowance Not exceeding PhP300.00
benefit is required by the nature of, or necessary to
per month
the trade, business or profession of the employer, or
Medical cash allowance Not exceeding PhP750.00 when the fringe benefit is for the convenience or
to dependents of per semester or PhP125 advantage of the employer). The tax herein imposed
employees per month is payable by the employer, which tax shall be paid in
the same manner as provided for under Sec. 57(A) of
Daily meal allowance for Not exceeding 25% of the the Tax Code, as amended.5
overtime work and basic minimum wage on a
night/graveyard shift per region basis
To better illustrate:
Monetized unused Not exceeding 10 days
vacation leave credits of during the year
5
Section 7 of BIR RR 8-2018
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Monetary value of fringe benefit Php5,000.00  Housing personnel such as maid, driver and
Percentage divisor applicable 65% others
Fringe benefit tax rate 35%  Interest on loan at less than the market rate
to the extent of the difference between the
FBT = (Monetary value / 65%) x 35% market and actual rate granted
FBT = (Php5,000.00 / 65%) x 35%  Membership fees, dues and other expenses
FBT = Php7,692.31 x 35% borne by the employer for the employees in
FBT = Php2,692.31 social athletic clubs or other similar
organizations
 Expenses for foreign travel
What is a fringe benefit?  Holiday and vacation expenses
 Educational assistance to the employee or his
It is a special form of benefits that an employer dependents
provides to its employees in addition to their salaries  Life or health insurance and other non life
and wages. It is any good, service, or other benefit insurance premiums or similar amounts in
furnished or granted in cash or in kind by an excess of what the law allows
employer, whether it is a corporate or sole
proprietor, to individual employees. Fringe benefits Please take note that fringe benefit becomes taxable
include but are not limited to: only when provided to managerial and supervisory
employees.
 Housing
 Expense account
 Vehicle of any kind Are there any exemptions to the fringe benefit tax?
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What are the rules on income tax for corporations

Yes. The following are exempted from fringe benefit and business partnerships?
tax:
They may elect a standard deduction in an amount
 Fringe benefits which are authorized and not exceeding forty percent (40%) of its gross
exempted from tax under special laws income. Unless the taxpayer signifies in his return his
 Contributions of the employer for the benefit intention to elect the optional standard deduction,
of the employees to retirement, insurance and he shall be considered as having availed himself of
hospitalization benefit plans the deductions allowed. Such election when made in
 Benefits given to rank-and-file employees, the return shall be irrevocable for the taxable year
whether granted under a collective bargaining for which the return is made.
agreement or not
 De minimis benefits Example:
 Benefits required by the nature of or necessary
to the conduct of trade or business or Gross sales/receipts PhP220,000.00
profession Less: Sales returns, discounts PhP20,000.00
 Benefits under employer convenience rule ( a and allowances
benefit provided to the employee but which Net sales PhP200,000.00
would be more beneficial to the employer than Less: Cost of sales/services PhP70,000.00
to the employee Gross profit PhP130,000.00
Optional Standard Deduction 40%
Allowable deduction – OSD PhP52,000.00
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Is a General Professional Partnership subject to

What are the requirements for a corporation return income taxation?
under the TRAIN law?
No. Pursuant to Sec. 26 of the Tax Code, as amended,
The income tax return shall consist of a maximum of a General Professional Partnership is not a taxable
four (4) pages in paper form or electronic form, be entity for income tax purposes. However, the
filed by the president, vice president or other partners shall be liable to pay income tax on their
principal officer, shall be sworn to by such officer and separate and individual capacities for their respective
by the treasurer or assistant treasurer, and shall only distributive share in the net income of the General
contain the following information: Professional Partnership.
(1) Corporate profile and information;
(2) Gross sales, receipts or income from services How is the distributable net income of the General
rendered, or conduct of trade or business, except Professional Partnership determined?
income subject to final tax as provided under the Tax
Code; It is determined either by claiming either itemized
deduction or Optional Standard Deduction. The share
(3) Allowable deductions under the Tax Code;
in the net income of the partnership, may it be actual
(4) Taxable income as defined under the Tax Code; or constructively received, shall form part of the
and taxable income of the partners and must be
reported. The partners in the General Professional
(5) Income tax due and payable.
Partnership can no longer claim further deduction
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from their distributive share in the net income of the

General Professional Partnership and are not allowed
to avail of the 8% income tax rate option since their Is there a new rule on income tax for cooperatives
distributive share from the General Professional and other similar entities?
Partnership is already net of cost and expenses.
None. The plan to remove the exemption of
Please take note that in case the partner also derives cooperatives did not push through. Cooperatives that
other income from trade, business or practice of are duly registered with the Cooperative
profession which is separate and distinct from the Development Authority or whose registration has
share in the net income of the General Professional been confirmed by the latter, including primary,
Partnership, the deduction that can be claimed from secondary or tertiary cooperatives, will still enjoy the
the other income would either be the itemized tax exemptions granted to cooperatives.
deductions or Optional Standard Deduction.
What is the new VAT threshold under the TRAIN

What is the new rule/s on income tax for general law?
professional partnerships?
The previous threshold for a taxpayer to be required
The only change on income tax for general to be a VAT taxpayer is PhP1,919,500.00. TRAIN
professional partnerships under the TRAIN law is that raises the VAT threshold to PhP3,000,000. If you
the Optional Standard Deduction of 40% of gross were a taxpayer earning below the PhP1,919,500.00
income may be availed only once by either the threshold, then things you’re still a non-VAT taxpayer
general professional partnership or the partners. unless you registered as a VAT taxpayer.
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 Medicines for diabetes, cholesterol, and

hypertension (VAT exemption beginning 2019)
What are the products, service, or groups that are  Socialized housing, or houses priced at
VAT exempt under the TRAIN law? P450,000 and below, and low-cost housing, or
those priced at P3 million and below (VAT
 Food and agricultural products exemption retained from 2018 to 2020 only)
 Senior citizens
 Persons with Disability (PWD)
 Cooperatives What should a non-VAT taxpayer file so as to avail
 Tourism the 8% income tax rate at the beginning of the
 Education taxable year?
 Renewable energy
 Health The non-VAT taxpayer should file an Application for
 Enterprises and BPOs located in Special Registration Information Update (BIR Form No. 1905)
Economic Zones to end-date the registered tax type of percentage tax.
 Condominium association dues
 Rentals and leases below P15,000 per month
What should a taxpayer do if he initially presumed
 Businesses with annual gross sales of P3 million
that gross sales/receipts and other non-operating
and below
income for the taxable year will not exceed the VAT
 Government owned and controlled
threshold but has actually exceeded the same
corporations (GOCCs), state universities and
during the taxable year?
colleges (SUC), and government agencies
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The taxpayer should immediately update his

registration to reflect the change in the tax profile
from non-VAT to VAT taxpayer. The registration shall
be made within the month following the month he
exceeded the VAT threshold. The taxpayer shall be
liable to VAT prospectively starting on the first day of
the month following the month the threshold was
breached.
What is the consequence if a VAT taxpayer did not

update the registration records on or before the first
quarter of the taxable year considering that he did
not exceed the VAT threshold within the
immediately preceding three (3) year period?
The taxpayer shall remain liable for VAT for as long as

there is no update in the registration and VAT-
registered invoices/receipts are continuously used.
Said taxpayer cannot avail of the 8% income tax rate
option.
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Digest of Latest Revenue Regulations and Other products under other laws shall now be subject to
Issuances in Connection with the TRAIN Law (from the applicable rates above beginning January 1, 2018.
Bureau of Internal Revenue)
b. All non-metallic minerals and quarry resources
Excise Tax Locally-extracted or produced Four
percent (4%) based on the actual market value of the
Revenue Regulation No. 1-2018
gross output thereof at the time of removal Imported
Four percent (4%) based on the value used by the
REVENUE REGULATIONS NO. 1-2018 issued on
Bureau of Customs (BOC) in determining tariff and
January 15, 2018 provides the revised tax rates on
customs duties, net of Excise Tax and Value-Added
Mineral Products pursuant to the provisions of
Tax (VAT) Locally-extracted natural gas and liquefied
Republic Act No. 10963 (TRAIN Law), amending for
natural gas Exempt
the purpose Revenue Regulations (RR) No. 13-94.
There shall be levied, assessed and collected on c. All metallic minerals Excise Tax Locally-extracted
mineral, mineral products and quarry resources, or produced copper, gold, chromite and other
Excise Tax as follows: metallic minerals Four percent (4%) based on the
actual market value of the gross output thereof at
a. On domestic and imported coal and coke Date of
the time of removal Imported copper, gold, chromite
Effectivity Excise Tax per Metric Ton January 1, 2018
and other metallic minerals Four percent (4%) based
Fifty pesos (P50.00) January 1, 2019 One hundred
on the value used by the BOC in determining tariff
pesos (P100.00) January 1, 2020 and onwards One
and customs duties, net of Excise Tax and VAT
hundred and fifty pesos (P150.00) Coal produced
under Coal Operating Contracts entered into by the d. Indigenous petroleum, a tax of six percent (6%) of
government pursuant to Presidential Decree No. 972 the fair international market price thereof, on the
as well as those exempted from Excise Tax on mineral first taxable sale, barter, exchange or such similar
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transaction, such tax to be paid by the buyer or PRODUCTS

purchaser before removal from the place of
EFFECTIVITY
production. The phrase ‘first taxable sale, barter,
exchange or similar transaction’ means the transfer January 1, 2018
of indigenous petroleum in its original state to a first
January 1, 2019
taxable transferee. The fair international market
price shall be determined in consultation with an January 1, 2020
appropriate government agency. The ‘indigenous
(a) Lubricating oils and greases, including but not
petroleum’ shall include locally-extracted mineral oil,
limited to base stock for lube oils and greases, high
hydrocarbon gas, bitumen, crude asphalt, mineral gas
vacuum distillates, aromatic extracts and other
and all other similar or naturally associated
similar preparations, and additives for lubricating oils
substances with the exception of coal, peat,
and greases, whether such additives are petroleum
bituminous shale and/or stratified mineral deposits.
based or not, per liter and kilogram respectively, of
volume capacity or weight. P 8.00 P 9.00 P 10.00 (a.1)
Locally produced or imported oils previously taxed
but are subsequently re- processed, re-refined or
recycled, per liter and kilogram of volume capacity or
weight. (b) Processed gas, per liter of volume
January 24, 2018 provides the revised tax rates and
capacity. (c) Waxes and petrolatum per kilogram. (d)
other implementing guideline on Petroleum Products
Denatured alcohol to be used for motive power, per
pursuant to the provisions of Republic Act (RA) No.
liter of volume capacity. (e) Asphalts, per kilogram. (f)
10963 (Tax Reform for Acceleration and Inclusion
Naphtha, regular gasoline, pyrolysis gasoline and
[TRAIN] Law), to wit:
other similar products of distillation, per liter of
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volume capacity P 7.00 P 9.00 P 10.00 (g) Unleaded gas during the non-availability thereof, per liter of
premium gasoline, per liter of volume capacity (h) volume capacity
Kerosene, per liter of volume capacity P 3.00 P 4.00 P
P 0.00 P 0.00 P 0.00
5.00 (i) Aviation turbo jet fuel, aviation gas, per liter
of volume capacity P 4.00 P 4.00 P 4.00 (j) Kerosene, (q) Liquefied petroleum gas, when used as raw
when used as aviation fuel, per liter of volume material in the production of petrochemical
capacity (k) Diesel fuel oil, and on similar fuel oils products, per kilogram (r) Petroleum coke, when
having more or less the same generating power, per used as feedstock to any power generating facility,
liter of volume capacity per metric ton
P 2.50 P 4.50 P 6.00 The said revised Excise Tax rates shall not apply
under the following instances: a) Lubricating oils and
(l) Liquefied petroleum gas used for motive power,
greases produced from basestocks and additives on
per kilogram (m) Bunker fuel oil, and on similar oils
which the Excise Tax has already been paid; and b)
having more or less the same generating power, per
Unless otherwise provided by special laws, if the
liter of volume capacity (n) Petroleum coke, per
denatured alcohol is mixed with gasoline, the Excise
metric ton (o) Liquefied petroleum gas, per kilogram
Tax on which has already been paid, only the alcohol
P 1.00 P 2.00 P 3.00
content shall be subject to the prescribed tax. The
(p) Naphtha and pyrolysis gasoline, when used as a removal of denatured alcohol of not less than one
raw material in the production of petrochemical hundred eighty degrees (180°) proof 90% absolute
products or in the refining of petroleum products, or alcohol shall be deemed to have been removed for
as replacement fuel for natural-gas-fired-combined motive power, unless shown otherwise. The Excise
cycle power plant, in lieu of locally-extracted natural Tax paid on the purchased basestock (bunker) used in
the manufacture of excisable articles and forming
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part thereof shall be credited against the Excise Tax upon recommendation of the Commissioner of
due thereon. Any excess of Excise Taxes paid on raw Internal Revenue. Provided, that the Department of
materials resulting from manufacturing, blending, Finance (DOF) shall maintain a registry of all
processing, storage and handling losses shall not give petroleum manufacturers and/ or importers and the
rise to a tax refund or credit. For the period covering articles being manufactured and/ or imported by
2018 to 2020, the scheduled increase in the revised them. Provided, further, that the DOF shall mandate
Excise Tax on fuel shall be suspended when the the creation of a real-time inventory of petroleum
average Dubai crude oil based on Mean Of Platts articles being manufactured, imported or found in
Singapore (MOPS) for three (3) months prior to the storage depots of such petroleum manufacturers
scheduled increase of the month reaches or exceeds and/or importers. Provided, finally, that importers of
eighty dollars (USD 80) per barrel. The use of an finished petroleum products shall also provide
official fuel marking or similar technology on themselves with BIR-accredited metering devices to
petroleum products that are refined, manufactured, determine as accurately as possible the volume of
or imported into the Philippines, and that are subject petroleum products imported by them.
to the payment of taxes and duties, such as but not
To effectively implement the TRAIN Law, the
limited to unleaded premium gasoline, kerosene, and
following guidelines shall be followed during the
diesel fuel oil shall be required. The manufacturers
transitory period: a. Concerned oil companies,
of oil products subject to Excise Tax shall provide
owners, operators or lessees of storage depots shall
themselves with such necessary number of suitable
submit duly notarized inventories of all petroleum
counting or metering devices to determine, as
products as of midnight of December 31, 2017 to
accurately as possible, the volume, quantity or
Excise LT Field Operations Division in the case of
articles produced by them under the rules and
taxpayers registered within Revenue Region (RR) Nos.
regulations promulgated by the Secretary of Finance,
4 (San Fernando, Pampanga), 5 (Caloocan), 6
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(Manila), 7 (Quezon City), 8 (Makati City) and 9 (San Excise Tax rates imposed under these Regulations at
Pablo City), or to the concerned Excise Tax Area in the time of its actual removal, even if the same were
the case of taxpayers registered outside of RR 4 to 9 taken from the old or previous inventory.
on or before January 15, 2018 using the prescribed
format in Annex A of the Regulations. Likewise,
similar inventories shall be submitted as of midnight Revenue Regulation No. 3-2018
of December 31, 2018, December 31, 2019 and
December 31, 2020. In the case of failure to submit REVENUE REGULATIONS NO. 3-2018 issued on
the required inventories by any of the aforesaid January 15, 2018 provides the revised tax rates on
taxpayer, petroleum products found in their Tobacco Products pursuant to the provisions of
possession as of January 1, 2018, January 1, 2019 and Republic Act No. 10963 (Tax Reform for Acceleration
January 1, 2020 shall be subject to the new Excise Tax and Inclusion or TRAIN Law), amending for the
rates. b. The inventories of petroleum products taken purpose Revenue Regulations (RR) No. 17-2012. The
prior to each date of effectivity shall be liquidated provisions of Section 3 Items B(4) and B(5) of RR No.
and accounted for on a “First-In First-Out” (FIFO) 17-2012 is amended as follows:
method of inventory. c. All Withdrawal Certificates
“SEC. 3. REVISED RATES AND BASES OF THE SPECIFIC
issued covering the removals of petroleum products
TAX. – There shall be levied, assessed and collected
subject to the old or previous tax rates products shall
an Excise Tax on Tobacco Products, in accordance
be prominently stamped with the phrase “STOCKS
with the following schedule:
ON HAND PRIOR TO APPLICABLE DATE OF
EFFECTIVITY”. The removals of finished goods where PRODUCT
the accompanying Withdrawal Certificate/s do not
DATE OF EFFECTIVITY OF TAX RATES
bear such information shall be subject to the new
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January 1, 2018 until June 30, 2018 The summary of changes in the DST rates are as
follows: a. The rate of DST on the original issue of
July 1, 2018 until December 31, 2019
shares has been increased from One Peso (P 1.00) to
January 1, 2020 until December 31, 2021 Two Pesos (P2.00) on each Two Hundred Pesos (P
200), or fractional part thereof, of the par value of
January 1, 2022 until December 31, 2023
such shares of stock. b. The rate of DST on sales,
January 1, 2024 onwards agreements to sell, memoranda of sales, deliveries or
transfer of shares or certificates of stock has been
xxx B. TOBACCO PRODUCTS xxx Per Pack Per
increased from Seventy-Five Centavos (P 0.75) to One
Pack Per Pack Per Pack Effective 1/1/2024, the
Peso and Fifty Centavos (P 1.50) on each Two
specific tax rate shall be increased by 4% every year
Hundred Pesos (P 200), or fractional part thereof, of
thereafter (4) Cigarettes packed by hand Php 32.50
the par value of such stock. In case of stocks without
Php 35.00 Php 37.50 Php 40.00 (5) Cigarettes packed
par value, the DST shall be equivalent to Fifty Percent
by machine Php 32.50 Php 35.00 Php 37.50 Php
(50%) of the DST paid upon the original issue of said
40.00 xxx
stock. c. The rate of DST on the Certificates of Profits
or Interest in Property or Accumulations has been
increased from Fifty Centavos (P 0.50) to One Peso (P
1.00) on each Two Hundred Pesos, or fractional part
thereof, of the face value of such certificates or
memorandum. d. The rate of DST on bank checks,
January 15, 2018 provides the rules and regulations
drafts, certificates of deposit not bearing interest,
implementing the adjusted Documentary Stamp Tax
and other instruments has been increased from One
(DST) rate under Republic Act (RA) No. 10963 (Tax
Peso and Fifty Centavos (P 1.50) to Three Pesos (P
Reform for Acceleration and Inclusion [TRAIN] Law).
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3.00). e. The rate of DST on all debt instruments is policies of insurance or other instruments by
increased from One Peso (P 1.00) to One Peso and whatever name the same may be called, whereby
Fifty centavos (P 1.50) on each Two Hundred Pesos (P any insurance shall be made or renewed upon any
200.00), or fractional part thereof, of the issue price life or lives, there shall be collected a one-time DST at
of any such debt instruments. f. The rate of DST on all the following rates:
bills of exchange or drafts has been increased from
If the amount of insurance does not exceed P
Thirty Centavos (P 0.30) to Sixty Centavos (P 0.60) on
100,000 Exempt
each Two Hundred Pesos (P 200.00), or fractional
part thereof, of the face value of any such bill of If the amount of insurance exceeds P 100,000 but
exchange or draft. g. The rate of DST on acceptance does not exceed P 300,000 P 20.00
of bills of exchange and others all bills of exchange or
If the amount of insurance exceeds P 300,000 but
drafts has been increased from Thirty Centavos (P
does not exceed P 500,000 P 50.00
0.30) to Sixty Centavos (P 0.60) on each Two Hundred
Pesos (P 200.00), or fractional part thereof, of the If the amount of insurance exceeds
face value of any such bill of exchange or draft, or the
P 150,000 but does not exceed P 750,000 P 100.00
Philippine equivalent of such value, if expressed in
foreign currency. h. The rate of DST on all bills of If the amount of insurance exceeds P 750,000 but
exchange or drafts has been increased from Thirty does not exceed P 1,000,000 P 150.00
Centavos (P 0.30) to Sixty Centavos (P 0.60) on each
If the amount of insurance exceeds P 1,000,000 P
Two Hundred Pesos (P 200), or fractional part
200.00
thereof, of the face value of any such bill of exchange
or letter of credit, or the Philippine equivalent of such The rates of DST on life insurance policies have been
face value, if expressed in foreign currency. i. On all doubled.
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j. The rate of DST on annuities has been increased rate of DST has been increased from Ten Pesos (P
from Fifty Centavos (P 0.50) to One Peso (P 1.00) on 10.00) to Twenty Pesos (P 20.00), if the value of
each Two Hundred Pesos (P 200), or fractional part goods exceeds One Thousand Pesos (P 1,000). o. The
thereof, of the premium or installment payment on rate of DST on each proxy has been increased from
contract price collected. Pre-need plans are now Fifteen Pesos (P 15.00) to Thirty Pesos (P 30.00). p.
taxed at Forty Centavos (P 0.40) from the previous The rate of DST on each Power of Attorney has been
rate of Twenty Centavos (P 0.20). k. The rate of DST increased from Five Pesos (P 5.00) to Ten Pesos
on certificates has been increased from Fifteen Pesos (P 10.00). q. The rate of DST on leases and other
(P 15.00) to Thirty Pesos (P 30.00). l. The rate of DST hiring agreements has been increased from Three
on warehouse receipts has been increased from Pesos (P 3.00) to Six Pesos (P 6.00) for the first Two
Fifteen Pesos (P 15.00) to Thirty Pesos (P 30.00). Thousand Pesos (P 2,000), or fractional part thereof;
m. The rate of DST on jai-alai, horse race, tickets, and the additional tax was increased from One Peso
lotto, or other authorized number game has been (P 1.00) to Two Pesos (P 2.00) for every One
increased from Ten Centavos (P 0.10) to Twenty Thousand Pesos (P 1,000) or fractional part thereof,
Centavos (P 0.20); and if the cost of ticket exceeds in excess of the first Two Thousand Pesos (P 2,000). r.
One Peso (P 1.00), the additional tax has been The rate of DST on every mortgage, pledge, or deed
increased from Ten Centavos (P 0.10) to Twenty of trust has been increased from Twenty Pesos (P
Centavos (P 0.20) on every One Peso (P 1.00), or 20.00) to Forty Pesos (P 40.00), when amount
fractional part thereof. n. The rate of DST on each bill secured does not exceed Five Thousand Pesos (P
of lading or receipt has been increased from One 5,000); and the additional tax has been increased
Peso (P 1.00) to Two Pesos (P 2.00), if the value of from Ten Pesos (P 10.00) to Twenty Pesos (P 20.00),
goods exceeds One Hundred Pesos (P 100) and does on each Five Thousand Pesos (P 5,000), or fractional
not exceed One Thousand Pesos (P 1,000); and the part thereof in excess of Five Thousand Pesos (P
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5,000). s. The rates of DST on charter parties and university and/or charitable corporation, accredited
similar instruments have been doubled. Donations of non-government organization, trust or philanthropic
real property shall now be subject to DST under the organization and/or research institution or
amended Section 196. However, the following organization, incorporated as a non- stock entity,
donations or gifts exempt from Donor’s Tax under paying no dividends, governed by trustees who
Section 101 (A) and (B) shall be exempt from DST: (A) receive no compensation, and devoting all its income,
In the Case of Gifts Made by a Resident i. Gifts made whether students' fees or gifts, donation, subsidies or
to or for the use of the National Government or any other forms of philanthropy, to the accomplishment
entity created by any of its agencies which is not and promotion of the purposes enumerated in its
conducted for profit, or to any political subdivision of Articles of Incorporation. (B) In the Case of Gifts
the said Government; and Made by a Non-resident not a Citizen of the
Philippines i. Gifts made to or for the use of the
ii. Gifts in favor of an educational and/or charitable,
National Government or any entity created by any of
religious, cultural or social welfare corporation,
its agencies which is not conducted for profit, or to
institution, accredited non-government organization,
any political subdivision of the said Government. ii.
trust or philanthropic organization or research
Gifts in favor of an educational and/or charitable,
institution or organization: Provided, however, that
religious, cultural or social welfare corporation,
not more than thirty percent (30%) of said gifts shall
institution, foundation, trust or philanthropic
be used by such donee for administration purposes.
organization or research institution or organization.
For the purpose of this exemption, a 'non- profit
Provided, however, that not more than thirty percent
educational and/or charitable corporation,
(30%) of said gifts shall be used by such donee for
institution, accredited non- government organization,
administration purposes.
trust or philanthropic organization and/or research
institution or organization' is a school, college or
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Over Six Hundred Thousand Pesos (P

Revenue Regulation No. 5-2018 600,000.00) to One Million Pesos (P
1,000,000.00)
Ten Percent (10%)
January 15, 2018 implements the adjustment of rates
on Excise Tax on Automobiles pursuant to the Over One Million Pesos (P
provisions of Republic Act (RA) No. 10963 (Tax 1,000,000.00) to Four Million Pesos (P
Reform for Acceleration and Inclusion [TRAIN] Law), 4,000,000.00)
amending for the purpose Revenue Regulations No.
Twenty Percent (20%)
25-2003. Effective January 1, 2018, an Ad Valorem
Tax on automobiles shall be levied, assessed and Over Four Million Pesos (P
collected based on the manufacturer’s/assembler’s 4,000,000.00)
or importer’s selling price, net of Excise and Value-
Fifty Percent (50%)
Added Tax, in accordance with the following
schedule: Provided, that hybrid vehicles shall be taxed at Fifty
Percent (50%) of the applicable Excise Tax rates on
NET MANUFACTURER’S PRICE/ IMPORTER’S SELLING
automobiles subject to the conditions in Section 9(e)
PRICE
of the regulations. Provided, further, that in the case
TAX RATE of imported automobiles not for sale, the tax
imposed herein shall be based on the total landed
Up to Six Hundred Thousand Pesos (P
value, including transaction value, customs duty and
600,000.00)
all other charges. Hybrid electric vehicle shall refer to
Four Percent (4%) a motor vehicle powered by electric energy, with or
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without provision for off-vehicle charging, in models against the Manufacturer’s or Importer’s
combination with gasoline, diesel or any other Selling Price, and initially determine the correct
motive power. Provided, that a hybrid electric vehicle bracket under which a newly-introduced model shall
must be able to propel itself from a stationary be classified.
condition using solely electric motor. The removals of
After the end of one year from such validation, and
locally-manufactured/assembled or release of
every year thereafter, the BIR shall revalidate the
imported automobiles from the place of production
initially validated Net Manufacturer’s or Importer’s
or from customs’ custody, respectively, are exempt
Selling Price against the Net Manufacturer’s or
from the payment of the appropriate Excise Taxes,
Importer’s Selling Price as of the time of revalidation
subject to certain conditions. Newly-included in the
in order to finally determine the correct tax bracket
list of tax-exempt removals of automobiles are pick-
under which a newly-introduced model shall be
ups and purely electric vehicles. Prior to the removal
classified. All manufacturers/assemblers or importers
of the automobiles from the manufacturing plant or
are required to file an updated
customs custody, the Department of Energy (DOE)
manufacturer’s/assembler’s or importer’s sworn
shall determine whether the automobiles are hybrid
statement for each brand/model of automobiles as of
vehicles or purely electric vehicles, and furnish the
the day immediately before the date of effectivity of
Commissioner of Internal Revenue (CIR), Attention:
these Regulations. The updated
Chief, Excise Large Taxpayers Regulatory Division
manufacturer’s/assembler’s or importer’s sworn
(ELTRD), certified copies of the results of such
statement shall be submitted to the Commissioner of
examination or indorsement to that effect. By the
Internal Revenue, Attention: Chief, ELTRD within
end of three months from the imposition of the new
seven (7) working days from the date of effectivity of
rates, the BIR shall validate the Manufacturer’s or
these Regulations. All manufacturers/assemblers or
Importer’s Selling Price of the newly-introduced
importers shall submit a duly notarized list of
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inventory on-hand of Completely Built-Up (CBU)

automobiles, including Completely Knocked-Down REVENUE REGULATIONS NO. 8-2018 issued on
(CKD) and Semi-Knocked Down (SKD) units that are February 20, 2018 implements the amended
located within the manufacturing/assembly plant, provisions on Income Tax pursuant to Republic Act
storage facility or warehouse or the customs’ No. 10963 (Tax Reform for Acceleration and Inclusion
premises for which import entries have been filed as or TRAIN Law). The Income Tax on the individual’s
of the day immediately before the date of effectivity taxable income shall be computed based on the
of these Regulations, indicating therein the brand, following schedules as provided under Sec.
year model, engine, body and chassis numbers 24(A)(2)(a) of the Tax Code, as amended:
thereof. The list shall be submitted to the CIR,
Effective January 1, 2018 until December 31, 2022:
Attention: Chief, Excise LT Field Operations Division
within seven working (7) days from the date of RANGE OF TAXABLE INCOME TAX DUE = a + (b x c)
effectivity of these Regulations. Failure to submit the
OVER NOT OVER
inventory list on the part of the
manufacturers/assemblers/importers shall be BASIC AMOUNT (a)
construed that the said
ADDITIONAL RATE (b)
manufacturers/assemblers/importers do not have
any inventory on hand of CBUs, CKDs and SKDs as of OF EXCESS OVER (c) - 250,000.00 - - 250,000.00
the day immediately before the date of effectivity of 400,000.00 - 20% 250,000.00 400,000.00 800,000.00
these Regulations. 30,000.00 25% 400,000.00 800,000.00 2,000,000.00
130,000.00 30% 800,000.00 2,000,000.00
8,000,000.00 490,000.00 32% 2,000,000.00
Revenue Regulation No. 8-2018 8,000,000.00 - 2,410,000.00 35% 8,000,000.00
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Effective January 1, 2023 and onwards: employee’s share in the SSS, GSIS, PHIC, Pag-ibig
contributions and union dues. Husband and wife shall
RANGE OF TAXABLE INCOME TAX DUE = a + (b x c)
compute their individual Income Tax separately
OVER NOT OVER based on their respective taxable income. If any
income cannot be definitely attributed to or
BASIC AMOUNT (a)
identified as income exclusively earned or realized by
ADDITIONAL RATE (b) either of the spouses, the same shall be divided
equally between the spouses, for the purpose of
OF EXCESS OVER (c) - 250,000.00 - - 250,000.00
determining their respective taxable income.
400,000.00 - 15% 250,000.00 400,000.00 800,000.00
Minimum wage earners shall be exempt from the
22,500.00 20% 400,000.00 800,000.00 2,000,000.00
payment of Income Tax based on their statutory
102,500.00 25% 800,000.00 2,000,000.00
minimum wage rates. The holiday pa, overtime pay,
8,000,000.00 402,500.00 30% 2,000,000.00
night shift differential pay and hazard pay received by
8,000,000.00 - 2,202,500.00 35% 8,000,000.00
such earner are likewise exempt. Individuals earning
Individuals earning purely compensation income shall income purely from self-employment and/or practice
be taxed based on the Income Tax rates prescribed of profession, whose gross sales/receipts and other
under subsection (A) of these Regulations. Taxable non-operating income does not exceed the Value-
income for compensation earners is the gross Added Tax (VAT) threshold as provided under Section
compensation income less non-taxable 109 (BB) of the Tax Code, as amended, shall have the
income/benefits such as but not limited to the option to avail of: a) the graduated rates under
thirteenth (13th) month pay and other benefits Section 24(A)(2)(a) of the Tax Code, as amended; or
(subject to limitations specified in Section 6(G)(e) of b) the eight percent (8%) tax on gross sales or
these Regulations), de minimis benefits, and receipts and other non-operating income in excess of
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Two Hundred Fifty Thousand Pesos (₱ 250,000.00), in the 8% Income Tax rate option. A taxpayer who
lieu of the graduated signifies the intention to avail of the 8% Income Tax
rate option, and is conclusively qualified for said
income tax rates under Section 24(A) and the
option at the end of the taxable year (annual gross
Percentage Tax under Section 116 all under the Tax
sales/receipts and other non-operating income did
Code, as amended. Unless the taxpayer signifies the
not exceed the VAT threshold [₱ 3,000,000.00])
intention to elect the 8% Income Tax rate in the 1st
shall compute the final annual Income Tax due based
Quarter Percentage and/or Income Tax Return, or on
on the actual annual gross sales/receipts and other
the initial quarter return of the taxable year after the
non-operating income. The said Income Tax due shall
commencement of a new business/practice of
be in lieu of the graduated rates of Income Tax and
profession, the taxpayer shall be considered as
the Percentage Tax under Sec. 116 of the Tax Code,
having availed of the graduated rates under Section
as amended. The Financial Statements (FS) is not
24(A)(2)(a) of the Tax Code, as amended. Such
required to be attached in filing the final Income Tax
election shall be irrevocable and no amendment of
Return. However, existing rules and regulations on
option shall be made for the said taxable year. The
bookkeeping and invoicing/receipting shall still apply.
option to be taxed at 8% Income Tax rate is not
A taxpayer shall automatically be subject to the
available to a VAT-registered taxpayer, regardless of
graduated rates under Section 24(A)(2)(a) of the Tax
the amount of gross sales/receipts, and to a taxpayer
Code, as amended, even if the flat 8% Income Tax
who is subject to other Percentage Taxes under Title
rate option is initially selected, when taxpayer’s gross
V of the Tax Code, as amended, except those subject
sales/receipts and other non-operating income
under Section 116 of the same Title. Likewise,
exceeded the VAT threshold during the taxable year.
partners of a General Professional Partnership (GPP)
In such case, his/her Income Tax shall be computed
by virtue of their distributive share from GPP, which
under the graduated Income Tax rates and shall be
is already net of cost and expenses, cannot avail of
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allowed a tax credit for the previous quarter/s earners, the Income Tax rates applicable are the
Income Tax payment/s under the 8% Income Tax rate following: a. The compensation income shall be
option. In addition, a taxpayer subject to the subject to the tax rates prescribed under Section
graduated Income Tax rates (either selected this as 24(A)(2)(a) of the Tax Code, as amended; and b. The
the Income Tax regime, or failed to signify chosen income from business or practice of profession shall
intention or failed to qualify to be taxed at the 8% be subject to the following: b.1 If the gross
Income Tax rate) is also subject to the applicable sales/receipts and other non-operating income do
business tax, if any. Subject to the provisions of not exceed the VAT threshold, the individual has the
Section 8 of these Regulations, an FS shall be option to be taxed at: a) graduated Income Tax rates
required as an attachment to the annual Income Tax prescribed under Section 24(A)(2)(a) of the Tax Code,
return even if the gross sales/receipts and other non- as amended; or b) Eight Percent (8%) Income Tax rate
operating income is less than the VAT threshold. based on gross sales/receipts and other non-
However, the annual Income Tax return of a taxpayer
operating income in lieu of the graduated Income Tax
with gross sales/receipts and other non-operating
rates and Percentage Tax under Section 116 of the
income of more than the said VAT threshold shall be
Tax Code, as amended. b.2 If the gross sales/receipts
accompanied by an audited FS. Taxable income for
and other non-operating income exceeds the VAT
individuals earning income from self-
threshold, the individual shall be subject to the
employment/practice of profession shall be the net
Graduated Income Tax rates prescribed under
income, if taxpayer opted to be taxed at graduated
Section 24(A)(2)(a) of the Tax Code, as amended. The
rates or has failed to signify the chosen option.
provision under Section 24(A)(2)(b) of the Tax Code,
However, if the option availed is the 8% income tax
as amended, which allows an option of 8% Income
rate, the taxable base is the gross sales/receipts and
Tax rate on gross sales/receipts and other non-
other non-operating income. For mixed income
operating income in excess of P 250,000.00 is
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available only to purely self-employed individuals subject to the final Income Tax rates: a. Interests
and/or professionals. The said P 250,000.00 is not from any currency bank deposit and yield or any
applicable to mixed income earners since it is already other monetary benefit from deposit substitutes and
incorporated in the first tier of the graduated Income from trust funds and similar arrangements – 20%; b.
Tax rates applicable to compensation income. Under Interest income received by an individual taxpayer
the said graduated rates, the excess of the P (except a non-resident individual) from a depository
250,000.00 over the actual taxable compensation bank under the expanded foreign currency deposit
income is not deductible against the taxable income system – 15%; c. Proceeds of pre-terminated long-
from business/practice of profession under the 8% term deposit or investment in the form of savings,
Income Tax rate option. The total tax due shall be common or individual trust funds, deposit
the sum of the: a) tax due from compensation, substitutes, investment management accounts and
computed using the graduated Income Tax rates; and other investments evidenced by certificates in such
b) tax due from self-employment/practice of form as prescribed by the Bangko Sentral ng Pilipinas
profession, resulting from the multiplication of the – the final tax shall be based on the remaining
8% Income Tax rate with the total of the gross maturity of the investment: c.1 Four (4) years but
sales/receipts and other non-operating income. less than five (5) years – 5% c.2 Three (3) years but
Mixed income earner who opted to be taxed under less than four (4) years – 12%; and c.3 Less than
the graduated Income Tax rates for income from three (3) years – 20% d. Royalties (except royalties
business/practice of profession shall combine the on books and other literary works and musical
taxable income from both compensation and compositions) – 20% e. Royalties on books and
business/practice of profession in computing for the other literary works and musical compositions – 10%;
total taxable income and consequently the Income f. Prizes (except prizes amounting to P 10,000 or less)
Tax due. The following passive income shall be – 20%; g. Winnings (except Philippine Charity
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Sweepstakes and Lotto winnings amounting to P application of preferential tax rates under existing
10,000 or less) – 20%; h. Cash and Property Dividends international tax treaties, if warranted. Thus, all
– 10%; i. Capital Gains from Sale of Shares of Stock concerned employees of the regional or area
not Traded in the Stock Exchange – 15%; j. Capital headquarters and regional operating headquarters of
Gains from Sale of Real Property located in the multinational companies, offshore banking units and
Philippines – 6%. The following Income Tax rates shall petroleum service contractor and subcontractors
be imposed to non-resident alien individual: a. The shall be subject to the regular Income Tax rate under
rates imposed on individual citizen and a resident Sec. 24(A)(2)(a) of the Tax Code, as amended. This is
alien individual on the taxable income derived within in accordance with the veto message of the
the Philippines shall be applicable to non-resident President. Under Section 27(C) of the Tax Code, as
alien engaged in trade or business within the amended, Government-Owned and - Controlled
Philippines; b. Upon the entire income received from Corporations (GOCCs), Government Agencies or
all sources within the Philippines by the non- Instrumentalities shall pay such rate of tax upon their
resident alien not engaged in trade or business within taxable income as imposed upon corporations or
the Philippines such as associations engaged in a similar business, industry,
or activity, except for the following: a. Government
interest, cash and/or property dividends, rents,
Service Insurance System (GSIS); b. Social Security
salaries, wages, premiums, annuities, compensation,
System (SSS); c. Philippine Health Insurance
remuneration, emoluments, or other fixed or
Corporation (PHIC); and d. Local Water Districts
determinable annual or periodic or casual gains,
(LWD). The items that shall not be included in gross
profits, and income, and capital gains. - 25%; c. The
income and shall be exempt from income taxation
preferential income tax rate under subsection (C), (D)
are the following: a. Life Insurance. – The proceeds of
and (E) of Section 25 of the Tax Code, as amended,
life insurance policies paid to the heirs or
shall no longer be applicable without prejudice to the
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beneficiaries upon the death of the insured, whether 1986; (iii) Benefits received by officials and
in a single sum or otherwise, but if such amounts are employees not covered by Presidential Decree No.
held by the insurer under an agreement to pay 851, as amended by Memorandum Order No. 28
interest thereon, the interest payments shall be dated August 13, 1986; and (iv) Other benefits such
included in gross income; b. Amount received by as productivity incentives and Christmas bonus; g.6
insured as Return of Premium; c. Gifts, bequests, and GSIS, SSS, Medicare and other contributions;
devises; d. Compensation for injuries or sickness; e.
g.7 Gains from the sale of bonds, debentures or other
Income exempt under treaty; f. Retirement benefits,
Certificate of Indebtedness with a maturity of more
pensions, gratuities, etc.; g. Miscellaneous items g.1
than five (5) years; and g.8 Gains from redemption
Income derived by foreign government; g.2 Income
of shares in mutual fund. The tax on fringe benefits at
derived by the government or its political
the rate of thirty-five percent (35%) shall be imposed
subdivisions; g.3 Prizes and awards; g.4 Prizes and
on the grossed-up monetary value of fringe benefits
awards in sports competition; g.5 13th month pay
furnished or granted to an employee (except rank-
and other benefits. – Gross benefits received by
and-file employees) by the employer, whether an
officials and employees of public and private entities.
individual or a corporation (unless the fringe benefit
Provided, however, that the total exclusion under
is required by the nature of, or necessary to the
this item shall not exceed ninety thousand (₱
trade, business or profession of the employer, or
90,000.00), which shall cover the following: (i)
when the fringe benefit is for the convenience of or
Benefits received by officials and employees of the
advantage of the employer). The tax herein imposed
national and local government pursuant to Republic
is payable by the employer, which tax shall be paid in
Act No. 6686; (ii) Benefits received by employees
the same manner as provided for under Section 57
pursuant to Presidential Decree No. 851, as amended
(A) of the Tax Code, as amended. The grossed-up
by Memorandum Order No. 28 dated August 13,
monetary value of the fringe benefit shall be
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determined by dividing the actual monetary value of Depreciation; g. Depletion of oil and gas wells and
the fringe benefit by sixty-five percent (65%), mines; h. Charitable and other contributions; i.
effective January 1, 2018 and onwards. Provided, that Research and development; and j. Pension trusts.
the grossed-up value of the benefit shall be Unless the taxpayer, who is taxable under the
determined by dividing the actual monetary value of graduated Income Tax rate, signifies in the Income
the fringe benefit by the difference between one Tax return the intention to elect the OSD, it shall be
hundred percent (100%) and the applicable tax rates. considered as having availed of the itemized
In general, there shall be allowed, at the option of deductions. Such election of the option, when made
the taxpayer, itemized deductions or an Optional in the return, shall be irrevocable for the taxable year
Standard Deduction (OSD) at the rate of forty percent for which the return is made. The election to claim
(40%). In case of individual taxpayers, OSD shall be either the itemized deductions or the OSD for the
computed at the rate of forty percent (40%) of gross taxable year must be signified by checking the
sales/receipts, as the case may be. Corporations may appropriate box in the Income Tax return filed for the
elect standard deduction in an amount not exceeding first quarter or the initial quarter of the taxable year
forty percent (40%) of its gross income. However, no after the commencement of a new business/practice
deductions shall be allowed to individual taxpayers of profession. Once the election is made, it must be
earning compensation income arising from personal consistently applied to all the succeeding quarterly
services rendered under an employer-employee returns and in the final income tax return for the
relationship, and those who opted to be taxed at 8% taxable year. The OSD allowed to individual
Income Tax rate on their income from taxpayers, except non-resident aliens, shall be forty
business/practice of profession. The following are the percent (40%) of gross sales/receipts during the
allowable itemized deductions: a. Expenses; b. taxable year. An individual who is entitled to and
Interest; c. Taxes; d. Losses; e. Bad Debts; f. claimed for the OSD shall not be required to submit
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with the tax return such FS otherwise required under income defined under Section 31 of the Tax Code, as
the Tax Code, as amended. A General Professional amended, the following may be allowed as
Partnership (GPP) may avail of the OSD only once, deductions: a. Itemized expenses which are ordinary
either by the GPP or the partners comprising the and necessary, incurred or paid for the practice of
partnership. profession; or b. Optional Standard Deduction (OSD).
The distributable net income of the partnership may
GPP is not subject to Income Tax imposed pursuant
be determined by claiming either itemized
to Sec. 26 of the Tax Code, as amended. However,
deductions or OSD. The share in the net income of
the partners shall be liable to pay Income Tax on their
the partnership, actually or constructively received,
separate and individual capacities for their respective
shall be reported as taxable income of each partner.
distributive share in the net income of the GPP. The
The partners comprising the GPP can no longer claim
GPP is not a taxable entity for Income Tax purposes
further deduction from their distributive share in the
since it is only acting as a “pass- through” entity
net income of the GPP and are not allowed to avail of
where its income is ultimately taxed to the partners
the 8% Income Tax rate option since their distributive
comprising it. Section 26 of the Tax Code, as
share from the GPP is already net of cost and
amended, likewise provides that “For purposes of
expenses. If the partner also derives other income
computing the distributive share of the partners, the
from trade, business or practice of profession apart
net income of the GPP shall be computed in the same
and distinct from the share in the net income of the
manner as a corporation.” As such, a GPP may claim
GPP, the deduction that can be claimed from the
either the itemized deductions allowed under Section
other income would either be the itemized
34 of the Code or in lieu thereof, it can opt to avail of
deductions or OSD. The following individuals are not
the OSD allowed to corporations in claiming the
required to file Income Tax Return since the
deductions in an amount not exceeding Forty Percent
Certificate of Withholding filed by the respective
(40 %) of its gross income. In computing taxable
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employers, duly stamped “Received” by the BIR, shall file an annual Income Tax Return not later than the
be tantamount to the substituted filing of Income Tax fifteenth (15th) day of the fourth month following
returns: a. An individual earning purely compensation the close of the calendar year or April 15 as provided
income whose taxable income does not exceed Two under Section 51(C)(1) of the Tax Code, as amended.
Hundred Fifty Thousand Pesos (P 250,000.00); b. An When the tax due is in excess of Two Thousand Pesos
individual whose Income Tax has been correctly (P 2,000.00), the individual may elect to pay the tax in
withheld by his employer, provided that such two (2) equal installments, wherein the first
individual has only one employer for the taxable installment shall be paid at the time the annual
year; and c. A minimum wage earner. An individual Income Tax Return is filed and the second installment
whose sole income has been subjected to Final paid on or before October 15 following the close of
Withholding Tax is also not required to file Income the calendar year.
Tax Return. In all cases, all individuals deriving
If any installment is not paid on or before the date
compensation income, regardless of the amount,
fixed for its payment, the whole amount of the
from two (2) or more concurrent or successive
unpaid tax becomes due and payable, together with
employers at any time during the taxable year, are
the delinquency penalties to be reckoned on the
not qualified for substituted filing. Thus, they are still
original date when the tax is required to be paid. In
required to file a return. Individuals engaged in
relation to Sections 24(A)(2)(b) and 24(A)(2)(c)(2) of
business/practice of profession, regardless of amount
the Tax Code, as amended, relative to the option of
of sales/receipts, are required to file Quarterly
self-employed individuals and/or professionals to
Income Tax Return on or before May 15, August 15
avail of an 8% Income Tax rate based on gross
and November 15 for the first, second and third
sales/receipts and other non-operating income, the
quarters of the current year, respectively pursuant to
existing non-VAT taxpayer who is contemplating to
Section 74(A) of the Tax Code, as amended; and to
avail of the 8% Income Tax rate at the beginning of
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the taxable year or before the due date for filing registration immediately within the month following
and/or payment of the Percentage Tax shall file an the month s/he exceeded the VAT threshold and shall
Application for Registration Information Update (BIR be liable to VAT prospectively starting on the first day
Form No. 1905) to end-date the registered tax type of of the month following the month when the
Percentage Tax. If the taxpayer is unable to timely threshold is breached. The taxpayer shall pay the
update the required registration, s/he shall continue required Percentage Tax covering the sales/receipts
to file the Percentage Tax return reflecting a zero- and other non-operating income, from the beginning
amount of tax with a notation that s/he is availing of of the taxable year or commencement of
the 8% Income Tax rate option for the taxable year. business/practice of profession until the time the
S/he is still required to signify the intention to avail taxpayer becomes liable for VAT, without imposition
the option on the initial Quarterly Income Tax Return of penalty if timely paid on the immediately
for Income Tax purposes. On the other hand, if the succeeding month/quarter. Thus, there may be an
non-VAT taxpayer opted to be taxed under the instance when a taxpayer files two (2) business tax
graduated Income Tax rates, s/he shall continue to returns in a month/quarter – i.e., Percentage and
pay the required Percentage Tax under Sec. 116 of VAT returns. A VAT taxpayer who did not exceed the
the Tax Code, as amended. A taxpayer who initially VAT threshold within the immediately preceding
presumed that the gross sales/receipts and other three (3) year period may opt to be a non-VAT
non-operating income for the taxable year will not taxpayer and avail of the 8% Income Tax rate option.
exceed the P 3,000,000.00 VAT threshold but has S/he shall update the registration records on or
actually exceeded the same during the taxable year before the first quarter of a taxable year to reflect
shall immediately update his/her registration to the change in registration. However, s/he shall
reflect the change in tax profile from non-VAT to a remain liable for VAT for as long as there is no update
VAT taxpayer. S/he shall be required to update of registration and VAT-registered invoices/receipts
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are continuously issued. Registration updates shall be provision of Section 24(A)(2)(b) and Section
subject to existing rules and regulations on updates, 24(A)(2)(c) of the Tax Code, as amended, all existing
verification, inventory and surrender/cancellation of VAT-registered taxpayers whose gross sales/receipts
unused VAT-invoices/receipts. A non-VAT taxpayer and other non-operating income in the preceding
who volunteers to be a VAT taxpayer, knowing that year did not exceed the VAT threshold of
sales/receipts and other non-operating income will
P3,000,000.00 shall have the option to update their
exceed the VAT threshold within the taxable year,
registration to non-VAT until March 31, 2018,
shall update the registration records. Such taxpayer
following the existing procedures on registration
becomes liable to VAT on the day when such
update, and the inventory and surrender/cancellation
updating is made. In this case, the taxpayer shall
of unused VAT invoices/receipts. After the said date,
automatically be subject to the graduated Income
existing VAT- registered taxpayers who have not
Tax rates if the 8% Income Tax rate option is initially
exceeded the threshold for the immediately
selected. Any Income Tax paid under the said flat 8%
preceding three years may opt to update their
Income Tax rate shall be deducted from the Income
registration to non-VAT following rules and
Tax due under the graduated Income Tax rates. The
regulations on registration updates, verification, and
Percentage Tax due from the beginning of the taxable
the inventory and cancellation of VAT
year or commencement of business/practice of
invoices/receipts. These regulations are effective
profession shall be paid on the month/quarter
beginning January 1, 2018, the effectivity date of the
immediately following such registration update.
TRAIN Law.
However, if the graduated Income Tax rate is chosen
from the beginning, then taxpayer ceases to be liable
to Percentage Tax upon registration updates and,
instead, is now liable to VAT. In connection with the
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REVENUE REGULATIONS NO. 9-2018 issued on where taxpayer is registered 2. File the deficiency
February 26, 2018 prescribes the rules and tax of 1/10 of 1% using BIR Form No. 0605, and pay
regulations implementing the increase in the Stock via the same options above ST Percentage Tax -
Transfer Tax pursuant to Republic Act No. 10963 (Tax Stocks MC 031- Deficiency Tax C. Manual Filers 1. Fill-
Reform for Acceleration and Inclusion [TRAIN] Law). in applicable BIR Form No. 2552 (pre- printed or
The Percentage Tax on the sale, barter or exchange downloaded from BIR website) using the new tax rate
of shares of stock listed and traded through the local of 6/10 of 1% ST Percentage Tax - Stocks PT 200 2.
stock exchange has been increased from one-half of File and pay manually via OTC of AABs under the
one percent (1/2 of 1%) to six-tenths of one percent jurisdiction of the RDO where the taxpayer is
(6/10 of 1%). The following are the work-around registered .
filing and payment procedures which shall be
followed while BIR Form No. 2552 is being updated:
Tax Type ATC A. eFPS Filers 1. File and pay ½ of 1%
online using existing BIR Form No. 2552 ST
Percentage Tax - Stocks PT 200 2. File and pay the
deficiency tax of 1/10 of 1% using BIR Form No. 0605
ST Percentage Tax - Stocks MC 031- Deficiency Tax B.
eBIR Forms Filers 1. File ½ of 1% online using existing
BIR Form in the eBIRForms Package, and pay: ST
Percentage Tax - Stocks PT 200 a. Online via GCASH,
LBEPS, or BDPTO b. Manually via Over-the-Counter
(OTC) of Authorized Agent Banks (AABs) under the
jurisdiction of the Revenue District Office (RDO)
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Sangalang & Gaerlan, Business Lawyers

1. The graduated rates under Section 24(A)(2)(a)

Please take note the taxpayer must expressly signify

PhP250,000.00 and below 0%

PhP500,000.00 and below Exempt from 3%

percentage tax amount of PhP30,000.00 plus 25% of the excess over

Above PhP2,000,000.00 PhP490,000.00 + 32% of

Income Per Year Tax Rate

It doesn’t matter now if the taxpayer has one

The following are exempt from payment of income Item Ceiling

Benefits received by an PhP10,000.00 per

Christmas and Major PhP5,000.00 per private employees

What are the rules on income tax for corporations

Is a General Professional Partnership subject to

(1) Corporate profile and information;

from their distributive share in the net income of the

What is the new VAT threshold under the TRAIN

 Medicines for diabetes, cholesterol, and

The taxpayer should immediately update his

What is the consequence if a VAT taxpayer did not

The taxpayer shall remain liable for VAT for as long as

transaction, such tax to be paid by the buyer or PRODUCTS

Over Six Hundred Thousand Pesos (P

inventory on-hand of Completely Built-Up (CBU)

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