The new Tax Reform for Acceleration and Inclusion (TRAIN) program, otherwise known as Republic Act No. 10963, has been signed into law by President Duterte on December 19, 2017.
The bill which envisions a simpler, efficient and fair tax system in the Philippines that lessens the burden for the poor and the middle class will begin on January 2018.
One of the significant changes in relation to the TRAIN Law is the ‘Personal Income Tax Rates’ for working Filipinos which can be summarized in the tables below.
Personal Income Tax Rates – 2018 to 2022
Those earning an annual salary of P250,000 or below will no longer pay any income tax.
Those earning between P250,000 and P400,000 per year will be charged an income tax rate of 20% on the excess over P250,000.
Those earning annual incomes between P400,000 and P800,000 will pay a fixed amount of P30,000 plus 25% of the excess over P400,000.
Those with yearly salaries between P800,000 and P2 million will be charged a fixed amount of P130,000 plus 30% on the excess over P800,000.
High-income earners receiving salaries between P2 million and P8 million annually will pay a fixed amount of P490,000 plus 32% of the excess over P2 million.
Finally, the highest income tier receiving salaries of at least P8 million per year will have withholding taxes of P2.41 million plus 35% of the excess over P8 million.
All these will be implemented from 2018 until 2022, but beginning 2023, the rates will further fall.
Personal Income Tax Rates – 2023 onwards
From year 2023 onwards, the income tax rates will be further adjusted, as follows:
Those earning an annual salary of P250,000 or below will continue to be exempted from paying income tax.
Those earning between P250,000 and P400,000 per year will be charged a lower income tax rate of 15% on the excess over P250,000.
Those with annual salaries from P400,000 to P800,000 will have withholding taxes of P22,500 plus 20% of the excess over P400,000.
Salaried employees with annual incomes between P800,000 and P2 million will be charged a fixed amount of P102,500 plus 25% on the excess over P800,000.
Those receiving salaries between P2 million and P8 million per year will be charged P402,500 plus 30% of the excess over P2 million.
Finally, the highest income segment of employees with annual salaries of at least P8 million will pay P2.2025 million plus 35% of the excess over P8 million.
Comparison of the Personal Income Tax Rates (Between the years 2018-2022 and 2023 onwards)
You can read more on TRAIN here.
