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Provision
Section 24 Taxable income of individuals are subject to the Revised personal income tax
Income tax following graduated rates: brackets of 2018-2022:
rates on Tax Schedule Tax Schedule effective January
individual 1, 2018 to December 31, 2022
Briefing on RA 10963: citizen and Not over P10,000 5%
Tax Reform for Acceleration and individual Not over 0%
Over P10,000 but not P500 + 10% of over
Inclusion (TRAIN) – resident alien
over P30,000 P10,000
P250,000
of the
Revenue Regulations No. 8-2018 on Philippines Over P30,000 but not P2,500 + 15% of over
Income Tax over P70,000 P30,000
Over P70,000 but not P8,500 + 20% of over
over P140,000 P70,000
Over P140,000 but not P22,500 + 25% of
over P250,000 over P140,000

TRAIN Briefing – IT & WT

VER 2.0 – April 2018

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3 NIRC NIRC TRAIN 4 NIRC NIRC TRAIN

Provision Provision
Section 24 Taxable income of individuals are subject Revised personal income tax brackets of For 2023 onwards:
Section 24
Income tax to the following graduated rates: 2018-2022:
Income tax rates Tax Schedule effective January 1, 2023
rates on Tax Schedule Tax Schedule effective January 1, 2018 to
on individual onwards
individual December 31, 2022
citizen and Not over P250,000 0%
citizen and Over P250,000 but P50,000 + 30% of Over P250,000 but 20% of the excess over individual resident
individual not over P500,000 the excess over not over P400000 P250,000 Over P250,000 but 15% of the excess over
alien of the
resident alien P250,000 not over P400,000 P250,000
Over P400,000 but P30,000 + 25% of the Philippines
of the Over P500,000 P125,000 + 32% of not over P800,000 excess over P400,000 Over P400,000 but P22,500 +20% of the
Philippines the excess over Over P800,000 but P130,000 + 30% of the
not over P800,000 excess over P400,000
P500,000 not over P2million excess over P800,000 Over P800,000 but P102,500 + 25% of the
not over P2,000,000 excess over P800,000
Over P2Million but P490,000 + 32% of the
not over P8Million excess over P2Million Over P2Million but P402,500 + 30% of the
not over P8Million excess over P2Million
Over P8Million P2,410,000 + 35% of
the excess over Over P8Million P2,202,500 + 35% of the
P8Million excess over P8Million

TRAIN Briefing – IT & WT TRAIN Briefing – IT & WT

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➢ Individuals Earning Purely Compensation Income ➢ Individuals Earning Purely Compensation Income.
1. Minimum wage earners (MWE) shall be
• Taxed based on the graduated income tax rates Sec. 3 Income exempt from income tax:
Sec. 3 Income prescribed.
Tax Rates on • Taxable income is the gross compensation
Tax Rates on • statutory minimum wage
Individual Individual • holiday pay
income less non-taxable income/benefits such
Citizen & Citizen &
as but not limited to:
Individual • overtime pay
Individual 1. 13th month pay and other benefits
Resident Alien Resident Alien • night shift differential pay and
(subject to limitations)
2. de minimis benefits • hazard pay
3. employee’s share in the SSS, GSIS, 2. Husband & wife shall compute their individual
PHIC, Pag-ibig contributions income tax separately based on their
4. union dues. respective taxable income;
TRAIN Briefing – IT & WT TRAIN Briefing – IT & WT
VER 2.0 – April 2018 VER 2.0 – April 2018

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Provision
➢ Taxpayer shall be considered as having
Section 24 Taxable income For purely self-employed and/or professionals availed of the graduated income tax rates
Income tax of self- whose gross sales/receipt and other non- Sec. 3 Income
is subject to the
employed and/or
same graduated operating income do not exceed the VAT Tax Rates on • unless signifies the intention to elect the
professionals
rates threshold of P3Million, the tax shall be, at the Individual 8% income tax rate in the 1st Quarter
taxpayer’s option, either:
Citizen & Percentage and/or Income Tax Return
1. Income tax based on the graduated income
tax rates for individuals; OR Individual
or on the initial quarter return;
2. 8% income tax on gross sales/receipts and Resident Alien
other non-operating income in excess of • election shall be irrevocable and no
P250,000 in lieu of the graduated income tax amendment of option shall be made
rates and the percentage tax under Sec. 116

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A taxpayer who signifies the intention to avail of the 8%
➢ The option to be taxed at 8% income tax rate is NOT income tax rate option, and is conclusively qualified for
available to: said option at the end of the taxable year:
Sec. 3 Income Sec. 3 Income
Tax Rates on • shall compute the final annual income tax due
Tax Rates on • individuals with gross sales/receipts and other based on the actual annual gross sales/receipts
Individual non-operating income which exceeded Individual
and other non-operating income
Citizen & ₱3,000,000.00 Citizen &
Individual • Income tax is in lieu of the graduated rates of
Individual • a VAT-registered taxpayer
Resident Alien income tax and the percentage tax under Sec.
Resident Alien • those subject to Other Percentage Taxes under 116
Title V of the Tax Code, as amended, except
under Section 116 • Financial Statements (FS) is not required
• partners of a General Professional Partnership • Bookkeeping and invoicing/ receipting rules still
(GPP) apply
• have not signified intention to avail of this
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VER 2.0 – April 2018 VER 2.0 – April 2018

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➢ Automatically be subjected to the graduated
➢ Automatically subject to the graduated rates rates ….
Sec. 3 Income even if initially selected the 8% income tax rate Sec. 3 Income • A taxpayer subject to the graduated income
Tax Rates on option: Tax Rates on tax rates (either selected this or failed to
Individual • if taxpayer’s gross sales/receipts and other Individual signify chosen intention or failed to qualify)
Citizen & Citizen & is also subject to the applicable business
non-operating income exceeded the VAT
Individual Individual tax, if any.
threshold of P3,000,000 at any time
Resident Alien Resident Alien • FS shall be required
• allowed a tax credit for the previous
• Audited FS mandatory for those with gross
quarter/s income tax payment/s under the
sales/receipts of more than the VAT
8% income tax rate option threshold

TRAIN Briefing – IT & WT TRAIN Briefing – IT & WT

VER 2.0 – April 2018 VER 2.0 – April 2018

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Provision
Section 24 Taxable income For mixed income earners (earning both compensation
➢ Taxable income - self-employment/ Income tax of is subject to the income and income from business and/or practice of
mixed income same graduated profession), their income taxes shall be:
Sec. 3 Income practice of profession: earners rates 1. For income from compensation: based on graduated
Tax Rates on
Individual • net income, if opted to be taxed at income tax rates for individuals, AND
2. For income from business and/or practice of profession:
Citizen & graduated rates or failed to signify the a. Gross sales/receipts and other non-operating income
which do not exceed the VAT threshold of P3Million –
Individual chosen option income tax based on graduated income tax rates on
Resident Alien
• the gross sales/receipts and other taxable income OR 8% income tax on gross
sales/receipts and other non-operating income, at the
non-operating income if option availed taxpayer’s OPTION
b.Gross sales/receipts and other non-operating income
is the 8% IT rate which exceeds the VAT threshold of P3Million – income
tax based on graduated tax rates for individuals

TRAIN Briefing – IT & WT TRAIN Briefing – IT & WT

VER 2.0 – April 2018 VER 2.0 – April 2018

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15 16 Mixed Income (Continuation) under 8%...

• The excess of the P250,000.00 over the actual
➢ Under Section 24(A)(2)(b) on option of 8% taxable compensation income is not a reduction
Sec. 3 Income income tax rate on gross sales/receipts and Sec. 3 Income against the taxable income from business/practice
Tax Rates on Tax Rates on of profession under the 8% income tax rate option.
Individual other non-operating income in excess of Individual
Citizen & P250,000.00 – Citizen & • The total tax due shall be the sum of:
Individual Individual (1) tax due from compensation computed using
Resident Alien
• only to purely self-employed individuals Resident Alien the graduated income tax rates; and
and/or professionals.
(2) tax due from self-employment/practice of
• not applicable to mixed income earners profession (product of 8% IT rate multiply
with the total gross sales/receipts and other
non-operating income)
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A taxpayer who initially presumed that the gross
Mixed Income (Continuation) graduated… sales/receipts for the taxable year and other non-operating
income will not exceed the ₱3,000,000.00 VAT threshold
Sec. 3 Income • option to be taxed under the graduated Sec. 12 but has actually exceeded the same during the taxable
Tax Rates on income tax rates for income from Registration year, shall
Individual Updates • immediately update registration from non-VAT to a
business/practice of profession, tax due
Citizen & VAT taxpayer
Individual shall be based on the total taxable income:
• update registration immediately within the month
Resident Alien following the month the sales/receipts exceeded the
combine the taxable income from both VAT threshold
compensation and business/practice of • be liable to VAT prospectively starting on the first day
profession multiply by the graduated tax following the month when the threshold is breached
rate
TRAIN Briefing – IT & WT TRAIN Briefing – IT & WT
VER 2.0 – April 2018 VER 2.0 – April 2018

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19 A taxpayer who initially presumed that the gross 20

sales/receipts for the taxable year and other non-operating
income will not exceed the P3,000,000.00 …, shall:
(continuation)
Sec. 12
• pay the required percentage tax from the beginning of
Registration the taxable year or commencement of
Updates
business/practice of profession until the time the
taxpayer becomes liable for VAT - without imposition of
penalty if timely paid on the immediately succeeding
month/quarter.
Thus, there may be an instance when a taxpayer files two
(2) business tax returns in a month/quarter – i.e.,
percentage and VAT returns.
A VAT taxpayer who did not exceed the VAT
threshold within the immediately preceding three (3)
year period, may opt to be a non-VAT taxpayer and
Sec. 12
avail of the 8% income tax rate option:
Registration
Updates • update the registration records on or before
the first quarter of a taxable year
• remain liable for VAT for as long as there is no
update of registration and VAT-registered
invoices/receipts are continuously issued
• updates shall be subject to existing rules and
regulations

TRAIN Briefing – IT & WT TRAIN Briefing – IT & WT

VER 2.0 – April 2018 VER 2.0 – April 2018

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21 A non-VAT taxpayer who volunteers to be a VAT taxpayer 22 In connection with the provision on the 8% income tax
knowing that sales/receipts and other non-operating income rate option under Section 24(A)(2)(b) and Section
will exceed the VAT threshold, shall update registration 24(A)(2)(c)
records - becomes liable to VAT on the day when updating
Sec. 12 is made. Sec. 13 - All existing VAT registered taxpayers whose gross
Registration sales/receipts and other non-operating income in
• automatically be subject to the graduated IT rates if Transitory the preceding year did not exceed the VAT
Updates the 8% IT rate option is initially selected; any income
tax paid previously shall be deducted from the income
Provisions threshold of ₱3,000,000.00:
tax due under the graduated IT rates; percentage tax • option to update their registration to non-VAT
due from the beginning shall be due on the on or before March 31, 2018 (now April 30,
month/quarter immediately following registration 2018)
update. • existing procedures on registration updates,
• However, if the graduated income tax rates is selected and the inventory and
from the beginning - ceases to be liable to percentage surrender/cancellation of unused VAT
tax and instead is now liable to VAT. invoices/receipts shall apply
TRAIN Briefing – IT & WT TRAIN Briefing – IT & WT
VER 2.0 – April 2018 VER 2.0 – April 2018

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NIRC Provision NIRC TRAIN

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Summary: Individual Taxpayers – Resident Citizen/Alien
Section 51 (C) The return of individual The return of individual required
(1) required to file an income tax to file an income tax return shall
Particulars Graduated IT Rates 8% IT Rates
Filing of return shall be filed on or be filed on or before April 15 of
Individual Tax before April 15 of each year each year covering income for Basis of IT net taxable income gross sales/receipts
Return covering income for the the preceding taxable year. and other non-
preceding taxable year. (Note: The TRAIN Law did not operating income
remove this provision) Deductions Allowable itemized or OSD (40%) n/a
Section 74 Every individual subject to The deadline for filing of
Business Tax PT/VAT Not subject to PT
Declaration of income tax shall make and file declaration estimated income for
estimated a declaration of his estimated the current taxable year is on or Financial Statements 1. If Itemized: if qualified: No FS
income for income for the current taxable before May 15 of the same FS if gross is less than 3M; required
individuals year on or before April 15 of taxable year. Audited FS if gross is more than
the same taxable year. 3M
2. If OSD: no FS required
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Summary: Individual Taxpayers – Resident Citizen/Alien

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Summary: Individual Taxpayers – Resident Citizen/Alien 26
and/
Source of Income Graduated IT Rates 8% IT Rates Remarks
Source of Graduated and 8% IT Rates Remarks or
Income IT Rates /or c. Mixed Income
c1. compensation Yes n/a n/a No option
Basis of IT net taxable gross sales/receipts
income and other non- c2. business/ Yes or Yes, if qualified: Option available to taxpayers who
operating income practice of gross sales/receipts did not exceed VAT threshold:
profession and other non- 1. if graduated IT rates – subject
a. Purely Yes n/a n/a No option operating income did to applicable business tax/es; or
Compensation not exceed ₱3M 2. if 8% IT rate- based on entire
b. Purely Yes OR Yes, if qualified: Option when sales/receipts and other threshold gross amount and the IT rate is in
Business/ gross sales/receipts income did not exceed VAT threshold; lieu of graduated income tax rates
Practice of and other non- if graduated IT rates – subject to & PT-Sec. 116
Profession operating income did applicable business tax/es; Note: If both under Note: Total Income Tax For business/practice of
not exceed ₱3M if 8% IT rate- taxable on amount in graduated IT rates – Due is the sum of the profession: in case of deductions
income tax due is Income tax due from
threshold excess of ₱250Th and shall be in lieu of compensation
under the graduated IT rate -
graduated rates and PT under Sec. 116 based on the sum of option to elect itemized or OSD to
(graduated), and the
both the taxable income tax due from compute the net taxable income
income from business/practice of subject to income tax
compensation and profession (8% of gross
TRAIN Briefing – IT & WT TRAIN Briefing – IT & WT
business/profession sales/receipts & other non-
VER 2.0 – April 2018 VER 2.0 – April 2018 operating income)

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