08/07/2021

TAX REFORM
1

ACCELERATION AND
INCLUSION LAW (TRAIN)
OUR LADY OF FATIMA UNIVERSITY
LECTURER: PROF. MERLITA C. MOJARES
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2
TAX REFORM OBJECTIVES
 Enhance progress in the tax system through the
rationalization of the Philippine internal revenue
system by promoting sustainable and inclusive
growth
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3
TAX REFORM OBJECTIVES
 Provide equitable relief to greater number of
taxpayers and their families in order to improve
levels of disposable income and increase
economic activity
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4
TAX REFORM OBJECTIVES
 Ensure the government will be able to provide
the needs of those under its jurisdiction and care
through the provision of better infrastructure,
health, education, jobs and social protection to the
people
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INCOME TAXATION FOR

INDIVIDUALS
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6 RATES OF INCOME TAX RESIDENT CITIZEN AND

RESIDENT ALIEN

 Removal of the personal and additional

exemption deductions (old law)
 Removal of the minimum wage earners tax
exemption Section 22 (HH) NIRC (old law)
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7 RATES OF INCOME TAX RESIDENT CITIZEN AND

RESIDENT ALIEN

 Tax exemption on total annual gross

revenue or gross receipts which is
P 250,000 and below
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8 RATES OF INCOME TAX RESIDENT CITIZEN AND

RESIDENT ALIEN

 Applied to compensation income if the

individual earns salaries on a regular
basis through an employer-employee
relationship
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9 RATES OF INCOME TAX RESIDENT CITIZEN AND

RESIDENT ALIEN

 Applied to purely self-employed

individual ( Persons earning gross
revenue or receipts annual) amounting
to P 250,000 below ( Tax exempt)
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10 TAX REFORM INDIVIDUAL INCOME TAXATION

NATURE OF INCOME OLD TAX RULE NEW TAX REFORM

‘13th Month and other Benefits Provides P 82,000 exemption Provides P 90,000 exemption

Personal and additional Personal exemption P 50,000 Removed Fixed income earners
exemption Additional P 25,000 for each will be uniformly taxed on gross
qualified child dependent basis

Premium payments on health and Provides deduction of P 2,400 Removes deductibility

hospitalization insurance annual form family with gross
income not more than P 250,000

Fringe Benefit Tax 32% - GMV 68% 35% - GMV 65%

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11 TAX REFORM INDIVIDUAL INCOME TAXATION

NATURE OF INCOME OLD TAX RULE NEW TAX REFORM


Self-employed and professionals Self-employed whose gross receipts For purely self-employed individuals
do not exceed P VAT threshold of P and professionals, Payment of 8%
1,919,500 shall be subject to 3% preferential rate either on gross sales
percentage tax or receipts and non-operating income
in excess of P 250,000 based on
regular individual rates
8% shall be in lieu of the graduated
income tax rates
For self-employed professionals For mixed income earners, Revised
whose gross income receipts exceed P graduated tax rates shall be used for
1,919,500 VAT threshold shall be compensation income tax rates and
taxed the same manner as corporations those whose income exceed the P 3M
applicable tax rate and Minimum threshold subject to graduated tax rates
Corporate Income Tax (2%) and or choose to pay 8% preferential tax
allowable deductions rates
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12 TAX REFORM INDIVIDUAL INCOME TAXATION

NATURE OF INCOME OLD TAX RULE NEW TAX REFORM


Option to elect Optional Standard If GPP avails OSD in computing its Allows GPP and the partners
Deduction (OSD) for general Net Taxable Income , the partners can comprising the partnership to avail
professional partnership and partners no longer claim itemized deductions OSD only once, shall be either
from the said net income exercised by the GPP or the partners

Application of 15% preferential rate Provides 15% preferential tax rate on Removes the privilege to avail the
on gross income of aliens as well as gross income of aliens as well as 15% preferential tax rates Shall be
Filipinos employed by Regional Filipinos employed by ROHQs and subject to new graduated tax rates
Operating Headquarters (RHQS) OPUs and Petroleum contractors and May continue if special law
Offshore Banking Units m(OBUs) subcontractors recognized by the sovereignty to
and Petroleum Contractors and continue such exemption
Subcontractors
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13 TAX REFORM INDIVIDUAL INCOME TAXATION

NATURE OF INCOME OLD TAX RULE NEW TAX REFORM

 Owned and Controlled
Government All exempt from Income Tax All government owned and controlled
Corporation (GOCC) corporations existing under special and
general laws shall pay income tax on
their taxable income same as imposed on
Corporations, associations and similar
business, industry or activity

Exempt are Government Service

Insurance System (GSIS) Social Security
System (SSS) and Philippine Health
Insurance Corporation (PHIC)
14
ANNUAL INCOME TAX TABLE – NEW (2018-2022)
BRACKET GROSS INCOME PER YEAR INCOME TAX RATE


1 P250,000 and below 0%

2 Above P250,000 to P400,000 20% of the excess over P250,000

3 Above P400,000 to P800,000 P30,000 + 25% of the excess over P400,000

4 Above P800,000 to P2,000,000 P130,000 + 30% of the excess over P800,000

5 Above P2,000,000 to P8,000,000 P490,000 + 32% of the excess over P2,000,000

6 Above P8,000,000 P2,410,000 + 35% of the excess over P8,000,000

Source: www.pinoymoneytalk.com
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15
ANNUAL INCOME TAX TABLE – NEW (2023 ONWARDS)
BRACKET INCOME PER YEAR TAX RATE


1 P250,000 and below 0%

2 Above P250,000 to P400,000 15% of the excess over P250,000

3 Above P400,000 to P800,000 P22,500 + 20% of the excess over P400,000

4 Above P800,000 to P2,000,000 P102,500 + 25% of the excess over P800,000

5 Above P2,000,000 to P8,000,000 P402,500 + 30% of the excess over P2,000,000

6 Above P8,000,000 P2,202,500 + 35% of the excess over P5,000,000

Source: www.pinoymoneytalk.com
16 SAMPLE TAX COMPUTATION:

Mo. income Gross income % Tax TRAIN TAX Withholding tax

P 15,395.00 P 184,740.00 0% exempted none
26,758.00 321,096.00 20% of excess 14,219.20 1,184.93
over 250,000
39,999.00 479,988.00 30,000 + 25% of 49,997.00 4,166.42
excess over 400k
50,263.00
17 SOLUTION:
• To compute Gross Income: Monthly income X 12

ex. 26,758 X 12 = 321,096

• To know the % of tax : look at the tax table (slide 14)
• To compute the TRAIN Tax:
ex. Train tax = 321,096 – 250,000 (exemption) = 71,096.00 (taxable income)
= 71,096.00 X 20% = 14,219.20
sol for #3 Train = 479,988 – 400,000 (exempt) = 79,988 (taxable income)
= 79,988 X 25% = 19,997 + 30,000 = 49,997.00
• To compute Withholding tax:
ex. WT = 26,758 (mo. Income) - 20,833.33 (exemption: 250,000/12) = 5924.67
= 5924.67 X 20% = 1,184.93
sol for #3 WT = 39,999 (mo.) – 33,333.33 (exempt. 400,00/12) = 6,665.67
= 6,665.67 X 25% = 1,666.42 + 2,500 (30,000/12) = 4,166.42
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18 RATES OF TAX ON PURELY SELF-EMPLOYED

INDIVIDUALS OR PROFESSIONALS

 Self-employed individuals and/or professionals shall

have the option to avail an 8% tax on gross sales or
receipts and other non-operating income in excess of P
250,000 in lieu of the graduated income tax rates
Section (A) (2) Section 24 NIRC
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19
PASSIVE INCOME
NATURE OF INCOME OLD TAX RATE NEW TAX RATE

Prize winnings more than Lotto Exempt regardless of 20% Final tax
P 10,000 – PCSO Lotto amount
Foreign currency deposit unit 7.5% Final Tax 15% Final Tax

Royalties, except books and other 10% Final Tax

literary works
Cash and Property Dividend Retain 10% Final Tax
received by individual
(constructive receipt)

Capital Gains from Sale of Shares 5%/10% on Capital Gains on 15% Final Tax
of Stock Traded in the Stock sales of shares not traded through
Exchange Stock Exchange
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20
NOTE FOR THE DAY

 Franklin Roosevelt: "Taxation according to income is the

most effective instrument yet devised to obtain just
contribution from those best able to bear it and to avoid
placing onerous burdens upon the mass of our people."
21 ACTIVITY NO. 15

Problem 1 - COMPUTE FOR THE NEW TRAIN INCOME TAX

 
 
Monthly Income Gross Income Tax % TRAIN TAX Withholding Tax

1.
193,130.53        

2.
65,112.87        

3.
12,500.99        

4.
125,313.45        

5.
34,299.81