TRAIN Tax Reform Bill (Senate version)

The Senate ways and means committee approved yesterday its version of the proposed Philippine Tax Reform Bill, also known as TRAIN or Tax Reform for Acceleration and Inclusion.

What’s in the Senate version of the tax reform package?

Here are eight (8) highlights from the Senate version of the proposed Tax Reform bill.

1. Lower threshold for tax exemption (from P250,000 to P150,000)

In the House version, those who are earning P250,000 and below will be exempted from paying income taxes.

The Senate lowered this threshold and, in the committee-approved version, exempted those who are earning at most P150,000 from paying income tax. This means anyone earning P150,000 and below (around P12,500 per month) will no longer have to pay income tax.

2. Additional exemption of P25,000 per dependent (max of 4 dependents)

Taxpayers with qualified dependents are eligible for additional exemption of P25,000 per dependent, for a maximum of four dependents, translating to a maximum of P100,000 additional exemptions.

What this means is that an employee earning P25,000 per month will be fully exempted from paying income tax. This is because, as computed:

  • P25,000 monthly salary * 13 months (includes 13 month pay) =  P325,000 gross annual salary
  • Four dependents of P25,000 each = P100,000 total exemption
  • Total taxable income is therefore P225,000 computed as P325,000 gross annual salary – P100,000 additional exemption

Since the P225,000 taxable income is below the Senate version’s threshold of P250,000, the employee is exempted from paying income taxes

3. Tax exemption for 13th month pay and bonuses up to P82,000

Bonuses and 13th month pay awarded to employees that amount to P82,000 or below will continue to be tax-exempt.

4. Self-employed and freelancers to be charged fixed 8% tax rate

Self-employed individuals and freelancers, who are not employed by any company, may choose between two tax options:

  • A flat 8% tax on gross earnings; or
  • The schedule of new income tax rates for compensation earners (income tax table here)

The good part is, these people no longer have to make quarterly tax payments. They can pay taxes once a year, based on the Senate proposal.

5. Higher VAT exemption for small businesses

At present, only businesses with gross sales of P1.9 million and below are exempted from paying VAT. The Senate version raised this threshold to P3 million.

This means small businesses with annual total sales of P3 million or below will be exempted from paying VAT, and will also not be required anymore to file monthly VAT returns and quarterly percentage tax returns.

6. Incremental tax increase on Diesel, Petroleum, and other Oil products

For diesel, petroleum, and other oil products, the current Senate version calls for additional tax of:

  • P1.75 per liter on the first year;
  • P2.00 per liter on the second year; and
  • P2.25 per liter on the third year

This is different from the House version of P3.00, P2.00 and P1.00 to be charged in the next three years.

For LPG, the increase will be additional P1.00 every year for the next three years. Kerosene will remain to be exempted.

7. Excise Taxes on Cars

The Senate committee version of the excise tax on cars and automobiles is similar to the House version. Hybrid and electric cars will remain to be tax-exempt.

Excise Tax on Cars and Automobiles

Automobile's Net Selling Price20182019
Below P600,0003%4%
P600,000 to P1.1 millionP18,000 + 30% in excess of P600,000P24,000 + 40% in excess of P600,000
P1.1 million to P2.1 millionP168,000 + 50% in excess of P1.1 MillionP224,000 + 60% in excess of P1.1 Million
P2.1 million to P3.1 millionP668,000 + 80% in excess of P2.1 MillionP824,000 + 100% in excess of P2.1 Million
Above P3.1 millionP1.468 million + 90% in excess of P3.1 MillionP1.824 million + 120% in excess of 2.1 Million

8. Tax on Drinks that use Sugar

The House-approved version charges a P10.00-per-liter tax on liquid, powder, and concentrate forms of drinks that use sugar, which include 3-in-1 coffee, powdered juice, energy drinks, bottled iced tea, and soft drinks.

The Senate version is different and categorized the tax based on the type of sweetener used on the drink:

  • P5.00 tax per liter of beverages that use caloric sweeteners;
  • P3.00 tax per liter for those using non-caloric sweeteners; and
  • P10.00 tax for beverages that use high fructose corn syrup (typical sweetener used in softdrinks and bottled juices)

The Senate version exempted 3-in-1 or instant coffee from the excise tax.

Earlier this May 2017, the House of Representatives approved its own tax reform version. Still, the bill could undergo changes and revisions when it reaches the Senate plenary. The entire Senate has to first approve the final version. Afterwards, the House and Senate versions will be harmonized in a bicameral conference committee, and a single and final version is then forwarded to the President for approval or veto.

Sources: Philippine Daily Inquirer, Rappler, GMA News, ABS-CBN News

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4 thoughts on “TRAIN Tax Reform Bill (Senate version)”

  1. Hello

    Please explain when you said “Since the P225,000 taxable income is below the Senate version’s threshold of P250,000, the employee is exempted from paying income taxes”. I thought senate’s version is P150,000 and below. I may have missed something.


  2. I’m a bit confused on items 2 & 3. Gross taxable compensation income as computed in item 2 to arrive at the net taxable compensation income included the 13th month pay. But,the 13th month pay is already included as part of the non-taxable limit of P 82,000.00 for 13th month pay and other bonuses(item 3) above. Are you saying that it is going to be taken up twice given the illustration scenario presented above? In the above scenario, since it is fairly obvious that the basic salary in question(basis for 13th month pay) is not going to exceed the maximum limit of P 82,000.00 per year, then it must and should not fall as part of the taxable income for purposes of this illustration in arriving at the income tax due or no tax due at all.

    therefore : P 25,000.00 x 12 months = P 300,000.00 (Gross taxable income)
    total Exemptions: Personal P (150,000.00)
    Special/add’l (100,000.00) 250,000.00 (maximum of 4 dependents)
    Net Taxable Income P 50,000.00
    The 13th month pay of P 25,000.00 already falls under the P 82,000.00 tax exempt provision for all bonuses and should therefore not be included in the above computation.

    My understanding of the senate version is as follows: It has upgraded the existing P 50,000.00 personal exemption to P 150,000.00 and has retained the special additional exemption for qualified dependents of P 25,000.00 up a maximum of 4 dependents. This brings up to a maximum of P 250,000.00 in total potential exemptions compared to the current P 150,000.00(aside from the P 82,000.00 tax exempt ceiling for 13th month pay and other bonuses). The house version provides for a flat P 250,000.00 annual income and below tax exemption(regardless of whether the taxpayer has qualified dependents or none) plus the P 100,000.00 tax exempt ceiling for 13th month pay and other bonuses. On top of this, I hope they have retained the other salient and applicable features of the House-proposed income tax bracket table.

    Under the current law, all minimum wage earners (bear in mind that minimum wages vary from region to region) are automatically 100% exempt from paying income taxes.

    Need further enlightenment of this…

  3. please expound on the personal exemptions.

    In number 2:”Four dependents of P25,000 each = P100,000 total exemption” – Does this mean an employee with no dependents/single will no longer have personal exemptions?

  4. Senate House : sample of 1st inaugurated law public thrust department fund=

    Reform Military Law= conduct housing bill sample senatorial bill

    =. na ang mga batang anak ng militar kasama ang sibilyang militar ay may antas na
    pera,assets, businesses at emergency and death funds mula sa gobyerno-

    = to give conducive wealth efforts to officer’s kids running till the the saidtrh next lineage.

    = Law of foreign policy since text and supply 1982- Foreign National rights
    =. Open city Philippines

    = the grant that an approved state foreigners can avail foreign citizenship since the country-

    = the same boat law since foreign citizenship

    =. Lengthen the power of Philippine money to a peso

    = a risk of gamble since filipino money

    by Lee warren H. Lim of Joe Lim , a former ;media man

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