Tax Reform Acceleration & Inclusion
Income Tax
1. Lower graduated individual income tax rates except if taxable income more than 8M
(Section 24)
a. From 5-32% to 0-35%
2. For employees, removal of deduction for insurance premium payments
3. Removal of personal and additional exemptions
4. 13th month pay and other benefit exclusion increased to 90k from 82K
5. Fringe benefit tax increased from 32% to 35%
6. 40% OSD proviso re GPP
a. provided further that a GPP and the partners comprising such partnership may
avail of the OSD only once, either the GPP or the partners
7. New optional 8% tax on gross sales/receipts in excess of 250k but not more than 3M of
self-employed/professionals
a. In lieu of graduated income tax and 3% percentage tax
b. Option also available to mixed income earners in respect of income from
business/profession
8. Removal of 1% preferential tax rate for employees of ROHQ, OBUs, RHQs and petroleum
service contractors/subcontractors
a. President vetoed the provisions: “provided however that existing RHQs/ROHQs,
OBUs or petroleum service contractors and subcontractors presently availing of
preferential tax rates for qualified employees shall continue to be entitled to
avail of the preferential tax rate for present and future qualified employees.
b. Ony those who were set up in Jan. 1, 2018 is not entitled to the preferential rate
9. Removal of tax exemption of PCSO and lotto winnings in excess of 10K – used to be
exempt regardless of amount
10. FWT on interest income from FCDU increased to 15% FROM 7.5%
11. CGT on sale of shares not traded in the stock exchange increased to 15% (previously 5%
on net capital gain up to 100k and 10% on excess)
– this applies to non-resident aliens as well
12. Beg. Jan1 2019, CWT rate shall not be less than 1% nor more than 15
a. Under RR 2-98, 20% CWT is imposed on interest income derived from any other
debt instruments not within the coverage of deposit substitutes
13. Income tax exemption of PCSO
a. Section 4 pf PCSO law- the horse races and the sale of tickets in the said
sweepstakes shall be exempt from all taxes, except each ticket shall bear a 12
centavo internal revenue stamp
14. For domestic corps, FWT on interest income from FCDU increased to 15% 9from 7.5%)
a. Passive income of resident foreign corp no =t similarly amended
15. For domestic corps, CGT on sale of share not traded increased to 15%
a. For resident foreign and non-resident foreign corp not similarly amended.
16. Simplification of income tax return for both individual and corporations – max of 4
pages with limited information
17. Deadline for declaration of estimated income and individual Income tax return moved
to May 15 from April 15 (1st installment – may 15, econd – aug 15, third – nov 15, 4th my
of subsequent year(
18. Deadline for second installment of individual income tax payment moved to October 15
from July 15
19. Deadline for CWT and FWT returns – last day of the month following close of quarter
(note that it appears that filing and payment is quarterly only)
20. Magna carta for PWDs, treatment of related PWD as dependednt under Tax Code
a. Foster care acr, foster child as dependent
b. PCSO law
Estate Tax
1. 6% estate tax (previously 0to 20%)
2. standard deduction increased to 5M for residents from 1M, for non0residents, P500k
3. removal of allowable deductions for (a) funeral expenses up to 200k; judicial expenses
of testamentary or intestate proceedings; medical expenses up to 500k
4. deductions for family home increased to P10M (from 1M)
5. 6% FWT on bank deposit withdrawal (Section 97) – removed unless….
6. repeal of reqt to file notice of death
7. reqt of CPA statement required if gross value exceeds 5M (previously 2M)
8. longer deadline for filing - 1 year (prev. 6 months)
9. payment by installment without penalty and interest within 2 years from deadline if
available cash sufficient (Section 91(c))
Donor’s Tax
1. 6% donor’s tax (prev. 0 to 15% if related, 30% if stranger)
2. deemed gif proviso: “provided however that a sale, exchange, or other transfer of prop
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 adequate and
full consideration in money or money’s worth. Section 100
3. removal of exemption of dowries up to 10k
Value Added Tax
1. sale of goods are no longer subject to 0% VAT
a. sale of gold to BSP (now a VAT exempt transaction)
b. foreign currency denominated sale (no subject 12% VAT)
i. sale to a nonresident of goods, except automobiles and non-essential
goods, assembled or manufactures in the Phis for delivery to a resident in
the Phils., paid for in acceptable foreign currency)
2. sale of goods subject to 12% instead of 0% upon satidsfaction of certain conditions:
a. sale of raw mats. Or packaging materials to nonresident buyer for delivery to a
resident local export-oriented enterprise.
b. Sale of raw material or packaging mats to an export-oriented ent.. whose export
sales exceed 70%
c. Export
3. Sale of services subkect to 12% upon satisfaction of certain conditions:
a. Processing , mfg or repacking of goods fr other persons doing bus. Outside the
Phils. which goods are subsequently exported where services paid fro in forex
b. Services performed by subcon and /or con in processing, converting, or mfg
goods for export exceeding 70%
4. Importation of professional instruments and implements, personal and houselhold
effects by persons coming to settle in the Phils or OFW
5. Sale of real prop (i) not primarlily held (Section 109 (p) – with selling price nnot more
than PhP2M beg. Jan 1 2021
6. Lease of reidentl unit with monthly rental of 15k
7. Fuel, goods and supplies must be used for international shipping or air transport
operations
8. Sale or lease of good – gross annual sales and or receipts do not exceed 3M
9. Sale or lease of goods and services t senior citizens and PWDs – exempt
10. Transfer of property pursuant to tax-free exchange transactions – exempt
11. Assoc dues, membership fees and other assessments – exempt
12. Sale of gold to BSP – exempt
13. Sale of drugs and medicines for diabetes, high cholesterol and hypertension beg. Jan 1,
2019 – exempt
14. Creditable withholding VAT of 5%, beginning Jan 1 2021 – withholding VAT by the
government (then Final withholding VAT of 5%)
15. Purchases of goods or services for projects funded by Official Development Assistance
(ODA) is not subject to final withholding VAT (no VAT will be due at all)
Vetoed provisions
1. Sale and delivery of goods and services to reg. enterprises within separate customs
territory
2. Sale and delivery of goods and services to reg. enterprises within tourism economic
zones
Repeals
1. Repealed VAT incentives of 52 entities or transactions
2. ROHQs (previously exempt)
3. Sale or lease of goods ad property and the rendition of services to RHQs (prev. zero
rated(
4. Importation of eqpt and mats for trainings and conferences for RHQs and ROHQs
(previously exempt)
Percentage Tax
1. Sale of shares traded in the exchange – 6/10 of 1% of GSP
2. Vetoed exemption of self-employed and professionals with total annual gross sales not
exceeding 500K
VAT refund procedure
Section 112 (C) within 90 days (from 120 days) from date of submission of official receipts or
invoices and other documents – claim for refund
- Inaction within 90 days shall be punishable under Section 269 of the Tax Code
- Issues: whether we can file an appeal
- CTA Law (RA 9282)- Section 7 - not expressly repealed by TRAIN, BIR’s inaction can be
considered denial
OTHER RELEVANT TAX PROVISION
- Double the legal interest rate for loans or forbearances as set by the BSP – interest
(deficiency and delinquency) – from 20% (now 12%)
- Deficiency interest when payable – added “OR upon issuance of a tice and demand by
the CIR, whichever comes earlier” – deficiency interest shall be assessed or collected
from the date prescribed for its payment until full payment or upon issuance of a tice
and demand by the CIR, whichever comes earlier
- Violations committed by government enforcement officers – deliberate failure to act on
VAT refund applications within the 90-day period – penal sanctions (then did not include
failure to act)
- Powers of CIR to examine returns and determine tax due – added “notwithstanding any
law requiring the prior authorization of any government agency or instrumentality.”
- Powers of the CIR to prescribe real property values
o CIR shall determine he FMV of real property upon mandatory consultation with
appraisers form both public and private sector
o Subject to adjustment once every 3 years and subject to publication
Excise Tax
1. Cigarettes
- Then P31.20 per pack to P32.50 – jan 2018, P35 – July 2018,
2. Manufactured oils and other fuels
- Unleaded premium gasoline (from 4.35 to 7 (20180, 9 (2019)
a. Suspension of scheduled increase
3. Automobiles
a. Hybrid – 50% of applicable excise tax
b. Purely electric vehicles and pick-up – exempt from excise tax
4. Mineral products
New goods subject to excise tax
1. Invasive cosmetic procedures, surgeries and body enhancements – 5% excise tax
a. Performed in the Phils.
b. Directed solely towards improving, altering or enhancing the patient’s appearance;
AND
c. Do not meaningfully promote
Exempt – congenital defects or accidents
Sweetened beverages
- P6 per liter – purely sweeteners
- P12 per liter – purely high fructose corn syrup or in combination with any sweetener
- Exempt – steviol, coco sap
Exclusions:
- Milk products
- 100% natural fruit juices
- 100% natural vegetable juice
- meal replacement and medically indicated beverages
- coffee
DST
-
original issue f shares of stock – P2/200 of par value from P1/200 of par value
175 – P1.5/200 of par from P0.75
everything doubles except 179 (50%) increase, non-life insurance, 196 (Donation of real
property is now subject to DST; same rate of P15/P1,000 (1.5%))