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 INCOME TAX DUE = A + (B X C)

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

Annual Income Tax Return Annual April 15

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 Quarter Quarterly Apil 30

1601-E/1601-F - Second Quarter Quarterly July 31

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

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

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 Stock DS101 P2.00/200

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

Deliveries or Transfer of Shares or Certificates of Stock
with par value

Sec 175 - Sales, Agreements to Sell, Memoranda of Sales, DS102 50% of DST paid on original issue
Deliveries or Transfer of Shares or Certificates of Stock
without par value
DOCUMENT ATC AMOUNT

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 of Trust DS121 1st P5,000=P40.00
Over P5,000=P20.00/P5,000.00

Sec 196 - Deeds of Sale, Conveyances and Donations of Real DS122 On first P1,000.00 = P15.00
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:
 RA 10963 (TRAIN

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 decedent 6% Final Tax

Notice of death Repealed

14. Donor’s Tax

 Gift inter vivos

RA 10963 (TRAIN

RATE

Relative 6%
First P250,000.00 - Exempt

Stranger 6%
 RA 10963 (TRAIN

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
R.A. NO.
PRODUCT TYPE 2017
10963

On all non-metallic mineral and quarry resources

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

2. In the case of importation based on value used by Bureau of Customs in determining 2% 4%

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
NIRC 1997 RA 10963 (TRAIN)

(a) Any person, who, being required under Section 237 to issue receipts or sales (a) same
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 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 hereunder shall be Penalties for Acts
 NIRC 1997 RA 10963 (TRAIN)

penalized in the same manner and to the same extent as provided for in this Enumerated Under Sec
Section: 264(B)

(1) Printing of receipts or sales or commercial invoices without authority from *Fine - not less than
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 invoices, not bearing Fourth item is added to Sec.
he name, business style, Taxpayer Identification Number, and business address of 264(B)
the person or entity. "(4) Printing of 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.