Tax Reform in the Philippines

President Duterte signs new TRAIN Law

Dumaguete BIR - Bureau of Internal Revenue

President Rodrigo Duterte signed the new Tax Law of the Philippines on December 19. 2017. The Tax reform is commonly referred to as TRAIN-Law. (Tax Reform for Acceleration and Inclusion).

While the word Tax by itself attracts most people like foul eggs, its impact affects everybody. As probably nobody who is not an accountant or works for the BIR reads through the whole paper we gatherd the most important information to provide this “TRAIN Law – Tax Reform in an Nutshell”.

Tax Reform & Train Law in a Nutshell

Any person around the globe does not likes income cuts due to higher taxes. It is clearly a clearly positive sign for small businesses, that the income tax for them is lowered. The old tax law charges a minimum of 5% for taxable income even if one earns less than Php10,000 annually. The maximum rate of Php125,000 plus 32% of the excess of Php500,000 was already in place for all who made over half a million Peso. Please refer to the info graphics below to see how the Train Law will affect your income tax.

The Tax Reform which will take effect after 15 days after the Presidents signature shows benefits for small business owners and people with a personal income below Php250,000 Php. If one earns below Php250,000 he/she has to pay 0% income tax. However, the maximum tax is raised to 35% which affects all earning a net income of Php8 Million and above.

Tax Reform will increase Excise Taxes

While up to this point the TRAIN Law Tax reform sound awesome, there are of course new tax packages to compensate for the revenue losses from the lower income tax. Under the existing “Sin Tax Law” from 2012 the Tabaco Tax rate was set to Php31,20. This will be increased frequently over the next years after the Tax reform takes effect. There will also be a new tax on sweetened beverages. Expect the prices for a liter of coke and the like go up significantly, as there will be a tax of Php6.00 or Php12.00 per liter, depending on the sweetener.

Everybody with a motorized vehicle (inclusive lawn-mower) will also feel the impact of the Tax Reform in the Philippines. For the first time Diesel will be taxed and the tax for gasoline will be raised. That will not only affect the car owners, but also the commuters using public transportation to go to work or schools. Expect ferry tickets to go up, too.

Luxury Cars become cheaper after Tax Reform

On rather surprising result of the Train Law Tax reform is the decrease of prices for luxury cars. While affordable cars for the “normal” people of the Philippines will go up in prices – some of them significantly – cars with a price tag above 3 Million Peso will become cheaper. Excluded from this Automobile Excise Tax are electric vehicles and Pick-Ups. Hybrid Cars will be taxed half of the new rates. Following some graphics how the TRAIN Law will affect us in our everyday life.

These are only the first steps in the long-due tax reform in the Philippines. Duterte instructed the Department of Finances (DoF) after signing the TRAIN Law into Republic Act No. 10963 on December 18th, 2017 to ensure the effective implementation.

2 replies
  1. Ryan says:

    Hi Good Day,

    Why we still have a Tax in SPi Global,

    though Duterte Declare that 20,000 below monthly gross will have no Tax.

    Reply

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