The TRAIN or The Tax Reform for Acceleration and Inclusion (RA 10963) has been effective in the Philippines since January 1, 2018. Its primary objective is to shift the levied taxes from the lower-income generating public into the high-income earners of the country.
Much have been said about the new tax rules and summaries of the RA have already been circulating, but the real question is, how will this reform really affect each stakeholder and how will they understand each tax law given its vast data?
Sometimes, we ignore details due to varied constraints. One of the best advices given to me about public speaking is, “If you want to tell the audience one thing, tell them one thing” and by that, it means that we tend to understand things if delivered in a lighter way. Here in Business Solutions, our service is to make the main points of the tax laws simpler and easier to understand without compromising the essential details.
Following is the gist of the RA:
- Rates of tax on taxable income of individuals have been reduced by up to 50%. RMC 105-2017 sets out the guidelines on the computation of withholding taxes;
- The limit of 13th month pay and other benefits was raised to Php 90,000;
- Fringe benefits tax rate is 35%;
- Estate tax is at 6% of net estate. Standard deduction is Php 5,000,000 and
Php 500,000 for resident and foreign citizens, respectively;
- Donor’s tax is generally 6% of total gifts in excess of Php 250,000;
- VAT refunds are granted more consideration by limiting the period (90 days) in which the BIR will decide upon its validity. Also, automatic 5% appropriation of the total BIR’s VAT collection will be allocated to replenish these tax refunds;
- Capital gains tax on stocks not traded in the Philippine Stock Exchange (PSE) is now fixed at 15%;
- Tax rate on sale/barter/exchange of shares in PSE-listed shares or thru IPO increased to 6/10 of 1% of gross selling price;
- VAT threshold is now set at Php 3 million. However, persons with sales or receipts not exceeding the threshold amount shall be subject to 3% percentage tax;
- VAT-exemption to (1) senior citizens/PWDs, (2) transfer of property in case of merger or consolidation, (3) association dues, (4) sale of gold to BSP, (5) specific medicines (effective 2019), (6) residential lot up to Php 1,500,000 and residential house and lot up to Php 2,500,000; (7) lease of residential units not exceeding
Php 15,000; and (8) transport of passengers by international carriers;
- Higher excise taxes on cigarettes, manufactured oils and fuels, automobiles and sweetened beverages. There is mandatory marking of all petroleum products;
- Books of the entities with gross annual sales or output exceeding Php 3,000,000 shall be examined by independent CPA;
- Within 5 years after the effectivity of the TRAIN, Electronic Sales Reporting System will require companies to report its real-time sales data to BIR through POS/CRM;
- Systems that can modify sales data are no longer allowed with penalty ranging from Php 500,000 to Php 10,000,000;
- DST rates have doubled in amount; and
- Previously VAT-exempt but now VATable: specific state colleges and universities, government bodies, succeeding regional headquarters and cosmetic procedures that are not for the sole purpose of treating any disease.
Those were the main points we hope that have been clearly explained and understood by the tax and non-taxpaying public.
If you need further assistance, feel free to ask us. In your volition, you may email us at firstname.lastname@example.org and we’ll get back to you immediately.
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