Tax Reform for Acceleration and INclution (TRAIN) Law

Last December 19, 2017, our President Rodrigo R. Duterte has signed the TRAIN (Tax Reform for Acceleration and Inclusion) bill into law now known as Republic Act No. 10963. This law, which seeks to make the tax system simpler, fairer and more efficient in accordance to collection, became effective on January 1, 2018.

In this new law, the rich will have a bigger contribution, apparently, and the poor will benefit more from the government’s services.

This new law aims to:

Lower the Personal Income Tax (PIT)
Simplify the Estate and Donor’s Tax
Expand the Value-Added Tax (VAT) Base
Increase the Excise Tax of Petroleum Products
Increasing the Excise Tax of Automobiles, and
Increase the Tax of Sugar-Sweetened Beverages

Says the Philippine Government Department of Finance. However in this blog, I will only discuss how to calculate the lowering of the personal income tax.

Lowering Personal Income Tax (PIT)

One of the greatest good news to Filipino taxpayers with an annual income less than P250,000 is they are now exempted from paying the PIT. Let me repeat that again, they are EXEMPTED! It’s indeed a good news, isn’t it? In addition to this, the first 90,000 of the 13th month pay and other bonuses will also be excepted from the income tax.

Eventually, for a person who has a taxable income of P500,000 and above will be taxed from 32% previously down to 25% this year and will be brought down to 20% after five years.

Tax Schedule Effective January 1, 2018
For the first five years (2018-2022) the Personal Income Tax will go like these.

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Sample Calculations

Maybe some of you can relate to these sample tax calculations with different incomes and different jobs. Take note: The compensations used in the following are just assumptions, not really the exact.

Detailed caculations

The detailed calculations of some the examples above are these:

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Tax Calculators

There are various tax calculator websites in the internet that are already in accordance to new tax reform law. These calculators show the difference between the withheld taxes the previous years and for the current.

Abs-cbn’s Pinoy Tax Calculator

Aside from the difference of the taxes from last years and now, this also shows the additional take-Home Pay.

BIR’s New Tax Calculator
What I would recommend for everybody is this website. This is more accurate, more detailed and is updated in accordance to SSS and Philhealth contributions for 2018.

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