Salient Features: Tax Reform For Acceleration and Inclusion (TRAIN)

– Republic Act No. 10963

Salient Features of the TRAIN (Tax Reform for Acceleration and

Inclusion) / RA 10963

Background
On December 19, 2017, the President signed into law Package I of the Tax
Reform for Acceleration and Inclusion (“TRAIN”) bill otherwise known as Republic
Act No. 10963.

The law contains amendments to several provisions of the National Internal

Revenue Code of 1997.  It shall take effect on January 1, 2018, following its
complete publication in the Official Gazette or in at least one newspaper of
general circulation.  The law was published in the Official Gazette on December
27, 2017.

1. Tax Schedule
Effective January 1, 2018 until December 31, 2022
RANGE OF TAXABLE
TAX DUE = A + (B X C)
INCOME

OVER NOT OVER BASIC ADDITIONAL OF OVER

(a) (b) (C)

- 250,000.00 - -

250,000.00 400,000.00 - 20% 250,000.00

400,000.00 800,000.00 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

8,000,000.00 2,410,000.00 35% 8,000,000.00

2. Minimum Wage Earner

 statutory minimum wage rates are EXEMPTED from income tax.

 Also exempted are the holiday pay, overtime pay, night shift
differential pay and hazard pay earned by MWEs

3. 13th Month Pay and Other Benefits

 Maximum of P90,000

4. Personal and Additional Exemptions

 NONE – already included in the P250,000 exempt from icome tax

 repeals Sec. 33(A) of the Magna Carta for Persons with Disability,
Sec.22(B) of the Foster Care Act of 2012
5. VAT Threshold

 Three Million Pesos (P3,000,000)

 Any person whose sales or receipts are exempt under Section 109(B)
of the Code from the payment of VAT and who is not a VAT-registered
person shall pay a tax equivalent to 3% of his gross quarterly sales or
receipts.

VAT Deadline

 Every 25th following the close of each taxable quarter

 Provided, however, that VAT-registered persons shall pay the value-
added tax on a monthly basis.
 Provided, finally, that BEGINNING JANUARY 1, 2023, the filing and
payment required under this Subsection shall be done within twenty-
five (25) days following the close of each taxable quarter.

6. Self-Employed Individuals
PURELY SELF-EMPOYED/PRACTICE OF PROFESSION

OPTIONS:

The graduated rates under Section24(A)(2)(a) of the Tax Code as amended;

OR

The 8% tax on gross sales or receipts and other non-operating income in excess
of P250,000 in lieu of the graduated income tax rates under Section 24(A)(2)(a)
and the percentage tax under Section 116.

 Taxpayer shall be considered as having availed of the graduated

income tax rates , unless the taxpayer signifies in the 1st Quarter
income tax return or the initial quarter of the taxable year after the
commencement of a new business/practice of profession and such
election shall be irrevocable  and no amendment of option  shall be
made for the said taxable year.

7. Taxpayers Who Cannot Avail of the 8% Income Tax Rate

 Those subject to Other Percentage Taxes under Title V of the Tax

Code, as amended, except those subject under Section 116 of the
same Title
  Partners of a General Professional Partnership (GPP) since their
distributive share from GPP is already net of cost and expenses.

8.  Mixed Income Earners

1. The compensation income  shall be subject to the graduated income

tax rates prescribed under Section 24(A)(2)(a) of the Tax Code, as
amended; AND
2. The income from business  or practice of profession  shall be
subject to:

a.  If the gross sales/receipts and other non-operating income do not exceed the
VAT threshold, option to be                     taxed  at:

The graduated rates under Section24(A)(2)(a) of the Tax Code as amended;

OR

        The 8% tax on gross sales or receipts and other non-operating income in

excess of P250,000 in lieu of the graduated income tax rates under Section 24(A)
(2)(a) and the percentage tax under Section 116.

         b.  If the gross sales/receipts and other non-operating income exceeds the
VAT threshold, the individual shall be subject to the graduated income tax rates
prescribed under Section 24(A)(2)(a).

9. Tax Filing Deadlines

TAX RETURN FREQUENCY DEADLINE

ITR - First Quarter Quarterly May 15

ITR - Second Quarter Quarterly August 15

ITR - Third Quarter Quarterly November 15

TAX RETURN FREQUENCY DEADLINE

Annual Income Tax Annual April 15

Return

Percentage Tax Quarterly Every 20th of the month after the end of

the quarter

1601-C Monthly Every 10th of he month

1601-E/1601-F - First Quarterly Apil 30

Quarter

1601-E/1601-F - Quarterly July 31

Second Quarter

1601-E/1601-F - Third Quarterly October 31

Quarter

1601-E/1601-F - Fourth Quarterly January 31

Quarter

10. Installment Payment – Income Tax for Individual Taxpayers

 Income Tax Payable : P2,000 or more

 First Installment – On or Before April 15
 Second Installment – On or Before October 15

11. Deductions from Gross Income

1. Itemized Deductions
2. Optional Standard Deduction (OSD)
* 40% of Gross Sales/Receipts during the taxable year

* Taxpayers not required to submit with the tax return such Financial Statements
otherwise required under the Tax Code, as amended

* General Professional Partnership (GPP) may avail of the OSD only once, either
by the GPP or the partners comprising the partnership

* The election to claim either the itemized deductions or the OSD for the taxable
year:

– must be signified by checking the appropriate box in the income tax return filed
for the first quarter of the taxable year adopted by the taxpayer.

– the same type of deduction must be consistently applied for all the succeeding
quarterly returns and in the final income tax return for the taxable year.

12. Documentary Stamp Tax

DOCUMENT ATC AMOUNT

Sec 174 - Original Issue of Share of DS101 P2.00/200

Stock

Sec 175 - Sales, Agreements to Sell, DS102 P1.50/200

Memoranda of Sales, Deliveries or

Transfer of Shares or Certificates of

Stock with par value

Sec 175 - Sales, Agreements to Sell, DS102 50% of DST paid on original

Memoranda of Sales, Deliveries or issue

Transfer of Shares or Certificates of

DOCUMENT ATC AMOUNT

Stock without par value

Sec 179 - All Debt Instruments DS106 P1.50/200.00 of FV or a fraction

of 365 days for instrument with

term of less than 1 year

Sec 188 - Certificates Issued DS114 P30.00/Certificate

Sec 189 - Warehouse Receipts DS115 Above P200.00=P30.00

Sec 193 - Powers of Attorney DS119 Above P200.00 = P30.00

Sec 194 - Leases and Agreements DS120 1st P2,000 = P6.00

Over P2,000 = P2.00/P1,000.00

Sec 195 - Mortgages, Pledges and Deeds DS121 1st P5,000=P40.00

of Trust Over P5,000=P20.00/P5,000.00

Sec 196 - Deeds of Sale, Conveyances DS122 On first P1,000.00 = P15.00

and Donations of Real Property In excess of P1,000 or fractional

part thereof = P15.00/P1,000.00

 Transfers exempt from Donor’s Tax under Section 101(a) and (b) of
the Tax Code shall be exempt from Documentary Stamp Tax.

13. Estate Tax

 Whether decedent is resident or non-resident of the Philippines:

  RA 10963 (TRAIN

Rate 6% based on the net value of the estate

Deductions:

Family Home 10M

Standard 5M

Funeral Expenses none

Judicial Expenses none

Medical Expenses none

Time of Filing 1 year from date of death

Payment by Installments 2 years in case of insufficient cash without civil penalty

and interest

CPA certification 5M

Withdrawal on deposits of 6% Final Tax

decedent

Notice of death Repealed

14. Donor’s Tax

 Gift inter vivos

   RA 10963 (TRAIN

RATE

Relative 6%

First P250,000.00 - Exempt

Stranger 6%

Exemption None

Dowries or gifts on account of marriage

 Documentary Stamp Tax on Donation of Real Property

Not to exceed P1,000.00                      P15.00

For each additional P1,000.00           P15.00

* Transfers exempt from donor’s tax shall be exempt from DST

 Transfer for less than adequate and full consideration:

Where property, other than property referred to in Section 24(D) is transferred

for less than an adequate and full consideration in money or money’s worth, then
the amount by which the fair market value of the property exceeded the value of
the consideration shall, for the purpose of the tax imposed, be deemed a gift, and
shall be included in computing the amount of gifts made during the calendar
year:   Provided, however,  that a sale, exchange, or other transfer of property
made in the ordinary course of business (a transaction which is a bona fide, at
arm’s length, and free from any donative intent) will be considered as made for
an adequate and full consideration in money or money’s worth.

15. Excise Tax

 PRODUCT TYPE 2017 R.A.NO.10963

On all non-metallic mineral and quarry resources

1. Locally extracted or produced, based on actual market 2% 4%

value

2. In the case of importation based on value used by 2% 4%

Bureau of Customs in determining tariff and customs

duties, net of excise tax and VAT

3. Locally-extracted natural gas and liquefied natural gas P0.00 Exempt

Excise Tax – on Non-Essential Services

 Rate = five percent (5%)

 Tax Base = Gross Receipts, net of excise tax and VAT
 Coverage = invasive cosmetic procedures, surgeries, and body
enhancements   directed solely towards improving, altering, or
enhancing the patient’s appearance and do not meaningfully promote
the proper function of the body or prevent or treat illness or disease.

Manner of Remittance of Excise Tax

Under existing rules on goods subject to excise taxes, the excise tax return is
required to be filed and the excise tax paid by the manufacturer or producer of
the goods before removal from the place of production .

 In cases where no service subject to excise tax is performed and

there are no payments received, the Monthly Remittance Return of
Final Withholding of Excise Tax shall be filed with Excise Large
Taxpayers Field Operations Division (ELTFOD) for Large
Taxpayers/Revenue District Office for taxpayers in the National Capital
 Region (NCR)/Excise Tax Area (EXTA) in Regional Offices for
taxpayers outside NCR.
 Taxpayers filing via EFPS shall comply with the provisions of the EFPS
Regulations.

Invoicing Requirements
Every person subject to excise tax herein imposed shall issue:

1. An Official Receipt  for services performed whether invasive/non-

invasive.
2. The following information shall be indicated in the Official Receipt:

a. The total amount which the patient/client pays or is obligated to pay to the
service provider including the excise tax and the value-added tax:

Provided, that:

* The amount of excise tax shall be shown as a separate item in the O.R.;

                * Discounts given shall be indicated in the O.R., otherwise, the same

shall not be allowed as deduction from gross receipts

* If the procedure performed is non-invasive and considered exempt from excise

tax, the term Exempt from Excise Tax shall be shown on the O.R.

* If the services performed involved both invasive (excisable) and non-invasive

(exempt from excise tax) procedures, the receipt shall clearly indicate the
breakdown of the amount received between its taxable and exempt components
and the calculation of excise tax on each portion of the procedure performed shall
be shown on the receipt:

* Provided, that the service provider may issue separate ORs for the excisable
and exempt components of the services rendered.

16. Keeping of Books of Accounts

 Corporations, companies, partnerships, or persons whose gross

annual sales, earnings, receipts or output exceed Three Million Pesos
(P3,000,000), shall have their books of accounts audited and
examined yearly by independent Certified Public Accountants and their
Income Tax Returns.
17. Issuance of Receipts or Sales or Commercial Invoices

 Threshold increased from P25 to P100

18. Keeping and Preservation of Receipts and Invoices

 In the place of business for a period of three (3) years from the close
of the taxable year in which the invoice or receipt was issued;
 Includes digital records for electronic receipts or sales or commercial
invoices;
 Original – to be kept by the purchaser, customer, or client;
 Duplicate – kept by the issuer

19. Attempt to Evade or Defeat Tax

1. Fine

* Not less than P500,000 but not more than P10,000,000.

2. Imprisonment

*Not less than 6 years but not more than 10 years

20. Failure or Refusal to Issue Receipts

RA 10963
NIRC 1997
(TRAIN)

(a) Any person, who, being required under Section 237 to (a) same

issue receipts or sales or commercial invoices, fails or refuses

to issue such receipts or invoices, issues receipts or invoices

that do not truly reflect and/or contain all the information

required to be known therein, or uses multiple or double

receipts or invoices, shall, upon conviction for each act or

omission, to be punished by a fine of not less than One

 RA 10963
NIRC 1997
(TRAIN)

thousand pesos (P1,000) but not more than Fifty thousand

pesos (P50,000) and suffer imprisonment of not less than two

(2) years but not more than four (4) years.

(b) Any person who commits any of the acts enumerated Penalties for Acts

hereunder shall be penalized in the same manner and to the Enumerated Under

same extent as provided for in this Section: Sec 264(B)

(1) Printing of receipts or sales or commercial invoices without *Fine - not less than

authority from the Bureau of Internal Revenue; or P500,000.00 but not

more than

P10,000,000.00

*Imprisonment - not

less than 6 years

but not more than

10 years

(2) Printing of double or multiple sets of invoices or receipts;

or

(3) Printing of unnumbered receipts or sales or commercial Fourth item is added

invoices, not bearing he name, business style, Taxpayer to Sec. 264(B)

 RA 10963
NIRC 1997
(TRAIN)

Identification Number, and business address of the person or "(4) Printing of

entity. other fraudulent

receipts or sales or

commercial invoices

21. Failure to Transmit Sales Data (CRM/POS)

Monthly e-Sales Reporting

Any taxpayer required to transmit sales data to the Bureau’s electronic sales
reporting system but fails to do so shall pay, for each day of violation, a penalty
amounting to one-tenth of one percent (1/10 of 1%) of the annual net income as
reflected in the taxpayer’s audited financial statement for the second year
preceding the current taxable year for each day of violation or Ten Thousand
Pesos (P10,000), whichever is higher Provided, That should the aggregate
number of the days of violation exceed one hundred eighty (180) days within a
taxable year, an additional penalty of permanent closure of the taxpayer shall be
imposed: Provided, further, That if the failure to transmit is due to force majeure
or any causes beyond the control of the taxpayer, the penalty shall not apply.

22. Sales Suppression Devices

Sec. 264-B Purchase, Use, Possession, Sale or Offer to Sell, Installment,

Transfer, Update, Upgrade, Keeping or Maintaining of Sales Suppression
Devices.  – Any person who shall purchase, use, possess, sell or offer to sell,
install, transfer, update, upgrade, keep or maintain any software or device
assigned for, is capable of: (A) suppressing the creation of electronic records of
sale transactions that a taxpayer is required to keep under existing tax laws
and/or regulations; or (B) modifying, hiding, or deleting electronic records of
sales transactions and providing a ready means of access to them, shall be
punished by a fine of not less than Five Hundred Thousand Pesos (P500,000) but
not more than Ten Million Pesos (P10,000,000); and suffer imprisonment of not
less than two (2) years but not more than four (4) ears; Provided, That a
cumulative suppression of electronic sales record in excess of the amount of Fifty
Million Pesos (P50,000,000) shall be considered as economic sabotage and shall
be punished in the maximum penalty provided for under this provision.

QUESTIONS
Q1
Clarification on self employed: on item #9 (tax filing deadlines), Percentage tax’s
frequency is quarterly but the deadline is every month. Medyo nalito po ako. And for
self-employed po ba ito na pumili ng graduated rates?
Ang pagkakaintindi ko naman po sa 8% option, once a year lang siya kailangan i-file.
With this, aside sa mas makakamura ang mga self-employed na kaunti lang ang
expenses, less hassle din kasi wala nang monthly and quarterly filings. Can you correct
me po on this?
Wala pa po kasi akong nababasang procedure on how to file using 8%. And I haven’t
paid for my Jan & Feb taxes kakahintay po sa new procedure. Sa pagkakaalam ko nga
din po kasi, one-time payment lang siya for the whole year.

Thank you po!! 🙂

A1
If you did not opt for the 8%, you will need to pay for the 3% quarterly percentage tax.
Hindi na siya monthly. What do you need to do? Go to your Revenue District Office,
surrender your Certificate of Registration and fill up BIR Form 1905 to update from
monthly to quarterly percentage tax.

IF YOU OPT FOR THE 8%:

When you will file your first quarter return of the taxable year, signify your intention to
elect the 8% income tax rate ( I am referring to 1701-Q). Otherwise, you shall be
considered as having availed of the graduated rates and such election shall be
irrevocable for the taxable year.

Q2
Di pa po ako nakapag-update ng COR kasi ang pagkaintindi ko, ang need lang mag-
update ay yung mga VAT taxpayers na gusto maging Non-VAT for them to avail of rhe
8% flat rate and sa taxpayers opting for the 8% flat rate. Nagbayad ako last february
ng percentage tax for the month of january then after a few days nalaman ko na
quarterly na pala ang percentage tax…sigh! (as of this writing wala pa rin bagong form
ng 2551Q kaya kahit gusto kong isabay sya sa pag-file ng ITR di pwede). Anyway, my
questions are :
1. if i do not opt for the 8% rate, how do i compute my quarterly tax? Kagaya rin ba ng
dati? Anong tax table gagamitin ko yung old tax table or yung train act table? Kasi this
quarter ang income ko is 53,000.00 kung yung same computation pa rin ang tax due
for this qtr is 2,770.00 (53,000-40%OSD = taxable amount 31,800) pero kung yung
new train act table, wala po ako babayaran kasi below 250,000.00 po ang income, tama
po ba?
2. If sa 2nd and 3rd quarter, old table gagamitin may payable pa rin po ako but with
new table kung below 250,000 pa rin ang taxable income wala pa rin po ako
Babayaran?
3. Sa annual income tax ganun rin po mangyayari?
4. Bale po sa mga hindi nag-opt ng 8% flat rate like me, i will file 2551Q, 1701Q (with
or without pyt), 1701 (wit or without pyt), tama po ba?
5. How do i register sa efps? Kasi sabi pag “no payment” dapat online ang pag-file and
once nag-file online, lahat online na ang filing with/without pyts.
Sorry, dami questions. Ako lang po kasi nag-aayos ng tax ko and nalalaman ko lang
yung train law while surfing kaya po nalilito na ako.
Thank you.
A2
1. if i do not opt for the 8% rate, how do i compute my quarterly tax? Kagaya rin ba ng
dati? Anong tax table gagamitin ko yung old tax table or yung train act table? Kasi this
quarter ang income ko is 53,000.00 kung yung same computation pa rin ang tax due
for this qtr is 2,770.00 (53,000-40%OSD = taxable amount 31,800) pero kung yung
new train act table, wala po ako babayaran kasi below 250,000.00 po ang income, tama
po ba?
TRAIN is effective Jan 1, 2018, so yung first quarter income mo, covered ka
na sa new tax table
2. If sa 2nd and 3rd quarter, old table gagamitin may payable pa rin po ako but with
new table kung below 250,000 pa rin ang taxable income wala pa rin po ako
Babayaran?
New table na gagamitin mo cuz your income would be your income sa 2018
3. Sa annual income tax ganun rin po mangyayari?
Yes, total mo yung income mo for the year, 40% OSD. then use the tax table
4. Bale po sa mga hindi nag-opt ng 8% flat rate like me, i will file 2551Q, 1701Q (with
or without pyt), 1701 (wit or without pyt), tama po ba?
yes
5. How do i register sa efps? Kasi sabi pag “no payment” dapat online ang pag-file and
once nag-file online, lahat online na ang filing with/without pyts. EFPS you need to
enroll and go to BIR. You can use naman eBIR forms (download it from the bir website
www dot bir dot gov dot ph