House Bill 5636 dubbed Tax Reform for Acceleration and Inclusion Act (TRAIN) passed by the House of Representatives on third and final reading on Wednesday, May 31, offers both lower and higher taxes plus expanded coverage of the value-added tax (VAT).
Since it will lower personal and corporate income taxes, the bill offsets revenues to be lost by raising taxes on certain products and not anymore exempting from VAT earnings that were previously VAT-exempt.
Workers are the foremost beneficiary of the TRAIN bill as the tax rates for salary would be as follows:
P10,000 – 5%
P10,000 to P29,999 – P500 plus 10% in excess of P10,000
P30,000 to P69,999 – P2,500 plus 15% in excess of P30,000
P70,000 to P139,999 – P8,500 plus 20% in excess of P70,000
P140,000 to P249,999 – P22,500 plus 25% in excess of P140,000
P250,000 to P499,999 – P50,000 plus 30% in excess of P250,000
P500,000 and above – P125,000 plus 32% in excess of P500,000
The bill exempts minimum wage, holiday pay, overtime pay, night shift differential pay, and hazard pay from income tax.
For estates, the tax rates for the following value of property are:
Below P200,000 – tax exempt
Over P200,000 but below P500,000 – 5% in excess of P200,000
Over P500,000 but below P2 million – P15,000 tax exemption, 8% in excess of P500,000
Over P2 million but below P5 million – P135,000 tax exempt, 11% in excess of P2 million
Over P5 million but below P10 million – P465,000 tax exempt, 15% in excess of P5 milllion
Over P10 million and above – P1.215 million tax exempt, 20% in excess of P10 million
The value of donation and corresponding tax are as follows:
Net gifts below P100,000 – tax exempt
Over P100,000 but below P200,000 – 2% in excess of P100,000
Over P200,000 but below P500,000 – P2,000 tax exempt, 4% in excess of P200,000
Over P500,000 but below P1 million – P14,000 tax exempt, 6% in excess of P500,000
Over P1 million but below P3 million – P44,000 tax exempt, 8% in excess of P1 million
Over P5 million but below P10 million – P404,000 tax exempt, 12% in excess of P5 million
Over P10 million – P1.004 million tax exempt, 15% in excess of P10 million
The excise tax on cars would be raised. The tax rate for the following car price is as follow:
Up to P600,000 – 3% tax
P600,000 to P1 million – P18,000 plus 30% in excess of P600,000
P1.1 million to P2.1 million – P168,000 plus 50% in excess of P1.1 million
P2.1 million to P3.1 million – P668,000 plus 80% in excess of P2.1 million
Over P3.1 million – P1.468 million plus 90% in excess of P3.1 million
The TRAIN bill imposes a P10 excise tax per liter of sugar-sweetened beverage. The tax increases 4% each year. Covered by the tax are soft drinks, fruit drinks, sports drinks, sweetened tea, coffee drinks and energy drinks. Not covered by the excise tax are natural fruit juices, natural vegetable juices, yogurt, meal replacement, beverages and all milk products.
The services to remain VAT-exempt are as follows:
Importation of professional instruments and implements;
Services by agricultural contract growers; medical, dental, hospital and veterinary services, except those rendered by professionals;
Educational services rendered by private educational institutions
Services rendered by regional of area headquarters established in the Philippines by multinational corporations
Sale of real properties not primarily held for lease in the ordinary course of business or trade;
Lease of a residential unit not exceeding P10,000
Importation of fuel, goods and supplies.
The Department of Finance is hoping the Senate will give its blessing to the bill when Congress resumes session next month.
