IMPACT

TRAIN Law

On INDIVIDUAL TAXPAYERS

AS S OC I ATI ON O F GOV ERNMENT I N TER NAL AU D I TORS , I N C .

ATTY. SOFRONIA R. PEREZ-ONESA, CPA CMA,

17 October 2018 1
OBJECTIVES
At the end of this session, the participants are expected
to:
✓ Enhance their basic understanding of the TRAIN
Law;
✓ Appreciate and apply the tax incentives and
benefits given to taxpayers under the TRAIN; and
✓ Develop and/or create doable tax plan to maximize
the tax incentives and minimize the financial
impact.

2
OUTLINE
I. Summary of the Titles/Sections of NIRC Amended
under TRAIN (Part 1)
II. New Individual Income Tax Rates
III. Revised Estate and Donor’s Tax Rates
IV. Value-added Tax and Percentage Taxes
V. New Coverage and Revised Excise Taxes

3
T
TAX REFORM FOR
R ACCELERATION
A AND INCLUSION
“AMENDMENTS”
I
N
4
AMENDED PROVISIONS
OF THE NIRC
SEC. TITLE
TITLE I – ORGANIZATION AND FUNCTION OF THE BIR
5 Power of the Commissioner to obtain information, and to
summon/examine, and take testimony of persons.
6 Power of the Commissioner to make assessments and
prescribe additional requirements for tax administration
and enforcement

5
AMENDED PROVISIONS
OF THE NIRC
SEC. TITLE
TITLE II – TAX ON INCOME
24 Income tax rates (imposed upon individual taxpayers)
25 Tax on non-resident alien individual
27 Rates of income tax on domestic corporations
31 Taxable income defined
32 Gross income
33 Special treatment of fringe benefit
34 Deductions from gross income

6
AMENDED PROVISIONS
OF THE NIRC
SEC. TITLE
51 Individual returns
52 Corporation returns
56 Payment and assessment of income tax for individuals and
corporations
57 Withholding tax at source
58 Returns and payment of taxes withheld at source
74 Declaration of income tax for individuals
79 Income tax collected at source

7
AMENDED PROVISIONS
OF THE NIRC
SEC. TITLE
TITLE III – ESTATE AND DONOR’S TAXES
84 Rates of estate tax
86 Computation of net estate
90 Estate tax returns
91 Payment of estate tax
97 Payment of tax antecedent to the transfer of shares, bonds
or rights
99 Rate of tax payable by donor
100 Transfer for less than adequate and full consideration
101 Exemption of certain gifts

8
AMENDED PROVISIONS
OF THE NIRC
SEC. TITLE
TITLE IV – VALUE-ADDED TAX
106 Value-added tax on sale of goods or properties
107 Value-added tax on importation of goods
108 Value-added tax on sale of services and use or lease of
properties
109 Exempt transactions (VAT)
110 Tax credits
112 Refunds or tax credits of input tax
114 Return and payment of value-added tax

9
AMENDED PROVISIONS
OF THE NIRC
SEC. TITLE
TITLE V – OTHER PERCENTAGE TAXES
116 Tax on persons exempt from VAT
127 Tax on sale, barter or exchange of shares of stocks listed
and traded through the local stock exchange or through
initial public offering
128 Returns and payments of percentage taxes

10
AMENDED PROVISIONS
OF THE NIRC
SEC. TITLE
TITLE VI – EXCISE TAXES ON CERTAIN GOODS
129 Goods subject to excise taxes
145 Cigars and cigarettes
148 Manufactured oils and other fuels
149 Automobiles
151 Mineral products
155 Manufacturers to provide themselves with counting or
metering devices to determine production
171 Authority of internal revenue officer in searching for
taxable articles

11
AMENDED PROVISIONS
OF THE NIRC
SEC. TITLE
TITLE VII – DOCUMENTARY STAMP TAX
174 Stamp tax on original issue of shares of stock
175 Stamp tax on sales, agreement to sell, memoranda of sales,
deliveries of transfer of due-bills, certificates of obligation,
or shares or certificates of stocks
177 Stamp tax on certificates of profits or interest in property
or accumulations
178 Stamp tax on bank checks, drafts, certificates of deposit not
bearing interest, and other instruments
179 Stamp tax on all debt instruments

12
AMENDED PROVISIONS
OF THE NIRC
SEC. TITLE
TITLE VII – DOCUMENTARY STAMP TAX
180 Stamp tax on all bills of exchange or drafts
181 Stamp tax upon acceptance of bills of exchange and others
182 Stamp tax on foreign bills of exchange and letters of credit
183 Stamp tax on life insurance policies
186 Stamp tax on policies of annuities and pre-need plans
188 Stamp tax on certificates
189 Stamp tax on warehouse receipts
190 Stamp tax on jai-alai, horse race tickets, lotto, or other
authorized number games

13
AMENDED PROVISIONS
OF THE NIRC
SEC. TITLE
191 Stamp tax on bills of lading or receipts
192 Stamp tax on proxies
193 Stamp tax on powers of attorney
194 Stamp tax on leases and other hiring agreements
195 Stamp tax on mortgages, pledges, and deeds of trust
196 Stamp tax on deeds of sale and conveyance of real property
197 Stamp tax on charter parties and other similar instruments

14
AMENDED PROVISIONS
OF THE NIRC
SEC. TITLE
TITLE IX – COMPLIANCE REQUIREMENTS
232 Keeping of books of accounts
236 Registration requirements
237 Issuance of receipts or sales or commercial invoices

15
AMENDED PROVISIONS
OF THE NIRC
SEC. TITLE
TITLE X – STATUTORY OFFENSES AND PENALTIES
249 Interest
254 Attempt to evade or defeat tax
264 Failure or refusal to issue receipts or sales or commercial
invoices, violations related to the printing of such receipts
or invoices and other violations
269 Violations committed by government enforcement officers
TITLE XI – ALLOTMENT OF INTERNAL REVENUE
288 Disposition of incremental revenues

16
NEW SECTIONS
(INSERTED) IN THE NIRC
SEC. TITLE
51-A Substituted Filing of Income Tax Returns by Employees
Receiving Purely Compensation Income
148-A Mandatory Marking of All Petroleum Products
150-A Non-essential Services
150-B Sweetened Beverages
237-A Electronic Sales Reporting System
264-A Failure to Transmit Sales Data Entered on Cash Register
Machine (CRM)/Point of Sale System (POS) Machines to
BIR’s Electronic Sales Reporting System

17
NEW SECTIONS
(INSERTED) IN THE NIRC
SEC. TITLE
264-B Purchase, Use, Possession, Sale or Offer to Sell,
Instalment, Transfer, Update, Upgrade, Keeping or
Maintaining of Sales Suppression Devices.
265-A Offenses Relating to Fuel Marking

18
REPEALED/DELETED
SECTIONS OF THE NIRC
SEC. TITLE
35 Allowance of personal exemption for individual taxpayer
62 Exemption allowed to estates and trusts
89 Filing of Notice of Death

19
T
R
A REVISED
INDIVIDUAL
I INCOME TAX
N
20
WHO ARE THE INDIVIDUAL
TAXPAYERS
Classification according to the source of income:

1. Compensation income earners — Individuals whose source

of income is PURELY derived from an employer-employee
relationship

2. Self-employed — a sole proprietor or an independent

contractor who reports income earned from self-
employment. S/he controls who s/he works for, how the
work is done and when it is done. It includes those hired
under a contract of service or job order, and professionals
whose income is derived purely from the practice of
profession and not under an employer-employee
relationship.

21
WHO ARE THE INDIVIDUAL
TAXPAYERS
Classification according to the source of income:

3. Mixed Income Earner — an individual earning

compensation income from employment, and income from
business, practice of profession and/or other sources aside
from employment.

22
REVISED GRADUATED INCOME
TAX RATES (1ST tranche)
NEW GRADUATED INCOME TAX RATES OLD GRADUATED
(Effective January 1, 2018 to December INCOME TAX RATES
31, 2022)
Not over P250k 0% Not over P10k 5%
Over P250k but not more 20% Over P10k but not more P500+10%
than P400k than P30k
Over P400k but not more P30k + 25% Over P30k but not more P2.5K + 15%
than P800k than P70k
Over P800k but not more P130k + 30% Over P70k but not more P8.5K + 20%
than P2M than P140k
Over P2M but not more P490k + Over P240k but not more P22.5k + 25%
than P8M 32% than P250k
Over P8M P2.4M + Over P250k but not more P50k + 30%
35% than P500k
Over P500k P125k + 32%

23
REVISED GRADUATED INCOME
TAX RATES (2nd tranche)
NEW GRADUATED INCOME TAX RATES NEW GRADUATED INCOME TAX RATES
(Effective January 1, 2023 and onwards) (Effective January 1, 2018 to December 31,
2022)
Not over P250k 0% Not over P250k 0%
Over P250k but not more than 15% Over P250k but not more than 20%
P400k P400k
Over P400k but not more than P22.5k + Over P400k but not more than P30k +
P800k 20% P800k 25%
Over P800k but not more than P102.5k + Over P800k but not more than P130k +
P2M 25% P2M 30%
Over P2M but not more than P402.5k + Over P2M but not more than P490k +
P8M 30% P8M 32%
Over P8M P2.2025M Over P8M P2.41M +
+ 35% 35%
EXCLUDED 13TH MONTH PAY
AND OTHER BENEFITS
➢ Non-taxable 13th month pay and other benefits ceiling has
been increased:
from: P82,000
to: P90,000
Additional exemption of P8,000.00

➢ The ceiling of P90,000 may be increased through rules and

regulations issued by the Secretary of Finance, upon
recommendation of the Commissioner, after considering
among others, the effect on the same of the inflation rate
at the end of the taxable year. (RR 11-2018)

25
REVISED GRADUATED
INCOME TAX RATES
Highlights:

✓ The first P250,000 of total taxable income is now EXEMPT.

▪ BUT, Basic personal and additional exemptions have been
removed as allowable /authorized deduction.

✓ Amounts in each bracket range have been WIDENED.

▪ AND, the tax rate in each bracket has been increased.

26
TRAIN vs. OLD INCOME
TAX COMPUTATION
Computation (for a purely compensation earner individual)
TRAIN OLD
LAW NIRC
Annual Taxable
Compensation 600,000 600,000
Less: APE - 150,000
Taxable Income 600,000 450,000
Income Tax Due:
Not over P400k/P250k 30,000 50,000
In excess of P400,000 50,000 60,000
80,000 110,000
Annual income
Php 30,000
tax savings

Daily tax savings – P82.19 (using 365-day rule)

TRAIN vs. OLD INCOME
TAX COMPUTATION
Savings
INCOME BRACKET
TRAIN OLD NIRC (Loss)
- 250,000.00 - 14,500.00 14,500.00
Over 250,000.00 400,000.00 30,000.00 50,000.00 20,000.00
Over 400,000.00 800,000.00 130,000.00 173,000.00 43,000.00
Over 800,000.00 2,000,000.00 490,000.00 557,000.00 67,000.00
Over 2,000,000.00 8,000,000.00 2,410,000.00 2,477,000.00 67,000.00
Over 8,000,000.00 10,235,000.00 3,192,250.00 3,192,200.00 (50.00)
Maximum Daily Tax Savings – P183.56
OPTIONAL 8% GROSS
TAX (NEW)
✓ Tax rate and base:
8% of [gross sales and/or gross receipts and other non-
operating income, (in excess of P250,000, if
applicable)].

✓ 8% gross tax is in lieu of:

i. Income tax; AND
ii. 3% percentage tax (under Section 116 of the Tax
Code)
OPTIONAL 8% GROSS
TAX (NEW)
✓ Who are QUALIFIED to avail:
i. Purely self-employed individuals and/or professionals;
OR
ii. Mixed income earners (i.e., earning both
compensation income and income from business or
practice of profession;
iii. Whose Gross Sales or Gross Receipts and Other Non-
operating Income Do Not Exceed the VAT Threshold
as provided in Section 109(BB), ie., P3M threshold;
AND
iv. Must be a Non-VAT registered person (and subject to
3% Percentage tax)
OPTIONAL 8% GROSS
TAX (NEW)
✓ Who are NOT QUALIFIED to avail:
i. PURELY compensation income earners (and MIXED
income earner, with respect to his/her compensation
income);
ii. VAT-registered taxpayers, regardless of the amount of
gross sales/receipts and other non-operating income;
iii. Non-VAT taxpayers whose gross sales/receipts and
other non-operating income exceeded the P3M VAT
threshold;
iv. Taxpayers who are subject to Other Percentage Taxes
under Title V of the Tax Code, as amended, except
those under Section 116 of the same title;
OPTIONAL 8% GROSS
TAX (NEW)
✓ Who are NOT QUALIFIED to avail: Cont’n.
v. Partners of a General Professional Partnership (GPP)
since their distributive share from the GPP is already
net of costs and expenses; and
vi. Individuals enjoying income tax exemption such as
those registered under the Barangay Micro Business
Enterprises (BMBEs), etc., since taxpayers are not
allowed to avail of double or multiple tax exemptions
under different laws, unless specifically provided by law.
OPTIONAL 8% GROSS
TAX (NEW)
✓ WHEN to avail:
❑ Taxpayer must signify his/her intention to avail of the
8% gross tax with the prescribed period, as follows:

Qualified Taxpayer When

New business • Upon application (BIR Form NO. 1905,
registrant end date the PT); or
• Initial quarterly filing of IT or PT return
Existing registered ▪ Update COR (to end date the PT); or
taxpayer ▪ First quarter filing of IT or PT return
SUMMARY:
COMPARISON
PARTICULARS GRADUATED IT 8% IT RATES
RATES
Applicability In general, May be availed by qualified
applicable to ALL individuals engaged in
individual business/practice of
taxpayers (Default profession whose gross
IT rate) sales/receipts and other non-
operating income did not
exceed P3M
Basis of IT Taxable income Gross sales receipts and
other non-operating income
Business Tax PT or VAT If qualified: No subject to PT
ILLUSTRATION:
GIT OR 8%
Illustration 1.1: PURELY self-employed/professionals

Annual gross receipts 2,000,0000

Less: Exemption up to P250,000 250,000
Gross taxable receipts 1,750,000
ANNUAL INCOME TAX DUE (8%) 140,000
Less: Creditable Withheld Taxes (5% or NIL) 100,000
INCOME TAX STILL DUE 40,000

Note:
▪ No longer liable to Percentage Tax (ie., P2M x 3% = P60,000)
▪ Therefore, the government shall not withhold 3% OPT.
ILLUSTRATION:
GIT OR 8%
Illustration 1.2: Compared with Graduated Income Tax (claimed
40% OSD)

Annual gross receipts 2,000,0000

40% OSD 800,000
Taxable income 1,200,000
ANNUAL INCOME TAX DUE (0-35%) 250,000
Less: Creditable Withheld Taxes (5% or NIL) 100,000

INCOME TAX STILL DUE 150,000

ILLUSTRATION:
GIT OR 8%
Illustration 1.3: Compared with Graduated Income Tax (claimed
itemized deductions)

Annual gross receipts 2,000,0000

Itemized deductions (actual) 1,200,000
Taxable income 800,000
ANNUAL INCOME TAX DUE (0-35%) 130,000
Less: Creditable Withheld Taxes (5% or NIL) 100,000

QUARTERLY/ANNUAL INCOME TAX STILL DUE 30,000

Note: Plus 3% PT
ILLUSTRATION:
GIT OR 8%
Illustration 2.1: Mixed income earner (8% IT on business income)
Annual taxable compensation income 300,000
Income tax due (Excess P50,000 @ 20%) (A) 10,000

Business income:
Annual gross receipts 2,000,000
Income tax due (8% of P2M) (B) 160,000
TOTAL INCOME TAX DUE (C )= (A)+(B) 170,000
ILLUSTRATION:
GIT OR 8%
Illustration 2.2: Mixed income earner (Graduated IT and OSD)

Annual taxable compensation income 300,000

Less: Exempt 250,000
Taxable compensation income (A) 50,000
Business income:
Annual gross receipts 2,000,000
Less: 40% OSD 800,000
Business Income (B) 1,200,000
Taxable income ( C) = (A)+(B) 1,250,000
TOTAL INCOME TAX DUE 265,000
ILLUSTRATION:
GIT OR 8%
Illustration 2.3: Mixed income earner (Graduated IT and itemized
deductions)
Annual taxable compensation income 300,000
Less: Exempt 250,000
Taxable compensation income (A) 50,000
Business income:
Annual gross receipts 2,000,000
Less: Itemized deductions 1,200,000
Business Income (B) 800,000
Taxable income ( C) = (A)+(B) 850,000
TOTAL INCOME TAX DUE 220,000
REVISED FINAL TAX RATES ON
CERTAIN PASSIVE INCOME
PASSIVE INCOME NEW OLD
FWT/CGT FWT/CGT
RATE RATE
PCSO and Lotto winnings above 20% EXEMPT
P10,000
PCSO and Lotto winnings amounting EXEMPT EXEMPT
to P10,000 or less
Interest income received from a 15% 7.5%
depository bank under expanded
foreign currency deposit system
Capital gains from the sale of shares 15% of Net 5%/10% of Net
of stocks not traded in the stock Capital Gains Capital Gains
exchange.
INSTALLMENT PAYMENT OF
INCOME TAX DUE
➢ Only an individual taxpayer may elect to pay income tax
in installment, subject to the following:
i. Annual income tax due is in excess of P2,000; AND
ii. Payable only in two installments, as follows:
▪ 1st instalIment – pay when the return is filed;
▪ 2nd instalment – on or before October 15,
following the close of the calendar year.
FS REQUIREMENTS
✓ No FS required:
i. If qualified and availed of 8% gross income tax; and
ii. If qualified and availed of 40% Optional Standard Deduction
✓ Unaudited FS required:
▪ Those whose gross quarterly sales, earnings, receipts or
output DO NOT exceed Three Million Pesos (P3,000,000) and
do not avail of 8% gross income tax or 40% OSD.
✓ Audited FS:
▪ Those whose gross quarterly sales, earnings, receipts or
output exceed Three Million Pesos (P3,000,000) (before
P600,000 or P150,000 per quarter).
FRINGE BENEFIT TAX
RATE
➢ Fringe benefit tax rate has been increased from 32% to 35%.
➢ Alien individuals employed by:
i. Regional Operating Headquarters;
ii. Regional Area Headquarters;
iii. Offshore Banking Units; and
iv. Petroleum Service Contractor
are now subject to the same FBT rate of 35%. They are no
longer entitled to 15% FBT rate, pursuant to the veto
statement of the President.
T
R ESTATE
AND
A
DONOR’S
I TAXES
N
45
REVISED ESTATE
TAX RATE

SIX PERCENT (6%) based on the value of

NET estate.
OLD GRADUATED
ESTATE TAX RATES
VALUE OF THE NET ESTATE ESTATE TAX DUE
Not over P200,000 EXEMPT
Over P200,000 but not over P0 plus 5% of the excess of
P500,000 P200,000
Over P500,000 but not over P15,000 plus 8% of the excess of
P2,000,000 P500,000
Over P2,000,000 but not over P135,000 plus 11% of the excess of
P5,000,000 P2,000,000
Over P5,000,000 but not over P465,000 plus 15% of the excess of
P10,000,000 P5,000,000
Over P10,000,000 P1,215,000 plus 20% of the excess
of P10,000,000

47
ALLOWABLE DEDUCTIONS
FROM GROSS ESTATE
A. Citizen and resident of the Philippines
E.L.I.T.E. AND TRANSFERS TRAIN LAW OLD NIRC
1. Standard Deduction P5,000,000 P1,000,000
2. Claims against estate. Provided, ALLOWED ALLOWED
That: (i) the debt instrument was
duly notarized; (ii) and if the loan
was contracted within 3 years
before the death, submit a
statement showing the disposition
of the proceeds of the loan.
3. Claims of the deceased against ALLOWED ALLOWED
insolvent persons (if the value is
included in the gross estate)
ALLOWABLE DEDUCTIONS
FROM GROSS ESTATE
A. Citizen and resident of the Philippines

E.L.I.T.E. AND TRANSFERS TRAIN LAW OLD NIRC

4. Unpaid mortgages, or any ALLOWED ALLOWED
indebtedness with respect to
property xxx
5. Property previously taxed ALLOWED ALLOWED
(Vanishing deduction)
6. Transfer for public use ALLOWED ALLOWED
7. Family home P10,000,000 P1,000,000
8. Amount received by heirs under ALLOWED ALLOWED
R.A. 4917
ALLOWABLE DEDUCTIONS
FROM GROSS ESTATE
B. Non-resident alien
E.L.I.T.E. AND TRANSFERS TRAIN LAW OLD NIRC
1. Standard Deduction P500,000 NONE
2. Proportion of the deductions specified in ALLOWED ALLOWED
paragraphs (2), (3) and (4) in the
preceding slides (deductions allowable to
the estate of citizen and resident) , which
the value of such part bears to the value
of his entire gross estate wherever
situated
3. Property previously taxed (Vanishing ALLOWED ALLOWED
deduction)
4. Transfers for public use ALLOWED ALLOWED
ITEMS NO LONGER
DEDUCTIBLE
E.L.I.T.E. AND TRANSFERS OLD NIRC
1. Actual funeral expenses Actual or 5% of Net Estate or
P200,000, whichever is the
lowest
2. Judicial expenses of the ACTUAL
testamentary or intestate
proceedings
3. Medical expenses incurred by ALLOWED up to a maximum
the decedent within one (1) year amount of P500,000
prior to his death (substantiated
with receipts)
WITHDRAWAL OF
DECEDENT’S BANK DEPOSITS
Subject to the following conditions:
❑ Applicable to all bank deposits maintained by the
decedent ALONE, or JOINTLY with another;
❑ Subject to a FINAL WITHHOLDING TAX at the rate of SIX
PERCENT (6%) of the amount withdrawn;
❑ Withdrawal shall only be made within ONE YEAR from
the date of the decedent’s death;
❑ The bank required to withhold shall file the quarterly
return on the final tax withheld and shall issue the
corresponding BIR Form No. 2306 certifying such
withholding;
WITHDRAWAL OF
DECEDENT’S BANK DEPOSITS
Subject to the following conditions:
❑ Submit the TIN of the estate and the BIR Form No. 1904
duly stamped received by the BIR;
❑ All withdrawal slips shall contain the following terms:
▪ A sworn statement by any one of the joint depositors
to the effect the effect that all of the joint depositors
are still living at the time of withdrawal; AND
▪ A statement that the withdrawal is subject to the final
withholding tax of 6%.
WITHDRAWAL OF
DECEDENT’S BANK DEPOSITS
Subject to the following conditions:
❑ If the bank deposits have already been included in the
gross estate and paid the tax due thereon, just present
the eCAR and the withdrawals shall no longer be taxed.
FILING AND PAYMENT
❑ Statement of Gross Estate. Gross estate of value
exceeding P5M shall be supported by statement duly
certified by a CPA;
❑ Time for Filing of Estate Tax Return. Within one(1) year
from the decedent’s date.
❑ Extension of Time to File. Thirty (30) days subject to
certain conditions.
❑ Time for Payment. General rule: “Pay as you file” the
estate tax return.
FILING AND PAYMENT
❑ Extension of Time to Pay:
i. Judicial settlement of estate – Five (5) years;
ii. Extrajudicial settlement of estate – Two (2) years
❑ Payment by installment:
I. Cash instalment; OR
II. Partial disposition of estate and application of its
proceeds to estate tax due
REVISED DONOR’S TAX
RATE
SIX PERCENT (6%) based on the TOTAL GIFTS in
EXCESS of P250,000 exempt gift made during
the calendar year.

NOTE:
✓ This donor’s tax rate applies to all types of taxable gifts, whether
donated to a RELATIVE or STRANGER.

57
OLD DONOR’S TAX
VALUE OF THE NET GIFTS DONOR’S TAX DUE
Not over P100,000 EXEMPT
Over P100,000 but not over P200,000 P0 plus 2% of the excess of P100,000

Over P200,000 but not over P500,000 P2,000 plus 4% of the excess of P200,000

Over P500,000 but not over P1,000,000 P14,000 plus 6% of the excess of P500,000

Over P1,000,000 but not over P3,000,000 P44,000 plus 8% of the excess of P1,000,000

Over P3,000,000 but not over P5,000,000 P204,000 plus 10% of the excess of P3,000,000

OverP5,000,000 but not over P10,000,000 P404,000 plus 12% of the excess of P10,000,0000

Over P10,000,000 P1,004,000 plus 15% of the excess of P10,000,000

While the gift to a stranger is subject to 30% fixed rate

58
TRANSFER FOR LESS THAN
ADEQUATE AND FULL
CONSIDERATION
Subject to donor’s tax IF:
✓ The property transferred is other than real property
referred to in Section 24(D);
✓ The transfer price is less than the fair market value
(adequate and full consideration); and
✓ The EXCESS of fair market value over the value of the
consideration shall be deemed a gift.

59
TRANSFER FOR LESS THAN
ADEQUATE AND FULL
CONSIDERATION
Subject to donor’s tax IF:
Provided, That, a sale, exchange or other transfer of property
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 an adequate and full
consideration in money or money’s worth.

60
RENUNCIATION OF
INHERITANCE
✓ Subject to donor’s tax.
i. Renunciation of net share in the conjugal or absolute
community property by the surviving spouse.
ii. Renunciation by an heir, including the surviving spouse, of
his/her share in the hereditary estate left by the decedent,
SPECIFICALLY AND CATEGORICALLY done in favor of
identified heir/s to the exclusion or disadvantage of the
other co-heirs in the hereditary estate.
✓ Exempt from donor’s tax. GENERAL renunciation by an heir,
including the surviving spouse, of his/her share in the hereditary
estate left by the decedent is not subject to donor's tax. (RR No.
12-18)

61
DOWRIES NO LONGER
EXEMPT FROM DONOR’S TAX
DELETED from the list of exempt gifts:

"(1) Dowries or gifts made on account of marriage and before its

celebration or within one year thereafter by parents to each of their
legitimate, recognized natural, or adopted children to the extent of
the first Ten thousand pesos (P10,000).”
T
VALUE-ADDED
R TAX (VAT)
AND
A
OTHER
I PERCENTAGE
TAXES
N
63
REVISED VAT
THRESHOLD
TRANSACTIONS TRAIN LAW NIRC, as
amended
Sale of goods and services, in P3,000,000 P1,919,500
general
Sale of residential lot P1,500,000 P1,919,500
Sale of house and lot, and P2,500,000 P3,199,200
other residential dwellings
Lease of residential unit P15,000 P12,800
(monthly rental)
 REMOVED FROM
“ZERO %” VAT
1. Foreign Currency Denominated Sale. —
"Foreign Currency Denominated Sale" means the sale to a non-
resident of goods, except those mentioned in Secs. 149 and 150
of the Tax Code, assembled or manufactured in the Philippines
for delivery to a resident in the Philippines, paid for in
acceptable foreign currency and accounted for in accordance
with the rules and regulations of the BSP.” (Now, subject to 12%
VAT)
2. Sale of gold to the BSP. (Now, VAT-exempt transaction)
3. Constructive exports (Now, subject to 12% VAT but not yet
effective)
VAT EXEMPT
TRANSACTIONS
Additional VAT exempt transactions:
P. VAT exempt transactions from January 1, 2018 to December 31,
2020:
✓ Sale of real properties not primarily held for sale to customers
or held for lease in the ordinary course of trade or business.
✓ Real property utilized for low-cost and socialized housing as
defined by Republic Act No. 7279, otherwise known as the
Urban Development and Housing Act of 1992, and other related
laws.
✓ Residential lot valued at P1,500,000 and below.
✓ House and lot, and other residential dwellings valued at
P2,500,000 and below
VAT EXEMPT
TRANSACTIONS
Additional VAT exempt transactions:
P. VAT exempt transactions effective January 1, 2021:
✓ Sale of real properties not primarily held for sale to
customers or held for lease in the ordinary course of trade
or business;
✓ Real property utilized for low-cost and socialized housing
as defined by Republic Act No. 7279, otherwise known as
the Urban Development and Housing Act of 1992, and
other related laws; AND
✓ House and lot, and other residential dwellings valued at
P2,000,000 and below
VAT EXEMPT
TRANSACTIONS
Q. Lease of a residential unit with a monthly rental not
exceeding Fifteen thousand pesos P15,000; (from P12,800)
W. Sale or lease of goods and services to senior citizens and
persons with disability, as provided under RA Nos. 9994
(Expanded Senior Citizens Act of 2010) and 10754 (An Act
Expanding the Benefits and Privileges of Persons with
Disability) respectively. (Inserted. VAT exemption is
based on special laws)
VAT EXEMPT
TRANSACTIONS
X. Transfer of property pursuant to Section 40(C)(2) of the
NIRC, as amended.
Y. Association dues, membership fees and other
assessments and charges collected by homeowners
associations and condominium corporations.
Z. Sale of gold to the Banko Sentral ng Pilipinas (BSP)
(formerly zero-rated sale);
AA. Sale of drugs and medicines prescribed for diabetes,
high cholesterol, and hypertension beginning January 1,
2019
VAT EXEMPT
TRANSACTIONS
Withholding of VAT:
✓ That beginning January 1, 2021, the VAT withholding
system shall shift from FINAL to a CREDITABLE SYSTEM.
✓ Payments for purchases of goods and service arising from
projects funded by Official Development Assistance Act
of 1996, as amended, shall not be subjected to FINAL
WITHHOLDING TAX SYSTEM.
OTHER PERCENTAGE
TAXES
Stock Transaction Tax (STT):
✓ Transaction: Sale, barter, exchange or other disposition
of shares of stock listed and traded through the local
stock exchange other than the sale by a dealer in
securities;
✓ Tax rate and base: Six-tenths of one percent (6/10 of 1%)
of the gross selling price or gross value in money of the
shares of stock sold, bartered, exchanged or otherwise
disposed; and
✓ Party liable: Seller or transferor.
OTHER PERCENTAGE
TAXES
Filing and Payment of OPT:
✓ Every person subject to the percentage taxes imposed
under this Title shall file a quarterly return of the amount
of his gross sales, receipts or earnings and pay the tax
due thereon within TWENTY FIVE (25) days AFTER THE
END OF EACH TAXABLE QUARTER;
✓ A person whose VAT registration is cancelled and who
becomes liable to the tax imposed in Section 116 of this
Code, the tax shall accrue from the date of cancellation
and shall be paid in accordance with the provisions of this
Section.
 OTHER PERCENTAGE
TAXES
Clarification:

✓ No amendments as to withholding of VAT and OPT.

✓ Taxpayers are still required to withhold and remit VAT and
OPT on a monthly basis using BIR Form No. 1600.
DOCUMENTARY
STAMP TAX
DST rates have increased by 100% of the existing rate or
twice the amount, except the transfer or conveyance of
real properties.

NOTE:
Deed of Donation covering a gratuitous transfer of
real property is now subject to DST
T
R
A REVISED
EXCISE TAX
I
N
75
GOODS AND SERVICES
SUBJECT TO EXCISE TAXES
✓ Excise taxes shall apply to certain articles or services:
i. Manufactured and produced in the Philippines for
domestic sales or consumption or for any other
disposition;
ii. Things imported; and
iii. Services performed in the Philippines (NEW)
✓ The excise taxes shall be in addition to VAT;
✓ Manner of imposition:
i. Specific tax - imposed and based on weight or volume
capacity or any other physical unit of measurement; and
ii. Ad valorem tax - imposed and based on selling price or
other specified value of the good or service performed.
ILLUSTRATION:
EST. IMPACT OF EXCISE TAX TO
SELLING PRICE, in general
Net Manufacturer/Importer Price 100.0%
Custom’s duties and other
brokerage costs, if any, (estimated) 2.0%
Total Costs 102.0%
Excise taxes (specific or ad valorem) (est.) 1.5%
Total Costs 103.5%
Plus: Mark-up (wholesaler/distributor/retailer) 100.0%
Gross Selling Price 203.5%
12% VAT 24.42%

Gross Selling Price inclusive of VAT 227.92%

CIGARETTES PACKED BY
HAND OR MACHINE (20’s)
SPECIFIC
EFFECTIVITY TAX/PACK % INC.
4% inc.
PRESENT (OLD RATE) 30.00 thru RR
JAN 1, 2018 - JUN 30, 2018 32.50 8%
JUL 1, 2018- DEC. 31, 2019 35.00 8%
JAN. 1, 2020- DEC. 31, 2021 37.50 7%
JAN. 1, 2022- DEC. 31, 2023 40.00 6%
JANUARY 1, 2024 4% inc. thru RR
LUBRICATING OILS AND
GREASES
SPECIFIC
TAX/LITER
EFFECTIVITY OR KG. % INC.
PRESENT (OLD RATE) 4.50
JANUARY 1, 2018 8.00 78%
JANUARY 1, 2019 9.00 13%
JANUARY 1, 2020 10.00 11%
PROCESSED GAS
SPECIFIC
EFFECTIVITY TAX/LITER % INC.
PRESENT (OLD RATE) 0.05
JANUARY 1, 2018 8.00 15900%
JANUARY 1, 2019 9.00 13%
JANUARY 1, 2020 10.00 11%
WAXES AND PETROLATUM
SPECIFIC
EFFECTIVITY TAX/KG. % INC.
PRESENT (OLD RATE) 3.50
JANUARY 1, 2018 8.00 129%
JANUARY 1, 2019 9.00 13%
JANUARY 1, 2020 10.00 11%
DENATURED ALCOHOL TO BE
USED FOR MOTIVE POWER
SPECIFIC
EFFECTIVITY TAX/LITER % INC.
PRESENT (OLD RATE) 0.05
JANUARY 1, 2018 8.00 15900%
JANUARY 1, 2019 9.00 13%
JANUARY 1, 2020 10.00 11%
NAPHTHA, REGULAR GASOLINE
AND OTHER SIMILAR
PRODUCTS OF DISTILLATION

SPECIFIC
EFFECTIVITY TAX/LITER % INC.
PRESENT (OLD RATE) 4.35
JANUARY 1, 2018 7.00 61%
JANUARY 1, 2019 9.00 29%
JANUARY 1, 2020 10.00 11%
UNLEADED PREMIUM
GASOLINE
SPECIFIC
EFFECTIVITY TAX/LITER % INC.
PRESENT (OLD RATE) 4.35
JANUARY 1, 2018 7.00 61%
JANUARY 1, 2019 9.00 29%
JANUARY 1, 2020 10.00 11%
AVIATION TURBO JET FUEL

SPECIFIC
EFFECTIVITY TAX/LITER % INC.
PRESENT (OLD RATE) 3.67
JANUARY 1, 2018 4.00 9%
JANUARY 1, 2019 4.00 0%
JANUARY 1, 2020 4.00 0%
KEROSENE

SPECIFIC
EFFECTIVITY TAX/LITER % INC.
PRESENT (OLD RATE) -
JANUARY 1, 2018 3.00 #DIV/0!
JANUARY 1, 2019 4.00 33%
JANUARY 1, 2020 5.00 25%
DIESEL FUEL OIL, AND ON
SIMILAR FUEL OILS
SPECIFIC
EFFECTIVITY TAX/LITER % INC.
PRESENT (OLD RATE) -
JANUARY 1, 2018 2.50 #DIV/0!
JANUARY 1, 2019 4.50 80%
JANUARY 1, 2020 6.00 33%
LIQUEFIED PETROLEUM GAS

SPECIFIC
EFFECTIVITY TAX/LITER % INC.
PRESENT (OLD RATE) -
JANUARY 1, 2018 1.00 #DIV/0!
JANUARY 1, 2019 2.00 100%
JANUARY 1, 2020 3.00 50%
ASPHALTS

SPECIFIC
EFFECTIVITY TAX/KG. % INC.
PRESENT (OLD RATE) 0.56
JANUARY 1, 2018 8.00 1329%
JANUARY 1, 2019 9.00 13%
JANUARY 1, 2020 10.00 11%
BUNKER FUEL OIL, AND ON
SIMILAR FUEL OILS
SPECIFIC
EFFECTIVITY TAX/LITER % INC.
PRESENT (OLD RATE) -
JANUARY 1, 2018 2.50 #DIV/0!
JANUARY 1, 2019 4.50 80%
JANUARY 1, 2020 6.00 33%
AUTOMOBILES
Net Manufacturer's
Price/Importer's Selling Price EXCISE TAX
("NMISP") RATES
Up to P600,000 4%
Over P600,000 to P1,000,000 10%
Over P1,000,000 to P4,000,000 20%
Over P4,000,000 50%
OLD EXCISE TAX RATES ON
AUTOMOBILES
Net Manufacturer's
Price/Importer's Selling Price
("NMISP") EXCISE TAX RATES
Up to P600,000 2%
Over P600,000 to P1,100,000 P12,000+ [20%, in excess of P600,000]
Over P1,100,000 to P2,100,000 P112,000+ [40%, in excess of P1,100,000]
Over P2,100,000 P512,000+ [60%, in excess of P2,100,000]
REVISED vs. OLD EXCISE TAX
ON AUTOMOBILES
INCREASE
NMISP in Php TRAIN LAW OLD NIRC (DECREASE)
600,000 24,000 12,000 12,000
800,000 80,000 52,000 28,000
1,000,000 100,000 92,000 8,000
1,200,000 240,000 152,000 88,000
1,400,000 280,000 232,000 48,000
1,650,000 330,000 332,000 (2,000)
2,100,000 420,000 512,000 (92,000)
3,000,000 600,000 1,052,000 (452,000)
4,000,000 800,000 2,192,000 (1,392,000)
6,000,000 3,000,000 4,532,000 (1,532,000)
 SIMULATION: IMPACT TO
THE GROSS SELLING PRICE
NMISP in Php TRAIN PRICE NIRC PRICE DIFFERENCE %
600,000 838,656 822,528.00 16,128.00 2%
800,000 1,182,720 1,145,088.00 37,632.00 3%
1,000,000 1,478,400 1,467,648.00 10,752.00 1%
1,200,000 1,935,360 1,817,088.00 118,272.00 7%
1,400,000 2,257,920 2,193,408.00 64,512.00 3%
1,650,000 2,661,120 2,663,808.00 (2,688.00) 0%
2,100,000 3,386,880 3,510,528.00 (123,648.00) -4%
3,000,000 4,838,400 5,445,888.00 (607,488.00) -11%
4,000,000 6,451,200 8,322,048.00 (1,870,848.00) -22%
6,000,000 12,096,000 14,155,008.00 (2,059,008.00) -15%
Assumptions:
▪ GSP is computed based on 20% mark-up and 12% VAT.
▪ Without taking into consideration the impact of the increase in custom’s duties and other taxes.
 SIMULATION: IMPACT TO
THE GROSS SELLING PRICE
NMISP in Php TRAIN PRICE NIRC PRICE DIFFERENCE %
600,000 838,656 822,528.00 16,128.00 2%
800,000 1,182,720 1,145,088.00 37,632.00 3%
1,000,000 1,478,400 1,467,648.00 10,752.00 1%
1,200,000 1,935,360 1,817,088.00 118,272.00 7%
1,400,000 2,257,920 2,193,408.00 64,512.00 3%
1,650,000 2,661,120 2,663,808.00 (2,688.00) 0%
2,100,000 3,386,880 3,510,528.00 (123,648.00) -4%
3,000,000 4,838,400 5,445,888.00 (607,488.00) -11%
4,000,000 6,451,200 8,322,048.00 (1,870,848.00) -22%
6,000,000 12,096,000 14,155,008.00 (2,059,008.00) -15%
Assumptions:
▪ GSP is computed based on 20% mark-up and 12% VAT.
▪ Without taking into consideration the impact of the increase in custom’s duties and other taxes.
EXCISE TAXES ON
AUTOMOBILES
✓ SUBJECT TO REDUCED EXCISE TAX RATE:
▪ Hybrid vehicles shall be subject to 50% of the applicable
tax rates on automobiles.
✓ EXEMPT FROM EXCISE TAX:
▪ Purely electric vehicles;
▪ Pick-ups; and
▪ Automobiles used exclusively within the Freeport zone.
“Hybrid electric vehicle” shall mean a motor vehicle powered by electric
energy, with or without provision for off-vehicle charging, in combination
with gasoline, diesel or any other motive power: Provided, That, for
purposes of this Act, a hybrid electric vehicle must be able to propel itself
from a stationary condition using electric motor.

96
EXCISE TAXES ON
AUTOMOBILES
✓ EXCLUSIONS (ie, not within the definition of automobiles for
purposes of the imposition of excise taxes on automobiles):
1. Buses;
2. Trucks;
3. Cargo vans;
4. Jeepneys/jeepney substitutes;
5. Single cab chassis; and
6. Special purpose vehicles

97
DOMESTIC OR IMPORTED
COAL AND COKE
SPECIFIC
TAX/METRIC
EFFECTIVITY TON % INC.
PRESENT (OLD RATE) 10.00
JANUARY 1, 2018 50.00 400%
JANUARY 1, 2019 100.00 100%
JANUARY 1, 2020 150.00 50%
MINERALS
ALL non-metallic minerals and quarry resources, copper and
other metallic minerals and gold and chromite

OLD
TAX BASE RATE JAN. 1, 2018
(1) Locally extracted or produced - Actual market value of
the gross output.

(2) Importation - Value used by the BOC in determing tariff

and customs duties, net of excise tax and VAT. 2% 4%
INDIGENOUS PETROLEUM
OLD
TAX BASE RATE JAN. 1, 2018
Fair international market price, on the first taxable
sale, barter, exchange or such other similar
transaction; such tax to be paid by the buyer or
purchaser before the removal from the place of
production. 3% 6%
NON-ESSENTIAL SERVICES
SUBJECT TO EXCISE TAX
(NEW)
Coverage:
➢ Applies to INVASIVE COSMETIC PROCEDURES
➢ Surgeries, and body enhancements directed solely
TOWARDS improving, altering or enhancing the
patients appearance and DO NOT meaningfully
promote the proper function of the body or prevent or
treat illness or disease.
Tax rate and base:
➢ Five percent (5%), based on the gross receipts derived
from the performance of services, NET of excise tax
and VAT.
NON-ESSENTIAL SERVICES
SUBJECT TO EXCISE TAX
(NEW)
Exclusions - The excise tax shall not apply to procedures
necessary to ameliorate a deformity arising from, or directly
related to:
➢ Congenital or developmental defect or abnormality;
➢ Personal injury resulting from an accident or trauma;
or
➢ Disfiguring disease, tumor, virus, or infection;
➢ Cases or treatments covered by the National Health
Insurance Program.
SWEETENED BEVERAGES (SB)
NOW SUBJECT TO EXCISE TAX
Rate and Tax Base:
(1) P6.00 per liter of volume capacity on SBs using:
➢ Purely caloric or non-caloric sweeteners; or
➢ Mix of caloric and non-caloric sweeteners
(2) P12.00 per liter of volume capacity on SB using:
➢ Purely high fructose corn syrup in combination with
any caloric or non-caloric sweetener.
SWEETENED BEVERAGES
NOW SUBJECT TO EXCISE TAX
Exception: SB using:
(1) Purely coconut sap sugar; and
(2) Purely steviol glycosides
SWEETENED BEVERAGES
NOW SUBJECT TO EXCISE TAX
Exclusions: The following items are not within the scope of SBs
subject to excise tax:
(1) All milk products, including plain milk, infant formula milk,
follow-on milk, growing up milk, powdered milk, ready-to-
drink milk and flavoured mil, fermented mil, soymilk and
flavoured soymilk;
(2) One Hundred Percent (100%) Natural Fruit Juices (i.e., do not
have added sugar or caloric sweetener)
(3) One Hundred Percent (100%) Natural Vegetable Juices;
(4) Meal Replacement and Medically Indicated Beverages;
(5) Ground coffee, instant soluble coffee, and pre-packaged
powdered coffee products.
DO YOU KNOW
HOW TAXING IS
OUR TAX?
LET’S DO THE MATH!
How much value do you really get (or enjoy) from your hard
earned money?
COMPUTE:
1. Net income/gross LESS income tax (direct tax) ranging from
20%-35% or 8%, if qualified = Disposable Income (Take-home
pay)
2. Disposable Income LESS 12% VAT and Excise taxes, if
applicable (indirect taxes) = Actual value of the
services/goods you get
3. If the transaction involves a document that establishes a
right or obligation, additional deduction – Documentary
Stamp Tax
LET’S DO THE MATH!
RESULT!

AVE. of 52%
only
 DO YOU KNOW
THE LEAST TAXING
TAX?
Sad truth is…

ESTATE TAX
(or DEATH TAX)
 END
“There is no guarantee of justice except the personality of the
judge.”
(Erlich, Preie Rechtsfindung and freie Rechtswissenschaft, 1948 case)

17 October 2018 111