TAX REFORM FOR ACCELERATION & INCLUSION

(Information are from the seminar conducted by BIR-RDO 33 on February 6, 2018)

(Information listed below are only those that may affect the Company. Other details are omitted)

INTRODUCTION/OVERVIEW OF THE LAW

• Provisions of TRAIN Law that are currently prevailing are the CONTENTS OF THE FIRST PACKAGE
ONLY.
• The SECOND PACKAGE (focuses on reduction of corporate income tax and rationalization of fiscal
incentives) targets to be implemented by early 2018.
• Through Republic Act 10963, approved and signed by President on December 29, 2017, with
effectivity on January 1, 2018.
• 5 provisions were vetoed by ther President
• KEY AMENDMENTS
– Individual Income Tax – Value Added Tax
– Final Income Tax – Documentary Stamp Tax
– Estate Tax – Some Admin. Provisions
– Donors Tax – Penalties
• PURPOSE (tax system to be)
– SIMPLE – FAIR – EFFICIENT

PERSONAL INCOME TAX

• Tax Rates
– Individuals with gross compensation/income below 250,000 are now tax exempt
– Individuals with gross compensation/income over 8 MILLION are subjected to 35% tax rate
– In lieu of INCOME TAX AND PERCENTAGE TAX, an individual may opt to choose the optional
registration wherein his/her annual gross revenues shall not exceed 3M and registered as a NON-VAT
Taxpayer

– For VAT registered individuals with gross sales/receipts of 3M AND BELOW from the preceding
year, have an option to change their status from VAT to NON-VAT by submitting an updated BIR FORM
1905 on or before March 31, 2018. All individuals who applied for the change of status are subject for
strict verification of the revenue officers regarding their declared income from the preceding year.
• Exclusions/Deductions
– No more basic personal exemption of 50,000, additional exemption of 25,000 per dependent
and Premium on Health Insurance (2,400).

– For 13th Mo. Pay and Other Benefits, exempted amount adjusted to 90,000 from 82,000.

PASSIVE INCOME
– Interests earned from Foreign Currency Deposit Units (FCDU) are now subject to 15% rate.
– Pre-terminated long term deposits are now subject to a flat rate of 20% regardless of time the LT
deposits have been terminated before maturity.
VALUE ADDED TAX
– threshold adjusted to 3M from 1,919,500
– sales of medicines FOR DIABETES, HIGH CHOLESTEROL AND HYPERTENSION will be VAT EXEMPT BY
2019
– Refunds or Tax Credit of Input Tax: 90 days from 120 days and granting of Tax Credit instead of
refund is now removed.

WITHHOLDING TAXES
– Expanded Withholding Tax (EWT) Rate on Professional Fees- flat rate of 8%

TAX DEADLINES
– Last day of filing of First Quarter Income Tax Return adjusted from April 15 to May 15
– Filing of Percentage Tax will now be on a quarterly basis, to be filed on or before last day of the
month following the close of the quarter
– Filing of Expanded Withholding Tax will now be on a quarterly basis, to be filed on or before last
day of the month following the close of the quarter; For the first two months, Payment Form 0605
will be used to remit the withheld taxes on or before the 10th day of the following month.
– Filing of Final Withholding Tax will now be on a quarterly basis, to be filed on or before last day of
the month following the close of the quarter

DOCUMENTARY STAMP TAX (rates were doubled)

– Original issue of shares of stock: P2.00 per P200.00
– Transfer of shares of stock with par value: P1.50 per P200.00
– Bank Checks and Other Instruments: P3.00 per piece of check
– All Debt Instruments: P1.50 per P200.00*
– Proxies for Voting at any Election: P30.00 per proxy vote
– Powers of Attorney: P10.00 per power of attorney
– Leases and other hiring agreements: First P2,000- P6.00; Over P2,000- P2.00 per P1,000

EXCISE TAX
• Petroleum Products
– Lubricating oil and greases- P8.00
– Waxes and Petrolatum- P8.00
– Processed gas- P8.00
– Naptha, regular gasoline and other simiar products- P7.00
– Kerosene- P3.00
– Diesel Fuel Oil- P2.50
– LPG- P1.00

ADMINISTRATIVE PROVISIONS
– ITRs with CPA Certificate- Gross annual sales of 3M

PENALTY
– Double the legal interest rate per annum- 12%