A. Personal Income Tax
Perhaps, one of the main highlights of the T.R.A.I.N. Law is the decrease of the tax paid for the personal income by the majority of individual taxpayers. As we know, prior to the new law, an individual taxpayer – may he/she be an individual employee or a self-employed taxpayer – would normally pay a 5% to 32% income tax depending on one’s bracket.
But under the T.R.A.I.N. Law, an individual with an income of P250, 000 or less will now be exempted from paying any rate of income tax. While those who have an income of above P250,000 will be subjected to pay at an income tax rate ranging from 20% to 35% effective on 2018, and 15% to 35% effective on 2023, both depend on a person’s income bracket.
Meanwhile, there were several key points from the NIDC that were removed under the T.R.A.I.N. Law. These are the personal exemption of P50, 000, additional exemption of P25, 000 per dependent child, and the premium for health and hospitalization insurance of P2, 400 per year.
B. Lower Tax Rates for Professionals
Self-employed professionals can also expect to pay lower taxes as well with the reduced tax rates for professionals which are shown in the table below.
C. Tax on 13th month pay and other bonuses
The changes for tax exemption on 13th month pay and other bonuses received by salaried employees have been raised from the current P82, 000 to P90, 000. It means that 13th month pay and other bonuses amounting to P90, 000 or below received by salaried employees will not be taxed.
D. Value Added Tax
There are also amendments in the Vat to lessen the burden of taxpayers.
Products, service, or groups that will continue to be VAT-exempt:
- Food and agricultural products
- Senior citizens
- Persons with Disability (PWD)
- Renewable energy
- Enterprises and BPOs located in Special Economic Zones
- Condominium association dues
- Rentals and leases below P15,000 per month
The following items, meanwhile, will now also enjoy the benefit of not paying VAT.
Groups, products, or transactions that will be VAT-exempt
- Businesses with annual gross sales of P3 million and below
- Government owned and controlled corporations (GOCCs), state universities and colleges (SUC), and government agencies were shift to subsidy through the tax expenditure fund (TEF) in the national budget.
- Medicines for diabetes, cholesterol, and hypertension (VAT exemption beginning 2019)
- Socialized housing, or houses priced at P450,000 and below, and low-cost housing, or those priced at P3 million and below (VAT exemption retained from 2018 to 2020 only)
- Socialized housing, mass housing projects in or out of NCR (P2 million and below) is exempted from VAT starting 2021
- Increase of VAT threshold from P1,919,500 to P3,000,000
- Starting 2019, the sale of drugs and medicines for diabetes, high cholesterol, and hypertension will be exempt from VAT
- Increase of VAT exemption for lease of a residential unit from P12,800 to P15,000
E. Petroleum Excise Tax
F. Sweetened Beverage Tax
Beverages that use sugar and other sweeteners will be taxed effective January 2018. These include soft drinks and other cola drinks, fruit juices, and powdered drinks, among others.
The sugar tax is as follows:
- 00 per liter of drink that uses caloric and non-caloric sweeteners
- 00 per liter of drink that uses high fructose corn syrup (HFCS)
Excluded from the tax:
- all milk
- ground and 3-in-1 coffee
- 100% natural fruit and vegetable juices
- Meal replacement and medically indicated beverages
- Beverages sweetened with coco sugar or stevia
G. Automobile Excise Tax
- Pick-ups (commonly used for commercial and agricultural purposes) and electric vehicles will be exempted from excise taxes.
- Hybrid cars will be taxed at half the rates.
H. Donor’s tax
The donor’s tax rate was also amended in the T.R.A.I.N. Law. All donations or gifts will be subject to a flat tax rate of 6% if it has exceeded to P250, 000 regardless of the relationship between the donor and the donee. In the old law, the rates of donor’s tax were 2% to 15% if the donor and donee are related, and 30% if otherwise. However, the donation of real property is now subject to Documentary Stamp Tax of P15 for every P1, 000.
I. Estate Tax
Under the T.R.A.I.N. Law, the estate tax, or the tax charged on the properties or estate of lawful heirs and beneficiaries inherited from a deceased person, will be subject to a flat tax rate of 6% based on the net value of the estate, plus the standard deduction is increased to P5 million from P1.7 million.
Aside from that, estates with a net value of P5 million and below will be exempted from paying the estate tax. Family homes that are valued at P10 million or less will also be exempted from estate tax.
Under the NIRC, only family homes worth P1 million are exempted.
J. Passive Income and other taxes
The T.R.A.I.N. Law also imposes higher taxes on some passive incomes, including interest income from dollar and other foreign currency deposits.
K. Documentary Stamp Tax
The T.R.A.I.N. Law also increases almost all of the taxable documents .
L. Cosmetic Procedures Tax
Starting 2018, there will be a 5% tax on cosmetic surgeries, aesthetic procedures, and body enhancements.
However, there are cosmetic procedures that are still tax-free. These include procedures necessary to ameliorate a deformity arising from, or directly related to, a congenital od developmental defect or abnormality, a personal injury resulting from, an accident or trauma, or disgusting disease, tumor, virus or infection.
M. Mineral Products Tax
N. Tobacco Excise Tax
Reference: Department of Finance
(order is based from how the picture was used in the post)