Geraldine E.

Martinez, BSA-III
Activity-assignment

1.What is TRAIN Law standard deductions on income tax?

 On December 19, 2017, President Rodrigo R. Duterte signed into law Package 1 of the
Comprehensive Tax Reform Program (CTRP) also known as the Tax Reform for
Acceleration and Inclusion (TRAIN) as Republic Act (RA) No. 10963. The Law took effect
on January 1, 2018.
 The TRAIN aims to make the Philippine Tax System simpler, fairer, and more efficient to
promote investments, create jobs and reduce poverty. Alongwith this objective, the
CTRP also aims to raise revenues that will fund the President's Build, Build, Build Project
that will sustain high and inclusive growth of the country; and finance investments in
our people through enhanced education,health and social services.
 The highlights of RA 10963 includes amendments to several provisions of the National
Internal Revenue Code of 1997 on personal income taxation, passive income for both
individuals and corporations, estate tax, donor's tax, value-added tax (VAT), excise tax,
documentary stamp tax (DST), and tax administration, among others. It likewise
introduced new taxes such as the excise tax on cosmetic surgery and sugar-sweetened
beverages.

1a. Pure Compensation

 For individuals earning purely compensation income, the income earned must be taxed
based on the prescribed graduated income tax rates, ranging from 0 percent to 35
percent with income not exceeding P250,000.00 being subjected to 0 percent tax rate.
Income earned by minimum wage earners based on statutory minimum wage rates,
including holiday pay, overtime pay, night shift differential pay, and hazard pay are still
exempt from income tax.

1b. Professional and/or Business

  Self-employed individuals and/or professionals whose gross sales/receipts do not
exceed the value-added tax (VAT) threshold and are not voluntarily registered under the
VAT system have the option to be taxed based on the 0 percent to 35 percent graduated
tax rates or eight percent tax rate on gross sales/receipts in excess of P250,000.00 in
lieu of percentage tax.
 Tax rate on gross receipts/sales is also applicable to mixed-income earners on income
from business or practice of profession; however, the tax base must be the total gross
sales/receipts without deducting P250,000.00, since it is already incorporated in the first
level of the graduated income tax rates on the mixed income earner’s compensation
income.
 Existing non-VAT taxpayers may avail of the eight percent income tax rate at the
beginning of the taxable year or before the due date for filing and/or payment of the
percentage tax.
 The taxpayers must file an application for registration information update (BIR Form
1905) to cancel percentage tax as registered tax type. However, this option is not
available to VAT-registered taxpayers, those who are subject to other percentage taxes
under Title V of the Tax Code (except those taxpayers exempt from VAT pursuant to
Section 116 of the same title), and partners of a general professional partnership (GPP)
by virtue of their distributive share from GPP, which is already net of cost and expenses.

1c. Mixed compensation and Business

 Individuals engaged in the business/practice of their profession, regardless of the

amount of sales/receipts, must file a quarterly income tax return on or before May 15,
Aug. 15, and Nov. 15 for the first, second, and third quarters, respectively, and an
 annual income tax return not later than the 15th day of the fourth month following the
calendar year.

Other provisions on the exclusions and deductions of gross income, income tax rates on non-
resident alien individuals, fringe benefit tax and income tax rates on certain passive income are
also included under this issuance. The RR took effect on Jan. 1, which is also the effectivity date
of the TRAIN Law.