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What’s in the approved TRAIN Tax Reform of 2018?




What taxes are included in the Philippine tax reform program to be implemented starting 2018?

We summarize below a list of revised and brand-new taxes that are part of the Tax Reform for Acceleration and Inclusion or TRAIN program initiated by the Department of Finance (DOF) and recently ratified by Congress. Implementation of said new taxation has begun on January 1, 2018 after being signed into law by Pres. Rodrigo Duterte in December 2017.

Let’s take an in-depth look at what’s included in this tax reform program.


UPDATE: We compiled all articles related to the TRAIN law on this page: TRAIN Law and BIR Tax Implementing Guidelines. Click the link to access BIR’s implementing rules and regulations and examples of how to compute applicable taxes.


* * * UPDATED resources on the approved TRAIN Tax Reform below:

1. New Personal Income Tax Rates

Personal income tax rates will be lowered, while salaried employees earning annual income of P250,000 or below will be exempted from paying income taxes.

Full details of the New Personal Income Tax Rates and Income Tax Tables can be found here.

2. Lower Tax Rates for Professionals

With the revised personal income tax table, salaried employees will surely benefit from the lower tax rate. Self-employed professionals, meanwhile, can expect to pay lower taxes as well with the reduced tax rates for professionals, as follows:

Annual Sales or Gross Receipts Tax Rate
P250,000 and below0%
Below P3 millionMay choose either 8% flat tax on gross receipts or follow personal income tax table
Above P3 millionSubject to personal income tax table

Professionals will no longer have to file and pay the percentage tax; instead they will be charged a withholding tax of 8% flat rate on gross sales or receipts.

Self-employed professionals earning annual income of P3 million and below may choose to pay the 8% flat tax or follow the personal income tax table.

3. Tax on 13th Month Pay and Other Bonuses

The threshold for tax exemption on 13th month pay and other bonuses received by salaried employees has been raised from the current P82,000 to P90,000. This means 13th month pay and bonuses paid to employees that amount to P90,000 or below will not be taxed.

4. Tax on Drinks using Sugar and Caloric / Non-Caloric Sweeteners 

Beverages that use sugar and other sweeteners will be taxed effective January 2018. These include softdrinks and other cola drinks, fruit juices, and powdered drinks, among others.

The sugar tax is as follows:

  • P6.00 per liter of drink that uses caloric and non-caloric sweeteners 
  • P12.00 per liter of drink that uses high fructose corn syrup (HFCS)

5. Tax exemption of milk, 3-in-1 coffee, medicines for diabetes, etc.

Exempted from the sugar tax are milk, 3-in-1 coffee, 100% natural fruit juice or vegetable juice, medically-indicated beverages, and drinks and beverages that use natural sweeteners such as coco sugar or stevia.

Meanwhile, drugs and medicines prescribed for diabetes, high cholesterol, or hypertension will also be exempted from the 12% VAT.

6. Taxes on LPG, Diesel, Gasoline, and other fuel products

Liquefied Petroleum Gas or LPG is currently not taxed, but will be charged excise tax as follows:

  • P1.00 tax per liter in 2018
  • P2.00 tax per liter in 2019
  • P3.00 tax per liter in 2020

Diesel is also currently not taxed, but will have new taxes, as follows:

  • P2.50 tax per liter in 2018
  • P4.50 tax per liter in 2019
  • P6.00 tax per liter in 2020

Gasoline, both regular and unleaded, will have the following excise taxes raised from the current P4.35 per liter:

  • P7.00 tax per liter in 2018
  • P9.00 tax per liter in 2019
  • P10.00 tax per liter in 2020

Other fuels and oil products will be taxed as follows:

  • Aviation gas – P4.00 per liter
  • Asphalts – P8.00 per kilo
  • Kerosene – P3.00
  • Naphtha – P7.00
  • Bunker fuel – P2.50
  • Lubricating oil – P8.00
  • Paraffin wax – P8.00
  • Petcoke – P2.50

UPDATE: Pres. Duterte has vetoed the exemption from excise taxes of petroleum products used as input, feedstock, or as raw material in the manufacturing of petrochemical products, or in the refining of petroleum products, or as replacement fuel for natural gas fired combined cycle power plants.

7. Taxes on Cars and Automobiles

The new excise taxes for cars will follow a four-tier scheme:

Excise Tax on Cars and Automobiles

Net Manufacturer's PriceTax Rate on Hybrid CarsTax Rate on Non-Hybrid Cars
P600,000 and below2%4%
Above P600,000 to P1 million5%10%
Above P1 million up to P4 million10%20%
Above P4 million25%50%

Pick-up trucks and electric vehicles will be exempted from additional taxes. Hybrid cars, as seen in the table above, will be charged 1/2 (half) the taxes imposed on non-hybrid automobiles.

8. Tax on Coal

The approved excise tax on coal is as follows (currently P10.00 tax per metric ton):

  • P50.00 tax per metric ton in 2018
  • P100.00 tax per metric ton in 2019
  • P150.00 tax per metric ton in 2020

9. Tax on Tobacco Products

Excise taxes on tobacco products will be increased to P32.50 initially during the first six months of 2018, then will rise to P35.00 from the rest of 2018 until 2019.

From 2020 to 2021, the tobacco tax will rise to P37.50, followed by a fixed tax of P40.00 to be imposed from 2022 to 2023. From 2023 onwards, tobacco taxes will rise 4% annually.

10. Donor’s Tax

Donations or gifts with at least P250,000 worth will be charged a donor’s tax of 6% flat rate. This will be charged regardless of the relationship between the donor and the donee.

11. Estate Tax

The estate tax, or tax levied on the properties or estate of lawful heirs and beneficiaries inherited from a deceased person, will now be subject to a flat rate of 6% on the amount in excess of P5 million.

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 existing tax laws, only family homes worth P1 million are exempted.

12. Tax on Cosmetic Surgery and other Aesthetic Procedures

Starting 2018, there will be a 5% tax on cosmetic surgeries, aesthetic procedures, and body enhancements.

13. Documentary Stamp Tax

The documentary stamp tax (DST) charged on some legal or business transactions will double from P1.50 to P3.00 beginning 2018.

14. Stock Transaction Tax

Stock trading in the Philippines might be affected with the revised taxes on stock market activity.

The stock transaction tax — a tax charged on stock sellers when a buy or sell transaction is made — will be increased to 0.6% of the gross trade amount from the current 0.5% rate.

Stock-related transactions of companies not listed in the Philippine Stock Exchange (PSE) will be slapped with a higher stock transaction tax of 15%, an increase from the current 5% or 10%.

15. Foreign Currency Interest Income Tax

The tax on interest income on foreign currency deposits is currently pegged at 7.5%. This will increase to 15% of the interest on foreign currency deposit unit (FCDU) under the TRAIN tax reform.

List of Vetoed Items by Pres. Duterte

Here are five (5) items in the tax reform bill that was vetoed by Pres. Duterte when he signed the bill into law.

  1. Veto on the 15% special tax rate for employees of Regional Headquarters (RHQ), Regional Operating Headquarters (ROHQ), Offshore Banking Units, and Petroleum Service Contractors and Subcontractors. Thes employees will be taxed using the regular income tax table as shown in Item No. 1 above.
  2. Veto on the exemption of self-employed professionals, with gross sales or receipts not exceeding P500,000, from the payment of the 3% percentage tax.
  3. Veto on the excise tax exemption of petroleum products used as input, feedstock, or as raw material in the manufacturing of petrochemical products, or in the refining of petroleum products, or as replacement fuel for natural gas fired combined cycle power plants (see Item No. 6 above).
  4. Veto on the zero rating of sales of goods and services to separate customs territory and tourism enterprise zones, specifically, the areas under the Tourism Infrastructure Enterprise Zone Authority (Tieza).
  5. Veto on the earmarking of incremental tobacco taxes

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33 thoughts on “What’s in the approved TRAIN Tax Reform of 2018?”

  1. Isel says:

    No. 3 and 4 Many people say we dont need the beverage tax because the communities are affected including some of the store owners the result is they will sign the petitions against from Beverage Tax

  2. Willeus says:

    Is there a change in the Optional Standard Deduction for professionals? Current rate is 40%. Has this been reduced?

    Will professionals earning at least P3M a year still pay VAT?

    Is the 8% withholding tax rate in lieu of percentage tax and income tax applicable also to professionals earning more than P3M?

  3. Aries says:

    Good day! Is the new ESTATE TAX retroactive?numerous old properties are still pending for transfer for fear of incurring high penalty and estate tax.

    Thank you

  4. Charity Joy Ronquillo says:

    How about the Bureau of Internal Revenue?

  5. Winero Pascual says:

    I have a question, what about the exemption for individuals who have dependent and married?

    1. Michelle Casionan says:

      I have the same question with Sir Winero. Cause my tax status is S2- Single with 2 dependents. Do we have exemption or at least lower tax rates. Before it was 25,000 per child. How about now was there a change?

  6. Jobbin Thomas says:

    Hi,

    Is there any change in the Provision for the Personal Exemption of Individual Taxpayers

  7. KOYMAK says:

    Anybody there who could answer my question. I work in a government. my annual income is just around P250,000. However, I also have a side job as a professional language consultant. I pay percentage tax of 3% per month, plus, I am withheld 10% of my part-time employer. So, papaano i.cocompute ang tax ko with the TRAIN LAW? I merge ba ang 2 sources of income ko? Salamat sa makakasagot.

  8. Yan2 says:

    panu nman po yung mga temp employees??may nakalgay na consultancy tax..exempted rin ba kmi..thanks sa makakasagot

  9. Jo says:

    Hi guys, will this be included in May 2018 CPA board exam already?

  10. TJ says:

    I’m buying a condo and I was told by several realtors there is a new 12% tax law. I see #13 is the Documentary Stamp Tax and it’s been increased to P3 from P1.5. Is this what they were talking about or is there another tax?

  11. Bobbie says:

    Hi, I’m a non-vat business owner. Pasok ba ko sa self-employed na tinatawag?

  12. anonymous says:

    Good day,

    Just want to ask, am IT consultant. my taxable salary is 21k and my non tax salary is 20k, ung 21k ba na taxable salary pasok sa train law, or meaning wala na ba dapat akong tax since 21k ang salary ko tama po ba?

    1. John says:

      Hi,

      Good day!

      If your non-taxed salary is Php 20,0000.00 each month multiplied by 12 months in a year, then, it will only result to an amount of Php 240,000.00 annually. Meaning, your basic income is non-taxable unless you got an annual increase the following year, then, the excess of Php 250,000.00 will be taxed as shown in the illustration above.

      Let us say your current annual income for basic pay alone is Php 240,000.00 and you got an increase of 5% through your basic pay, then Php 20,000.00 multiplied by 1.05, would be Php 252,000.00. In this scenario, that Php 2,000.00 excess will be taxed at 20% rate.

      Hope this helps!

      John

  13. Arlyn Robles says:

    As a part timer worker, do I have to pay taxes. Rate is below 400 daily for 3 hours of work.

    1. John says:

      Hi Arlyn Robles,

      Good day!

      If you work just like a regular company of a company, then, it makes sense that you get Php 146,000.00 each year for a three-hour work daily that is, being paid Php 400.00 for such duration. Under the newly enacted law for taxes you are exempted for not paying any taxes at all back to the government.

      But if you were a self-employed individual, as based on the illustrations shown above, you are not also a candidate for paying any taxes to the government.

      The, your income is free of tax unless it went beyond the Php 250,000.00 annual income then, the said-above rates will apply to you.

      Hope this helps!

      John

  14. Ma.Carmencita M. Fernandez says:

    Is the Magna Carta Benefits of Health Workers taxable in the New TRAIN LAW?

    1. Ma.Carmencita M. Fernandez says:

      Is the Magna Carta for Health Workers taxable in the New TRAIN LAW?

    2. John says:

      Hi Ma.Carmencita M. Fernande,

      Good day!

      Section 33(a) of R.A. 7277, as amended by R.A. 10754 or the Magna Carta for Persons with
      Disability is still being repealed under the House of Representatives and in the House of Senate for approval and refurbishing.

      Hope this helps!

      John

  15. Ramil says:

    My brother passed away last Jan 23, 2017. He still has 90K pesos in his bank deposit account. How can my mom, the heir of my unmarried brother, withdraw such amount? Is it exempt from estate tax? What are the documentary requirements i need to show to the bank?

  16. Ching perez says:

    I am a lessor of real property . My income is less than p250000 a year. Am i exempt from my lessee’s deduction of 5percent as withholding tax expanded? Pls reply… that is only my income and nothing more

  17. Jam says:

    Hi, for Non-VAT Registered professionals, if we choose the 8% income tax, can we not pay and file the 3% percentage for January 2018 due this Feb 20? I am just worried of penalties if we do not pay and file. Thanks and God bless!

  18. Eucell says:

    Good day! Isa po akung self employed at my earnings is 18 to 19k lang po monthly.., kailangan po ba akung mag bayad ng percentage tax?

  19. abner villanueva says:

    Good day I’m Ner i”m employed as Job Order at DPWH My daily rate is 453,00 pesos
    taxable ba ang income ko under TRAIN Law?
    Thank you very much

  20. eman says:

    Is a medical practitioner (Professional) who is a government employee. Is the 8% withholding tax is applicable? Annual income is less than 3M

  21. Ailyn says:

    Hello, if the maximum tax exempted bonus + 13th month pay is now P90K annually, how about for the monthly/annual “de minimis” benefits? Does the list remain the same? Thank you!

  22. Em Por says:

    Is the overtime pay taxable? What are included in the deminimis? Thanks

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  24. aira says:

    Good day! Covered po ba ng lower income tax ang mga contractual employees?

  25. anastacio bado says:

    hi –
    i am a non vat taxpayer, opted for the optional standard deduction (40%) and used to have an exemption of Php50K under the form 1701

    i used to pay 3% percentage using the monthly form 2551M. what happens now? it says we have to pay this 3% quarterly using the 2551Q form. do i have to register (again) with BIR to migrate from 2551M to 2551Q?

    i have paid my jan 2018 2551M in the absence of clear instructions. how do i recover or apply this when i file 2551Q

    is the 1701Q still to be used?

    please help me.

    thanks and regards,

    1. arriane joyce says:

      hello po @anastacio bado. same po tau ng questions. Have they been answered already? thanks po

  26. November06 says:

    Hi, I have a house in under PAGBIG loan that is valued under 1 million. To avoid the hassle of going back and forth to Cavite to pay a small amount of real estate tax, I just pay in advance. Now, I have already paid for until the year 2020. If there will be no real estate tax anymore, what will happen to my advance payment? WIll it be returned to me?

  27. Jorgie says:

    Hello, I just registered with BIR as professional (freelancer) and my tax includes 0605, 1701Q, 1701 and the 2551Q. In your blog, you said we no longer pay the percentage tax. How come my RDO put that in my tax.

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