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10 TRAIN Tax Reform Items that You Probably Didn’t Know

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last updated: FEB 28, 2018by PINOYMONEYTALKin BIR AND TRAIN TAX LAW

Did you know that there are other provisions in the approved TRAIN tax reform aside from the reduced
personal income tax rates, new sugar tax, oil and fuel tax, and automobile excise tax?

By now, we’re most likely familiar already with those tax items. Still, the approved Tax Reform for
Acceleration and Inclusion (TRAIN) bill is much more comprehensive and includes dozens of other tax
provisions not highlighted or explained very well in mainstream media.

We explain below these relatively unknown tax items. Here are 10 TRAIN tax reform provisions that you
probably do not know — but ought to know.

(UPDATE): We compiled all articles related to the TRAIN law on this page: TRAIN Law and BIR Tax
Implementing Guidelines. Click the link to access BIR’s implementing rules and regulations and examples
of how to compute applicable taxes.

* * * UPDATED resources on the approved TRAIN Tax Reform below:

Everything about TRAIN Law and BIR Tax Implementing Guidelines

What’s included in the approved Philippine Tax Reform of 2018?

New Personal Income Tax Rates and Income Tax Tables in the Philippines (2018)

BIR Sample Computations: How to Compute Taxes under TRAIN

1. Deadline to file annual Income Tax Return (ITR)

(UPDATE Jan. 2018): Previously, it was reported that under the TRAIN law or Republic Act (RA) No.
10963, the deadline to file the annual Income Tax Return (ITR) has been moved to May 15. The BIR has
issued an official announcement clarifying that the Deadline to file ITR under TRAIN is still April 15.

According to the BIR, the deadline to file the individual ITR specifically BIR forms 1700 and 1701, is still
April 15 from year 2018 onwards. What was moved is the deadline to file BIR Form 1701Q, the quarterly
ITR, for the first quarter every year from April 15 to May 15, beginning the year 2018.

Thus, the deadline to submit BIR Forms 1700 and 1701 for the taxable year 2017, is April 15, 2018.
Meanwhile, the deadline to submit the quarterly ITR, BIR Form 1701Q, for the taxable year 2017 has
been moved to May 15, 2018. Every year thereafter, the deadline to file the 1701Q will be May 15, not
anymore April 15.

To summarize, the deadline for filing for Self-employed and Professionals:

2017 Annual ITR: April 15, 2018

2018 Annual ITR: April 15, 2019

2018 Quarterly ITR (1st Quarter): May 15, 2018

2018 Quarterly ITR (2nd Quarter): Aug. 15, 2018

2018 Quarterly ITR (3rd Quarter): Nov. 15, 2018

See also: Comparison of Old and New Personal Income Tax Rates and Tax Tables

2. Personal and additional exemptions have been removed

Some people already know this, but many are still unaware: under the tax reform, the personal
exemption of P50,000 and additional exemption of P25,000 per dependent, which were enjoyed by
taxpayers in the old tax system, have now been removed.

In the past, an individual may avail of personal exemption (P50,000) and additional exemption
(maximum of P100,000 if there are four dependents) to be deducted from the taxable income. Under
TRAIN, the exemption has been simplified and made more straightforward. This simply means:

if the taxpayer’s gross income is P250,000 or below, he or she is automatically exempted from paying
the income tax; and

it doesn’t matter now if the taxpayer has one dependent or four dependents or no dependent at all

That means two taxpayers with the same gross income will pay exactly the same tax due — regardless if
one taxpayer has four children (i.e., four dependents) while the other has none.

In addition to the removal of personal and additional exemptions, the maximum P2,400 premium for
health and hospitalization insurance, which is previously deductible from taxable income, has also been
removed.

3. Tax on lotto winnings and PCSO prizes

Under the existing National Internal Revenue Code (NIRC), lotto winnings and all PCSO prizes are tax-
exempt. This has now been changed by the TRAIN law.

Starting 2018, all PCSO and lotto prizes are taxed 20% if the amount of the prize or winnings is above ten
thousand pesos (P10,000).
 OLD TAX RATE NEW TAX RATE (TRAIN TAX REFORM)

Lotto Winnings and PCSO Prizes None (Tax-exempt) 20% if amount is above P10,000

4. Tax on pre-terminated long-term time deposits

Long-term time deposits (TD), or time deposits with duration of 5 years and 1 day, will continue to be
tax-exempt. However, the tax on interest income of these deposits once preterminated has been
changed.

From the current rate of 5-20%, the tax charged on the interest income of long-term time deposits that
are preterminated (meaning, withdrawn prior to the scheduled maturity date) has been increased to a
fixed 20%.

OLD TAX RATE NEW TAX RATE (TRAIN TAX REFORM)

Interest Income on Pre-terminated Long-Term Time Deposit 5-20% 20%

5. Tax on interest income of foreign currency deposits

Under the existing tax code, the interest income on foreign currency accounts (e.g., US dollar, Euro,
Japanese Yen, Korean won, etc.) deposited in Philippine banks is 7.5%. The TRAIN law has increased the
foreign currency deposit unit (FCDU)’s interest income tax rate to 15%.

OLD TAX RATE NEW TAX RATE (TRAIN TAX REFORM)

Interest Income of FCDU 7.5% 15%

6. Tax on stock transactions

The tax rate on sale of stocks have been increased. The sale of stocks not traded in the Philippine Stock
Exchange (PSE) is previously taxed 5-10%. This is now increased to 15% under the tax reform.

Meanwhile, sale of stocks that are traded in the PSE will be taxed 0.6% of the gross trade amount, up
from the previous rate of 0.5%. (Read more details here: Impact of New PSE Stock Transaction Tax)

7. Documentary Stamps (Doc Stamps) Tax

The documentary stamp tax (DST) has been doubled, with the new doc stamps tax ranging from P1.50 to
P3.00 under the tax reform.

8. Donor’s Tax

The donor’s tax was revised to a flat rate of 6% regardless of the relationship between the donor and
the donee. Previously, the donor’s tax was 2% to 15% if the donor and donee are related, and 30% if the
donation was to a stranger.

Donations or gifts below P250,000 are tax-exempt. Donations with value of at least P250,000 are taxed
using the new rate of 6% on the amount in excess of P250,000.

9. Estate Tax

Under TRAIN, the estate tax is now a flat 6% rate on the amount in excess of P5 million.

Estates with a net value of P5 million and below will be tax-exempt. Family homes that are valued at no
more than P10 million will also be exempted. Under current tax laws, only family homes worth P1
million are tax-exempt.

10. Cosmetic Surgery Tax

Starting 2018, all cosmetic surgeries, aesthetic procedures, and body enhancements intended to
improve, alter, or enhance a person’s appearance is now subject to a tax of 5%.

* * * UPDATED resources on the approved TRAIN Tax Reform below:

Everything about TRAIN Law and BIR Tax Implementing Guidelines

What’s included in the approved Philippine Tax Reform of 2018?

New Personal Income Tax Rates and Income Tax Tables in the Philippines (2018)

BIR Sample Computations: How to Compute Taxes under TRAIN

View Related Posts

Ask a question or post a comment

About this post: train law summary, PCSO TRAIN LAW, sample file of 1701q for 2018, Train law
testbanksTagged with: bir, BIR tax, FCDU, income tax, lotto tax, NIRC, pcso, professionals, Self-
Employed, tax code, tax reform, TRAIN, TRAIN tax reform, VAT

8 THOUGHTS ON

“10 TRAIN Tax Reform Items that You Probably Didn’t Know”

Henry says:JAN 12, 2018

Can you advise which particular section in TRAIN Law provides item no. 4 above ? Thanks.

REPLY

curious says:JAN 14, 2018

Hi, please be easy on me, I have a question regarding that tax on lotto winnings exceeding 10,000. Uhm,
Kakatingin ko lang kasi sa official gazette and still, nakalagay na all prizes are tax exempt as provided in
Section 4 of Republic Act No. 1169? Confused lang hehe thank u :)

REPLY

Alf Eugenio says:JAN 15, 2018

How about the free lancer? I have already a business permit for my agency, however most of my client
are from top tier countries like US and UK which is they are paying me in my paypal or to my merchant
directly in $. I know my obligation to pay taxes, however I want to learn more before applying for train.
Does bookkeeper can do this or should I get a public accountant to file for me.

REPLY

Maria says:JAN 21, 2018

How about property taxes still outstanding prior to 2018? My property value is less than 200,000 pesos.
Do I need to pay my arrears?

REPLY

Jovin says:FEB 11, 2018

wala bang bagong batas para sa amilyar ng bahay?

REPLY

Agnes V. Lapresca says:MAR 11, 2018

How do we compute tax of professionals?

REPLY

Jenelyn Baroro says:JUN 07, 2018

EH how about Job Order? pina pa bayad sila nag 500 para ma exempted. pero bakit mayroon pang
Percentage Tax na 3 %?
eh Job Order na nga walang Benifits even Phil Health wala tapos my deduction pa din. And regarding din
po sa Job order pag hindi daw naka file nang business tax automatic my kaltas na 10%?

REPLY

Ariel Fernandez says:SEP 18, 2018

Ang mga ahente po ba na may minimum salary wages at may komisyon sa nabebenta nila sa kanilang
kumpanya na 0.005 percent (singko centavo) ay kailangan din mag tax sa bagong train law? Salamat po
sa sasagot..

REPLY

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