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Study of The New Income Tax Schedule of The TRAIN Law
Study of The New Income Tax Schedule of The TRAIN Law
A Research Paper
Presented to
Submitted By:
De Leon, Jeannie Fe S.
January 2018
CHAPTER 1
INTRODUCTION
The Philippines has different income tax rates for individuals, corporations, and
partnerships. Knowing the right income tax return that an individual will pay can make his life
better. A taxpayer must pay his/her taxes properly because it is required that taxes should be paid
so that the government have a budget or fund to make the projects that can help the people in this
country. The failure to pay one’s tax is punishable by law. Income tax is one of many taxes that
should be paid by a taxpayer. According to the bir.gov.ph, “Income Tax is a tax on a person's
income, emoluments, profits arising from property, practice of profession, conduct of trade or
business or on the pertinent items of gross income specified in the Tax Code of 1997 (Tax Code),
as amended, less the deductions and/or personal and additional exemptions, if any, authorized for
such types of income, by the Tax Code, as amended, or other special laws”.
practice of profession. The Philippines usually uses graduated income tax rates for individuals,
which is a form of progressive computation that increases the tax rate as the taxable income
increases. For 20 years, the Philippines follow the tax rates stated in the Tax Reform Act of 1997.
Because the new administration promised that they will implement a fairer tax reform
program, President Duterte has already signed the Republic Act No. 10963 or the Tax Reform for
Acceleration and Inclusion (TRAIN) bill aiming to earn revenues to fund the country’s
infrastructure program. The new TRAIN law revises most of the Tax reform act of 997.
The TRAIN law will reduce the personal income tax rates of each individual, while
The new TRAIN law will foregone the tax rates from those who have an annual income,
not over P250, 000. While people earning more than P250, 000 but not over P400, 000 annually
will be charged with 20 percent tax on the excess over P250, 000.
Annual income over P400, 000 but not more than P800, 000 will pay worth P30, 000 and
People earning more than P800, 000 but not over P2 million per year will be charged
with P130, 000 plus 30 percent of the excess over P800, 000.
Individuals with over P2 million annual income will pay P490, 000 plus 32 percent of the
The yearly income of over P8 million will have a tax of P2, 410, 000 plus 35 percent of
1. What is the new the new graduated income tax schedule in the TRAIN Law?
2. What are the differences between the old and new graduated income tax schedule for
individuals?
The general objective is to know the new income tax rates of TRAIN law implemented by
the new administration for the individual taxpayer and what are its effect to the income tax return
To recognize the effects and benefits of the new income tax rates for individuals.
This research can give additional information for business students about the new tax law
and individual tax payer about the new tax rates in the TRAIN law.
CHAPTER II
Annual Income Tax for Individuals Earning Purely Compensation Income (Including
Tax Form
BIR Form 1700 - Annual Income Tax Return (For Individual Earning Purely Compensation
Annual Income Tax for Self-Employed Individuals, Estates and Trusts (Including
Those with Mixed Income, i.e., Compensation Income and Income from Business and/or
Practice of Profession)
Tax Form
BIR Form 1701 - Annual Income Tax Return (For Self-Employed Individuals, Estates and Trusts
(Including Those with Mixed Income, I.E., Compensation Income and Income from Business
Tax Form
BIR Form 1701 AIF - Account Information Form for Self-Employed Individuals, Estates and
Trusts (Including those with Mixed Income, i.e., Compensation Income and Income from Business
and/or Practice of Profession) and Estates and Trusts (Engaged in Trade or Business)
persons whose gross quarterly sales, earnings, receipts or output exceed P 150,000.00 may not
accomplish this form. In lieu thereof, they may file their annual income tax returns accompanied
by balance sheets, profit and loss statement, schedules listing income-producing properties and the
corresponding income therefrom, and other relevant statements duly certified by an independent
CPA.
Quarterly Income Tax for Self-Employed Individuals, Estates and Trusts (Including Those with
Mixed Income, I.E., Compensation Income and Income from Business and/or Practice of
Profession)
Tax Form
BIR Form 1701Q - Quarterly Income Tax Return for Self-Employed Individuals, Estates and
The Philippine Tax Code imposes these graduated income tax rates for individual taxpayers who
are:
1. Resident citizens on their taxable income from all sources within and outside the
Philippines.
2. Nonresident citizens on their taxable income from all sources within the Philippines.
3. Resident aliens on their taxable income from all sources within the Philippines.
4. Nonresident aliens engaged in trade or business within the Philippines on their taxable
These rates will be based on the amount of your net taxable income, which is the net of your
gross taxable income less your allowable deductions (itemized deductions or optional standard
deductions) and personal and additional exemptions. Please read our post on how to compute
Take note that non-resident aliens who are not engaged in trade or business within the
Philippines are taxed at fixed rate of 25% instead of the graduated tax rate on their gross amount
Regional Operating Headquarters (ROH), Offshore Banking Units (OBUs), Petroleum Service
Contractor and Subcontractors are taxed at fixed rate of 15% on their gross income in the
Philippines.
CHAPTER III
The study used this instrument in collecting the data in order to arise with desired
objectives.
is needed to get detailed information about their opinion about the new graduated tax schedule for
New BIR Income Tax Rates, from TRAIN Tax Reform (2018-2022)
BRACKET GROSS INCOME PER INCOME TAX RATE
YEAR
1 P250,000 and below 0%
COMPUTATIONS
Example:
Tax Rate of 300,000 => Above 250, 000 but not more than 400,000
PRESENTATION OF DATA
The Tax Reform Act of 1997 gives us the table for the old Income tax schedule. The taxes
rate start at P10, 000 income per year on which it has a 5% income tax return and individual
taxpayer who earned P500, 000 and above annually has the same tax rate of P125, 000 + 32% of
the excess over P500, 000. Even though a person who has a small amount of income per year is
required to pay his or her income tax as long as they are engaged in business or practice their
professions.
taxed on all their net income derived from sources within and without the Philippines. For
nonresident, whether an individual or not of the Philippines, is taxable only on income derived
Php 0 – 10,000 5%
Income in Philippines is divided into the following three categories which are taxed separately, as
summarized below.
1. Compensation employment income: This income is taxed at progressive rates on gross income
after deduction of personal and additional exemptions but without deductions for expenses.
2. Passive income: This income, including dividends and interest, is subject to tax at 7.5%.
3. Business income and professional income: This income is taxed at progressive rates on net
business income after deduction of certain specified expenses.
The researcher conducted an interview to 3 people and the following questions were ask.
100,000-250,000
250,000-400,000
400,00-800,000
800,000-2,000,000
2,000,000-8,000,000
Figure 1
Figure 1 shows the amount of income annually of the 3 individual who was interviewed
for this research. 1 of them answered that his ranges from 250,000-400,000 pesos, the other one
answered that his income ranges from 800,000-2,000,000 and the last one answered that her
income ranges from 100,000- 250,000 Pesos.
Question Number 2: Are you aware of the New TRAIN law implemented by the President?
Person YES NO
1
2
3
Figure 2
Figure 2 shows if the person is aware or know the new TRAIN law implemented. All of
them answered yes.
Question 3: Are you in favor in the new TRAIN law? Why or why not?
Person Yes or No Reason
1 No It is unfair because we are the
ones who’ll have to pay taxes
just because are income
250,000 and above.
2 Yes Because my income tax return
in the new graduated income
tax schedule is lower than the
old one.
3 Yes Because I don’t have to pay the
individual tax return anymore.
Figure 3
Figure 3 shows the answers of the individual who was interviewed for the 3rd questions.
One of them are not in favored in the new tax law and others are favored. They also states their
own reasons for their answers.
CHAPTER 5
CONCLUSION
The new income tax schedule of the TRAIN law signed by the president and impose
starting this year will sure affect the life of both the poor and rich individual that are engaged in
business or who practice his or her profession. The TRAIN law will reduce the personal income
tax rates of each individual, while people earning a lower personal income will be free from tax.
The tax rates are very different from the Tax reform act of 1997 that are implemented for over 20
years in the Philippines. Some of the differences of the new income tax schedule in the old income
tax schedule are 1. The income tax brackets are reduced to six, 2. Individual who earned 250,000
and below are not subject to income tax and 3. Individual who earned 500,000 and above has now
a more detailed income tax rate than before. Although many of individual will be in favor in the
new graduated income tax schedule, there are still some individual who are not. The new graduated
income tax schedule is more favorable to lower level individuals than those who are in the middle
and upper class. If the government implement this in a good way, I think that this may be a solution
to make our economy increase and help the Filipino citizen more.
APPENDICES
BIBLIOGRAPHY
https://www.bir.gov.ph/index.php/train.html
https://www.pinoymoneytalk.com/old-income-tax-rates-nirc-tax-tables/
http://www.wipo.int/wipolex/en/text.jsp?file_id=224718
https://www.bir.gov.ph/index.php/tax-information/income-tax.html
https://philnews.ph/2018/01/03/adjusted-income-tax-rates-train-law/
https://www.pinoymoneytalk.com/new-income-tax-table-rates-philippines/