10963 (TRAIN)
Income Tax Provisions
R.A. 8424 vs. R.A. 10963
-Income Tax Provisions Overview
Description R.A. 8424 (TAX CODE of 1997) R.A. 10963 (TRAIN)
Income Tax Rates Graduated rates from 5% to In general, graduated rates from 20% to 35%
for Individuals 32%, with 7 tiers; basis is from (beg. 2023, 15%-35%) with zero rate for first
P1 to over P500,000 P250Th and 5 tiers; basis is from over
P250,000 to over P8M; with option, under
certain cases, of qualified individuals to opt
for the 8% income tax rate in lieu of the
graduated rates and the percentage tax under
Sec. 116
Personal/Additional Available to qualified taxpayers None – already included in the P250,000
Exemptions & exempt from income tax; repeal of Sec. 33(A) of
Health Insurance the Magna Carta for Persons with Disability, Sec.
22(B) of the Foster Care Act of 2012
13th month pay Maximum of P82,000 Maximum of P90,000
other benefits
2
R.A. 8424 vs. R.A. 10963
-Income Tax Provisions Overview
Description R.A. 8424 (TAX CODE of 1997) R.A. 10963 (TRAIN)
GOCCs, Exceptions to IT: GSIS, SSS, Exceptions: GSIS, SSS, PHIC, LWD
Agencies/Instrumentalities PHIC, PCSO, LWD (repeal of Sec. 4 of An Act Providing for
Charity Sweepstakes, ….)
Employees of Preferential rates With Presidential veto note
RHQ/ROHQ/OBU/Petroleum
Fringe Benefit Tax (FBT) FBT rate: 32% of grossed-up FBT rate: 35% or the applicable tax
value rate
Filing of Quarterly ITR 1Q-April 15, 2Q-Aug. 15, 3Q- 1Q-May 15 …
Nov.15
Installment Payments of IT 2nd installment- July 15 2nd installment – October 15
3
SECTION 2. DEFINITION OF TERMS
Gross Receipts – refers to
a. the total
amount of money or its equivalent representing the
contract price, compensation, service fee, rental or royalty,
including the amount charged for materials supplied with the
services; and
b. deposits and advance payments actually or constructively
received during the taxable period for the services performed
or to be performed for another person, except returnable
security deposits for purposes of these regulations.
In the case of VAT taxpayer, this shall exclude the VAT
component.
4
SECTION 2. DEFINITION OF TERMS.
Gross Sales – refers to the total of all sale transactions reported in a period,
without any deduction. However, for purposes of these regulations specifically on the gross
sales to be subjected to the 8% income tax rate option, the following shall be allowed as
deductions:
1. Sales returns and allowances - proper credit or refund was made during the month or
quarter to the buyer for sales previously recorded as taxable sales.
2. Discounts determined and granted at the time of sale, which are expressly indicated in the
invoice; part of the gross sales; duly recorded in the books of accounts; the grant of which is not
dependent upon the happening of a future event - may be excluded from the gross sales within
the same month/quarter it was given.
5
SECTION 2. DEFINITION OF TERMS
Self-employed – a sole proprietor or an independent contractor who reports income earned from
self-employment. He/She controls who he/she 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.
Professional/s – Person formally certified by a professional body belonging to a specific
profession by virtue of having completed a required examination or course of studies and/or
practice, whose competence can usually be measured against an established set of standards;
also one who engages in some art or sport for money, as a means of livelihood, rather than as
a hobby.
It includes but is not limited to doctors, lawyers, engineers, architects, CPAs, professional
entertainers, artists, professional athletes, directors, producers, insurance agents, insurance
adjusters, management and technical consultants, bookkeeping agents, and other recipients
of professional, promotional and talent fees.
6
SECTION 2. DEFINITION OF TERMS.
VAT Threshold – refers to the ceiling set to determine VAT registrable taxpayers, currently set at
three million (P3,000,000.00) pesos; same threshold to be used to determine the income tax
liability of self- employed and/or professionals under Sections 24(A)(2)(b) and 24(A)(2)(c)(2)
of the Tax Code, as amended.
➢ Minimum Wage Earner (MWE) – refers to a worker in the private sector who is paid with a statutory
minimum wage (SMW) rates, or to an employee in the public sector with compensation income of
not more than the statutory minimum wage rates in the non-agricultural sector where the
worker/employee is assigned. Such statutory minimum wage rates are exempted from income tax.
•Likewise, covered by the exemption are the holiday pay, overtime pay, night shift differential pay
and hazard pay earned by MWE.
•However, a worker who receives/earns additional compensation such as commissions, honoraria,
fringe benefits, benefits in excess of the allowable P90,000.00 (inclusive of “de minimis” benefits),
taxable allowances and other taxable income other than the SMW, holiday pay, overtime pay, night
shift differential pay and hazard pay shall not enjoy the privilege of being a MWE.
7
SECTION 3. INCOME TAX RATES ON INDIVIDUAL
CITIZEN AND INDIVIDUAL RESIDENT ALIEN
In general, the income tax on the individual’s taxable income
shall be computed based on the following schedules as provided
under Sec. 24(A)(2)(a) :
Effective January 1, 2018 until December 31, 2022:
RANGE OF TAXABLE INCOME TAX DUE = a + (b x c)
BASIC ADDITIONAL (b) OF OVER
OVER NOT OVER (a) (c)
- 250,000.00 - -
250,000.00 400,000.00 - 20% 250,000.00
400,000.00 800,000.00 30,000.00 25% 400,000.00
800,000.00 2,000,000.00 130,000.00 30% 800,000.00
2,000,000.00 8,000,000.00 490,000.00 32% 2,000,000.00
8,000,000.00 - 2,410,000.00 35% 8,000,000.00
8
SECTION 3. INCOME TAX RATES ON INDIVIDUAL CITIZEN AND
INDIVIDUAL RESIDENT ALIEN
- 250,000.00 - -
250,000.00 400,000.00 - 15% 250,000.00
400,000.00 800,000.00 22,500.00 20% 400,000.00
800,000.00 2,000,000.00 102,500.00 25% 800,000.00
2,000,000.00 8,000,000.00 402,500.00 30% 2,000,000.00
8,000,000.00 - 2,202,500.00 35% 8,000,000.00
9
SECTION 3. INCOME TAX RATES ON INDIVIDUAL CITIZEN AND
INDIVIDUAL RESIDENT ALIEN
➢ Income Tax Rates for Self-Employed Individuals Earning Income Purely from Self-Employment
or Practice of Profession. -
Individuals earning income purely from self-employment and/or practice of profession whose
gross sales/receipts and other non-operating income does not exceed the VAT threshold as
provided in Section 109 (BB) of the Tax Code, as amended, shall have the option to avail of :
10
SECTION 3. INCOME TAX RATES ON INDIVIDUAL
CITIZEN AND INDIVIDUAL RESIDENT ALIEN
OPTIONS (Purely Self-Employment/Practice of Profession)
1. The graduated rates under Section 24(A)(2)(a) of the Tax Code,
as amended;
OR
2. The 8% tax on gross sales or receipts and other non-operating income in excess of P250,000 in
lieu of:
the graduated income tax rates under Section 24(A)(2)(a) and the percentage tax
under Section 116.*
11
SECTION 3. INCOME TAX RATES ON INDIVIDUAL CITIZEN AND
INDIVIDUAL RESIDENT ALIEN
12
SECTION 3. INCOME TAX RATES ON INDIVIDUAL CITIZEN AND
INDIVIDUAL RESIDENT ALIEN
➢ taxpayer shall be considered as having availed of the graduated income tax rates, unless the
taxpayer signifies in the 1st Quarter income tax return or the initial quarter of the taxable year
after the commencement of a new business/practice of profession, the intention to elect the
8% income tax rate and such election shall be irrevocable and no amendment of option shall be
made for the said taxable year.
13
SECTION 3. INCOME TAX RATES ON INDIVIDUAL CITIZEN AND
INDIVIDUAL RESIDENT ALIEN
• Provided that, at any time during a given taxable year, a taxpayer’s gross sales or receipts
exceeded the VAT threshold of P3,000,000, he/she shall automatically be subjected to the
graduated rates under Section 24(A)(2)(a) of the Tax Code, as amended.
14
SECTION 3. INCOME TAX RATES ON INDIVIDUAL CITIZEN AND
INDIVIDUAL RESIDENT ALIEN
➢ A VAT-registered taxpayer, regardless of the gross sales/receipts can no longer avail of the 8% income
tax rate option.
• When said taxpayer would later realize gross sales/receipts of less than the VAT threshold for a
taxable year, such taxpayer will still be liable to VAT for as long as the VAT-registered
invoices/receipts are issued and no update/s of registration was made.
15
SECTION 3. INCOME TAX RATES ON INDIVIDUAL CITIZEN AND
INDIVIDUAL RESIDENT ALIEN
➢ A non-VAT registered taxpayer who initially opted to avail of the 8% option but has exceeded the VAT
threshold during the taxable year:
• shall be subject to 3% Percentage Tax on the first P3,000,000.00 of his/her gross sales/receipts
under Section 116 of the Tax Code, as amended, without imposition of any penalty if payment is
timely made on the following month when the threshold is breached
• the amount over the threshold shall be subject to VAT prospectively, and the 8% income tax
previously paid shall be credited to the Income Tax Due under the graduated rates provided in
Section 24(A)(2)(a) of the Tax Code, as amended.
16
SECTION 3. INCOME TAX RATES ON INDIVIDUAL CITIZEN AND
INDIVIDUAL RESIDENT ALIEN
➢ Taxpayers who did not qualify for the 8% income tax rate shall be subject to the graduated income tax
rate, and shall also be subject to the applicable business tax/es, if any.
➢ Taxpayers who cannot avail of the 8% income tax rate:
➢ Those subject to Other Percentage Taxes under Title V of the Tax Code, as amended, except those
subject under Section 116 of the same Title
• Partners of a General Professional Partnership (GPP) since their distributive share from GPP is
already net of cost and expenses.
17
SECTION 3. INCOME TAX RATES ON INDIVIDUAL
CITIZEN AND INDIVIDUAL RESIDENT ALIEN
➢ Income Tax Rates for Individuals Earning Income Both from Compensation and from Self-
employment (business or practice of profession). – For MIXED income earners, the tax rates are :
1. The compensation income shall be subject to the graduated income tax rates prescribed
under Section 24(A)(2)(a) of the Tax Code, as amended;
AND
2. The income from business or practice of profession shall be subject to:
a. If the gross sales/receipts and other non-operating income do not exceed the VAT
threshold, option to be taxed at :
18
SECTION 3. INCOME TAX RATES ON INDIVIDUAL CITIZEN AND
INDIVIDUAL RESIDENT ALIEN
a.1 Graduated income tax rates prescribed under Section 24(A)(2)(a) of the Tax Code, as
amended;
OR
a.2. Eight percent (8%) income tax rate based on gross sales/receipts and other non-
operating income in lieu of the graduated income tax rates and percentage tax under
Section 116 of the Tax Code, as amended.
b. If the gross sales/receipts and other non-operating income exceeds the VAT threshold, the
individual shall be subject to the graduated income tax rates prescribed under Section
24(A)(2)(a).
19
SECTION 3. INCOME TAX RATES ON INDIVIDUAL
CITIZEN AND INDIVIDUAL RESIDENT ALIEN
➢ The provision under Section 24(A)(2)(b) of the Tax Code, as amended, which allows an option of 8%
income tax rate on gross sales/receipts and other non-operating income in excess of P250,000.00 is
available only to purely self-employed individuals and/or professionals.
• not applicable to mixed income earners since it is already incorporated in the first tier of the
graduated income tax rates applicable to compensation income.
• excess of the P250,000.00 over the actual taxable compensation income is not creditable against the
taxable income from business/practice of profession under the 8% income tax rate option.
20
SECTION 3. INCOME TAX RATES ON INDIVIDUAL CITIZEN AND
INDIVIDUAL RESIDENT ALIEN
➢ Mixed income earner who opted to be taxed under the graduated income tax rates for income from
business/practice of profession, shall combine the taxable income from both compensation and
business/practice of profession in computing for the total taxable income and consequently, the income
tax due.
21
Income Tax Rates on Certain Passive Income
The following passive income shall be subject to the final income tax rates indicated:
➢ Interests from any currency bank deposit and yield or any other monetary benefit from deposit
substitutes and from trust funds and similar arrangements – 20%;
➢ Interest income received by an individual taxpayer (except a nonresident individual) from a
depository bank under the expanded foreign currency deposit system – 15%;
➢ Capital Gains from Sale of Shares of Stock not Traded in the Stock Exchange – 15%;
XXX
22
SECTION 4. INCOME TAX RATES ON NON-RESIDENT ALIEN
INDIVIDUAL
The following income tax rates shall be imposed to non-resident alien individual:
➢ Non-resident Alien Engaged in Trade or Business Within the Philippines. -Applicable shall be the
income tax rates imposed to individual citizen and a resident alien individual for income derived
within the Philippines.
➢ Non-resident Alien Not Engaged in Trade or Business Within the Philippines – 25%.
➢ The provision on the preferential income tax rate of fifteen percent (15%) for qualified employees of
Regional Headquarters, Regional Operating Headquarters, Offshore Banking Units, and Petroleum
Service Contractors and Subcontractors has been vetoed.
23
Quoted hereunder is part of the veto message of the President relative
to the above:
A. Reduced income tax rate of employees of Regional Headquarters (RHQs), Regional Operating
Headquarters (ROHQs), Offshore Banking Units (OBUs), and Petroleum Service Contractors and
Subcontractors.
24
RHQs, ROHQs, OBUs, Petroleum Service Contractors
and Subcontractors
I am constrained to veto the proviso under Section 6(F) of the enrolled bill that effectively
maintains the special tax rate of 15% of gross income for the aforementioned employees, to wit:
25
While I understand the laudable objective of the proposal, the provision is violative of Equal
Protection Clause under Section 1, Article III of the 1987 Constitution, as well as the rule of equity
and uniformity in the application of the burden of taxation:
Section 1. No person shall be deprived of life, liberty or property without due process of law, nor
shall any person be denied the equal protection of the laws.
In line with this, the overriding consideration is the promotion of fairness of the tax system for
individuals performing similar work. Given the significant reduction in the personal income tax, the
employees of these firms should follow the regular tax rates applicable to other individual
taxpayers.
xxx xxx xxx”
26
RHQs, ROHQs, OBUs, Petroleum Service Contractors and
Subcontractors
➢ Thus, the preferential income tax rate of qualified employees of aforementioned entities shall no
longer be applicable without prejudice to the application of preferential tax rates under existing
international tax treaties.
27
SECTION 5. GOVERNMENT OWNED AND CONTROLLED
CORPORATIONS (GOCCs), AGENCIES OR INSTRUMENTALITIES
Under Section 27(C) of the Tax Code, as amended, they shall pay such rate of tax upon their
taxable income as imposed upon corporations or associations engaged in a similar business,
industry, or activity, except for the following:
28
SECTION 6. EXCLUSIONS FROM GROSS INCOME
The following items shall not be included in gross income and shall be exempt from income taxation:
➢ Life Insurance. – The proceeds paid to the heirs or beneficiaries upon the death of the insured,
whether in a single sum or otherwise, but if such amounts are held by the insurer under an
agreement to pay interest thereon, the interest payments shall be included in the gross.
➢ Miscellaneous Items. –
• Income derived by Foreign Government
• Income Derived by the Government or its Political Subdivisions
• Prizes and Awards
• Prizes and Awards in Sports Competition
XXX …
29
SECTION 6. EXCLUSIONS FROM GROSS INCOME
• 13th Month Pay and Other Benefits. – Gross benefits received by officials and employees of
public and private entities: Provided, however, That the total exclusion under this item shall
not exceed NINETY THOUSAND PESOS (₱90,000.00), which shall cover:
i. Benefits received by officials and employees of the national and local government pursuant
to Republic Act No. 6686;
ii. Benefits received by employees pursuant to Presidential Decree No. 851, as amended by
Memorandum Order No. 28, dated August 13, 1986;
iii. Benefits received by officials and employees not covered by Presidential Decree No. 851, as
amended by Memorandum Order No. 28, dated August 13, 1986; and
iv. Other benefits such as productivity incentives and Christmas bonus.
30
SECTION 7. SPECIAL TREATMENT OF FRINGE BENEFITS
The tax on fringe benefits at the rate of THIRTY-FIVE PERCENT (35%) shall be imposed on -
• the grossed-up monetary value of fringe benefits furnished or granted to an employee (except
rank and file employees) by the employer, whether an individual or a corporation (unless the
fringe benefit is required by the nature of, or necessary to the trade, business or profession of the
employer, or when the fringe benefit is for the convenience of or advantage of the employer).
• the tax herein imposed is payable by the employer which tax shall be paid in the same manner as
provided for under Section 57 (A) of the Tax Code, as amended.
31
SECTION 7. SPECIAL TREATMENT OF FRINGE BENEFITS
32
SECTION 8. DEDUCTIONS FROM GROSS INCOME
In general, there shall be allowed, at the option of the taxpayer :
1. Itemized deductions;
OR
2. Optional Standard Deduction (OSD) at the rate of forty percent (40%) of gross sales/receipts for
individuals, while corporations an amount not exceeding forty percent (40%) of its gross income.
➢ No deductions shall be allowed to individual taxpayers earning compensation income arising from
personal services rendered under an employer-employee relationship, and those who opted to be
taxed at 8% income tax rateon their income from business/practice of profession.
33
SECTION 8. DEDUCTIONS FROM GROSS INCOME
The following are the allowable itemized deductions:
a. Expenses
b. Interest
c. Taxes
d. Losses
e. Bad Debts
f. Depreciation
g. Depletion of Oil and Gas Wells and Mines
h. Charitable and Other Contributions
i. Research and Development
j. Pension Trusts
34
SECTION 8. DEDUCTIONS FROM GROSS INCOME
➢ Unless the taxpayer signifies in the return the intention to elect the OSD, it shall be considered as
having availed of the itemized deductions. Such election, when made in the return shall be
irrevocable for the taxable year for which the return is made.
• The election to claim either the itemized deductions or the OSD for the taxable year must be
signified by checking the appropriate box in the income tax return filed for the first quarter of
the taxable year adopted by the taxpayer. Once the election is made, the same type of deduction
must be consistently applied for all the succeeding quarterly returns and in the final income tax
return for the taxable year.
35
SECTION 8. DEDUCTIONS FROM GROSS
INCOME
➢ An individual who is entitled to and claimed for the OSD shall not be required to submit with the
tax return such Financial Statements otherwise required under the Tax Code, as amended. A General
Professional Partnership (GPP) may avail of the OSD only once, either by the GPP or the partners
comprising the partnership.
➢ The OSD allowed to individual taxpayers except nonresident aliens shall be forty percent (40%)
of gross sales/receipts during the taxable year. If the individual is on the accrual basis of accounting
for his/her income and deductions, the OSD shall be based on the gross sales during the taxable year.
On the other hand, if the individual employs the cash basis of accounting for his/her income and
deductions, the OSD shall be based on his/her gross receipts during the taxable year. (Illustration 13)
36
GPPs and Partners of GPPs
➢ GPP is not subject to income tax imposed pursuant to Sec. 26 of the Tax Code, as amended.
However, the partners shall be liable to pay income tax on their separate and individual capacities
for their respective distributive share in the net income of the GPP.
➢ The GPP is not a taxable entity for income tax purposes since it is only acting as a “pass-
through” entity where its income is ultimately taxed to the partners comprising it. Section 26 of
the Tax Code, as amended, likewise provides that- “For purposes of computing the distributive
share of the partners, the net income of the GPP shall be computed in the same manner as a
corporation.”
37
GPPs and Partners of GPPs
• As such, a GPP may claim either the itemized deductions allowed under Section 34 of the
Code or in lieu thereof, it can opt to avail of the OSD allowed to corporations in claiming the
deductions in an amount not exceeding forty percent (40 %) of its gross income.
In computing taxable income defined under Section 31 of the Tax Code, as amended, the
following may be allowed as deductions:
1. Itemized expenses which are ordinary and necessary, incurred or paid for the practice of
profession;
OR
38
GPPs and Partners of GPPs
➢ The distributable net income of the partnership may be determined by claiming either itemized
deductions or OSD. The share in the net income of the partnership, actually or constructively received,
shall be reported as taxable income of each partner. The partners comprising the GPP can no longer
claim further deduction from their distributive share in the net income of the GPP and are not allowed to
avail of the 8% income tax rate option since their distributive share from the GPP is already net of cost
and expenses.
39
GPPs and Partners of GPPs
➢ If the partner also derives other income from trade, business or practice of profession apart and
distinct from his share in the net income of the GPP, the deduction that he can claim for the OTHER
INCOME would either be the itemized deductions or OSD.
40
SECTION 9. INDIVIDUALS NOT REQUIRED
TO FILE INCOME TAX RETURN
The following individuals are not required to file income tax return:
➢ AN INDIVIDUAL EARNING PURELY COMPENSATION INCOME WHOSE TAXABLE INCOME DOES NOT
EXCEED TWO HUNDRED FIFTY THOUSAND PESOS (P250,000.00);
• The Certificate of Withholding filed by the respective employers, duly stamped “Received” by the
Bureau, shall be tantamount to the substituted filing of income tax returns by said employees.
• Individual earning purely compensation income with more than one employer shall be required to
file an annual income tax return, regardless of the amount of income earned.
41
SECTION 9. INDIVIDUALS NOT REQUIRED
TO FILE INCOME TAX RETURN
The following individuals are not required to file income tax return
(cont…):
➢ An individual whose income tax has been correctly withheld by his employer, provided, that such
individual has only one employer for the taxable year – the Certificate of Withholding filed by the
respective Employers, duly stamped “Received” by the Bureau, shall be tantamount to the
substituted filing of income tax returns by said employees;
42
SECTION 9. INDIVIDUALS NOT REQUIRED
TO FILE INCOME TAX RETURN
The following individuals are not required to file income tax return (cont…):
➢ An individual whose sole income has been subjected to final withholding tax; and
➢ A minimum wage earner as defined in these regulations - The Certificate of Withholding
filed by the respective employers, duly stamped “Received” by the Bureau, shall be
tantamount to the substituted filing of income tax returns by said employees.
43
SECTION 10. TIME OF FILING OF INDIVIDUAL INCOME TAX
RETURN
• Note: The creditable tax withheld is deductible from the income tax due.
44
SECTION 11. INSTALLMENT PAYMENT OF INDIVIDUAL INCOME
TAX
When the tax due is in excess of Two thousand pesos (P2,000.00), the individual may elect to pay the
tax in two equal installments, in which case -
a. the first installment shall be paid at the time the annual income tax return is filed (on or before
April 15); and
b. the second installment ON OR BEFORE OCTOBER 15 following the close of the calendar year.
• If any installment is not paid on or before the date fixed for its payment, the whole amount of
the unpaid tax becomes due and payable, together with the delinquency penalties.
45
SECTION 12. TRANSITORY PROVISIONS
In relation to Section 24(A)(2)(b) and Section 24(A)(2)(c) of the Tax Code, as amended, all existing VAT
registered taxpayers whose gross sales/receipts and other non-operating income in the preceding year did
not exceed the VAT threshold of P3,000,000.00 have the option to update their registration to non-VAT as
early as possible but not after March 31, 2018, following the existing procedures on registration updates
and the surrender/cancellation of unused VAT invoices/receipts.
Starting January 1, 2019, existing VAT-registered taxpayers who have not exceeded the threshold
for the immediately preceding three-years, may opt to update their registration to non-VAT following rules
and regulations on registration updates, inventory and cancellation of VAT invoices/receipts.
46
TRAIN LAW
VALUE-ADDED TAX
1
[REPUBLIC ACT NO. 10963]
AN ACT AMENDING SECTIONS 5, 6, 24, 25, 27, 31, 32, 33, 34, 51, 52,
56, 57, 58, 74, 79, 84, 86, 90, 91, 97, 99, 100, 101, 106, 107, 108, 109,
110, 112, 114, 116, 127, 128, 129, 145, 148, 149, 151, 155, 171, 174,
175, 177, 178, 179, 180, 181, 182, 183, 186, 188, 189, 190, 191, 192,
193, 194, 195, 196, 197, 232, 236, 237, 249, 254, 264, 269, AND 288;
CREATING NEW SECTIONS 51-A, 148-A, 150-A, 150-B, 237-A, 264-A,
264-B, AND 265-A; AND REPEALING SECTIONS 35, 62, AND 89; ALL
UNDER REPUBLIC ACT NO. 8424, OTHERWISE KNOWN AS THE
NATIONAL INTERNAL REVENU CODE OF 1997, AS AMENDED, AND FOR
OTHER PURPOSES
2
TRAIN LAW RA 10963
NIRC TRAIN
SEC. 106. Value-Added Tax on Sale of Goods or SEC. 106. Value-Added Tax on Sale of Goods or
Properties. – Properties. –
XXXX XXXX
(2) The following sales by VAT-registered persons (2) The following sales by VAT-registered persons
shall be subject to zero percent (0%) rate:
shall be subject to zero percent (0%) rate:
SEC. 108. Value-added Tax on Sale of Services and SEC. 108. Value-added Tax on Sale of Services and
Use or Lease of Properties. – Use or Lease of Properties. –
(B) Transactions Subject to Zero Percent (0%) (B) Transactions Subject to Zero Percent (0%)
Rate. – The following services performed in the Rate. – The following services performed in the
Philippines by VAT-registered persons shall be Philippines by VAT-registered persons shall be
subject to zero percent (0%) rate: subject to zero percent (0%) rate:
(1) Processing, manufacturing or repacking goods (1) Processing, manufacturing or repacking goods
for other persons doing business outside the for other persons doing business outside the
Philippines which goods are subsequently Philippines which goods are subsequently
exported, where the services are paid for in exported, where the services are paid for in
acceptable foreign currency and accounted for in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the accordance with the rules and regulations of the
Bangko Sentral ng Pilipinas (BSP); Bangko Sentral ng Pilipinas (BSP);
10
TRAIN LAW RA 10963
NIRC TRAIN
(2) Services other than those mentioned (2) Services other than those mentioned
in the preceding paragraph, rendered to in the preceding paragraph, rendered to a
a person engaged in business conducted person engaged in business conducted
outside the Philippines or to a outside the Philippines or to a
nonresident person not engaged in nonresident person not engaged in
business who is outside the Philippines business who is outside the Philippines
when the services are performed, [51] when the services are performed, [51]
the consideration for which is paid for in the consideration for which is paid for in
acceptable foreign currency and acceptable foreign currency and
accounted for in accordance with the accounted for in accordance with the
rules and regulations of the Bangko rules and regulations of the Bangko
Sentral ng Pilipinas (BSP) Sentral ng Pilipinas (BSP)
(3) Services rendered to persons or (3) Services rendered to persons or
entities whose exemption under special entities whose exemption under special
laws or international agreements to laws or international agreements to
which the Philippines is a signatory which the Philippines is a signatory
effectively subjects the supply of such effectively subjects the supply of such
services to zero percent (0%) rate; services to zero percent (0%) rate; 11
TRAIN LAW RA 10963
NIRC TRAIN
13
TRAIN LAW RA 10963
NIRC TRAIN
14
TRAIN LAW RA 10963
NIRC TRAIN
“Provided, That subparagraphs (B)(1) and
(B)(5) hereof shall be subject to the twelve
percent (12%) value-added tax and no longer
be subject to zero percent (0%) VAT rate upon
satisfaction of the following conditions:
“(1) The successful establishment and
implementation of an enhanced VAT refund
system that grants refunds of creditable input
tax within ninety (90) days from the filing of
the VAT refund application with the Bureau:
Provided, That, to determine the effectivity of
item no. 1, all applications filed from January
1, 2018 shall be processed and must be
decided within ninety (90) days from the filing
of the VAT refund application; and
“(2) All pending VAT refund claims as of
December 31, 2017 shall be fully paid in cash
by December 31, 2019. 15
TRAIN LAW RA 10963
NIRC TRAIN
24
TRAIN LAW RA 10963
NIRC TRAIN
SEC. 114. Return and Payment of Value- SEC. 114. Return and Payment of Value-
Added Tax. - added Tax. –
(A) In General. - Every person liable to pay “(A) In General. – Every person liable to
the value-added tax imposed under this Title pay the value-added tax imposed under
shall file a quarterly return of the amount of this Title shall file a quarterly return of the
his gross sales or receipts within twenty-five amount of his gross sales or receipts
(25) days following the close of each taxable within twenty-five (25) days following the
quarter prescribed for each taxpayer: close of each taxable quarter prescribed
Provided, however, That VAT-registered for each taxpayer: Provided, however,
persons shall pay the value-added tax on a That VAT-registered persons shall pay the
monthly basis. value-added tax on a monthly basis:
Provided, finally, That beginning January
1, 2023, the filing and payment required
under this Subsection shall be done
within twenty-five (25) days following the
close of each taxable quarter. 26
TRAIN LAW RA 10963
NIRC TRAIN
(C) Withholding of Value-added Tax. - The “(C) Withholding of Value-added Tax. – The
Government or any of its political subdivisions, Government or any of its political
instrumentalities or agencies, including
government-owned or -controlled corporations subdivisions, instrumentalities or agencies,
(GOCCs) shall, before making payment on including government-owned or -controlled
account of each purchase of goods and services corporations (GOCCs) shall, before making
which are subject to the value-added tax payment on account of each purchase of
imposed in Sections 106 and 108 of this Code,
deduct and withhold the value-added tax goods and services which are subject to the
imposed in Sections 106 and 108 of this Code, value-added tax imposed in Sections 106 and
deduct and withhold a final value-added tax at 108 of this Code, deduct and withhold the
the rate of five percent (5%) of the gross value-added tax imposed in Sections 106 and
payment thereof: Provided, That the payment for 108 of this Code, deduct and withhold a final
lease or use of properties or property rights to
nonresident owners shall be subject to ten value-added tax at the rate of five percent
percent (10%) withholding tax at the time of (5%) of the gross payment thereof: Provided,
payment. For purposes of this Section, the payor That beginning January 1, 2021, the VAT
or person in control of the payment shall be withholding system under this Subsection
considered as the withholding agent.
shall shift from final to a creditable system:
27
TRAIN LAW RA 10963
NIRC TRAIN
Provided, further, That the payment for lease
or use of properties or property rights to
nonresident owners shall be subject to twelve
percent (12%) withholding tax at the time of
payment: Provided, finally, That payments for
purchases of goods and services arising from
projects funded by Official Development
Assistance (ODA) as defined under Republic
Act No. 8182, otherwise known as the ‘Official
Development Assistance Act of 1996’, as
amended, shall not be subject to the final
withholding tax system as imposed in this
Subsection. For purposes of this Section, the
payor or person in control of the payment
shall be considered as the withholding agent.
28
REVENUE REGULATION ON VAT
29
Republic Act No. 10963
Tax Reform on Acceleration and
Inclusion (TRAIN) Act
TOBACCO
Tobacco
R.A.10351 /
RR 17-2012
R. A. 10963
CIGARETTES, per pack January 1, July 1, 2018 January 1, January 1, January 1,
2018 until until 2020 until 2022 until 2024
2017
June 30, December December December Onwards
2018 31, 2019 31, 2021 31, 2023
Cigarettes packed by hand
Effective
Php30 Php32.50 Php35.00 Php37.50 Php40.00 1/1/2024, the
specific tax
Cigarettes packed by machine rate shall be
increased by
4% every
Php30 Php32.50 Php35.00 Php37.50 Php40.00 year
thereafter
Tobacco
REVISED RATES AND BASES OF EXCISE TAX ON TOBACCO PRODUCTS
TOBACCO PRODUCTS
R.A.10351 / RR 17-2012
2017 2018
(1) TOBACCO PRODUCTS, per kilo
a) Tobacco twisted by hand or reduced into a condition to be consumed in any
manner other than the ordinary mode of drying and curing; Php2.05 Php2.13
Effective
b) Tobacco prepared or partially prepared with or without the use of any machine January 1,
or instrument or without being pressed or sweetened; and Php2.05 2014, the Php2.13
tax rate
c) Fine-cut shorts and refuse, scraps, clippings, cuttings, stems, midribs and shall be
Php2.05 Php2.13
sweepings of tobacco increased
(2) CHEWING TOBACCO, per kilo Php1.75 by 4% every Php1.82
(3) CIGARS, per cigar year
AD VALOREM TAX equivalent to % of NRP/cigar and Specific Tax per cigar thereafter
AD VALOREM TAX 20% 20%
SPECIFIC TAX Php5.85 Php6.08
PETROLEUM
PETROLEUM
RA No. 10963
PRODUCTS 2017 January 1, January 1, January 1,
2018 2019 2020
(a) Lubricating oils and greases, including but not
limited to basestock for lube oils and greases, high
vacuum distillates, aromatic extracts and other
similar preparations, and additives for lubricating P4.50
oils and greases, whether such additives are
petroleum based or not, per liter and kilogram
respectively, of volume capacity or weight.
(a.1) Locally produced or imported oils previously P8.00 P9.00 P10.00
taxed but are subsequently reprocessed, rerefined
P4.50
or recycled, per liter and kilogram of volume
capacity or weight.
(b) Processed gas, per liter of volume capacity. P0.05
(c) Waxes and petrolatum per kilogram. P3.50
(d) Denatured alcohol to be used for motive
P0.05
power, per liter of volume capacity.
(e) Asphalts, per kilogram. P0.56
PETROLEUM
RA No. 10963
PRODUCTS 2017 January 1, January 1, January 1,
2018 2019 2020
(f) Naphtha, regular gasoline, and other
similar products of distillation, per liter of P4.35
volume capacity
P7.00 P9.00 P10.00
Pyrolysis gasoline -
(g) Unleaded premium gasoline, per liter
P4.35
of volume capacity
(h) Kerosene, per liter of volume capacity P0.00 P3.00 P4.00 P5.00
PETROLEUM
RA No. 10963
PRODUCTS 2017 January 1, January 1, January 1,
2018 2019 2020
(i) Aviation turbo jet fuel, per liter of volume capacity P3.67
Aviation gas - P4.00 P4.00 P4.00
(j) Kerosene, when used as aviation fuel, per liter of
P3.67
volume capacity
(k) Diesel fuel oil, and on similar fuel oils having
more or less the same generating power, per liter of P0.00
volume capacity
(l) Liquefied petroleum gas used for motive power,
P0.00
per kilogram P2.50 P4.50 P6.00
(m) Bunker fuel oil, and on similar oils having more
or less the same generating power, per liter of volume P0.00
capacity
(n) Petroleum coke, per metric ton -
PETROLEUM
RA No. 10963
PRODUCTS 2017 January 1, January 1, January 1,
2018 2019 2020
(o) Liquefied petroleum gas, per kilogram P0.00 P1.00 P2.00 P3.00
(p) Naphtha and pyrolysis gasoline, when used
as a raw material in the production of
petrochemical products or in the refining of
petroleum products, or as replacement fuel for
P0.00
natural-gas-fired-combined cycle power plant,
in lieu of locally-extracted natural gas during
the non-availability thereof, per liter of volume P0.00 P0.00 P0.00
capacity
(q) Liquefied petroleum gas, when used as raw
material in the production of petrochemical P0.00
products, per kilogram
(r) Petroleum coke, when used as feedstock to
-
any power generating facility, per metric ton
PETROLEUM
a) Lubricating oils and greases produced from basestocks and additives on which
the excise tax has already been paid shall no longer be subject to excise tax.
b) Accounting for stocks or inventory of goods after each date of effectivity of the new excise tax
rates. These inventories of petroleum products taken prior to each date of effectivity shall be
liquidated and accounted for on a “First-In First-Out” (FIFO) method of inventory.
c) Issuance of Withdrawal Certificates. All Withdrawal Certificates issued covering the removals
of petroleum products subject to the old or previous tax rates products shall be prominently
stamped with the phrase “STOCKS ON HAND PRIOR TO APPLICABLE DATE OF
EFFECTIVITY”.
MINERALS
MINERALS
F. PICK-UPS. ”
AUTOMOBILES
SEC. 5. A new provision designated as Section 5-A in RR No. 25-2003 is hereby
inserted to read as follows:
OFFICIAL RECEIPT
In settlement of the following:
DATE January 1, 2018
Amount
Cash 73,125.00
Professional Fee 17,857.14
Input VAT (P20,000.00/1.12 x 12%) 2,142.86
FWT-Excise 3,125.00
Output VAT 7,500.00
Doctor’s Fee Payable (P20,000.00/1.12 – 2,142.86) 18,571.43
Withholding Tax Payable (Prof Fee) 1,428.57
Service Income 62,500.00
• 6.3.2 Accounting Requirements. –
COSMETIC
OFFICIAL RECEIPT PROCEDURES AMOUNT COLLECTED
Gross Receipts
(Net of VAT 5% Excise Tax
No. Date PERFORMED /Excise) Withheld 12% VAT Total
• SEC.6. Administrative Requirements.
b) Owner or Possessor of
untaxed products
c) Importer
TAX RATES AND BASES
PRODUCT TAX RATE
(per Liter)
Using purely caloric sweeteners, and
purely non-caloric sweeteners, or a mix P6.00
of caloric and non-caloric sweeteners
Using purely high fructose corn syrup or
in combination with any caloric or non- P12.00
caloric sweetener
Using purely coconut sap sugar and
purely steviol glycosides
Exempt
COMPUTATION OF EXCISE TAX
Number of Liters
EXCISE TAX DUE = X
(Specific Tax) Excise Tax Rate
ILLUSTRATION
1. Carbonated Beverages
Dulce Manufacturing Corp. will remove
100 cases of Super Cola using HFCS and
non-caloric sweetener from place of
production. Each case contains 6 bottles
of 1.5 liters each.
Compute for the excise tax.
Solution:
No. of Cases 100
Multiplied by no. of bottles per case x 6
Total no. of bottles 600
Multiplied by contents per bottle x 1.5L
Total Volume in Liters 900L
Multiplied by Specific Tax Rate x P12.00
Total Excise Tax Due P10,800.00
ILLUSTRATION
2. Powdered Juice
Sweety Import Corp. will remove from
customs custody 50 cases of Four Seasons
Juice using caloric and non-caloric
sweetener containing 144 packs by 25
grams. Each 25grams pack can make 1Liter.
Compute for the excise tax.
Solution:
No. of Cases 50
Multiplied by no. of packs per case x 144
Total no. of packs 7,200
Multiplied by consumable yield per pack x 1L
Total Volume in Liters 7,200L
Multiplied by Specific Tax Rate x P6.00
Total Excise Tax Due P43,200.00
FILING AND PAYMENT OF EXCISE TAX
In General
Before removal from the place of production, in
case of locally manufactured products
Advance Payment/Deposit – Taxpayer, at his
option pay to the BIR using BIR Form 2200S
4. Use the downloadable BIR Form No. 2200-S in filing and paying
of excise tax due upon removals of excisable products from the
place of production.
The transfer of the net estate of every decedent, whether resident or non-
resident of the Philippines, as determined in accordance with the NIRC, shall be
subject to an estate tax at the rate of six percent (6%).
ESTATE TAX
What are included in gross estate?
For resident alien decedents/citizens:
a) Real or immovable property, wherever located
b) Tangible personal property, wherever located
c) Intangible personal property, wherever located
Net share of the surviving spouse in the conjugal partnership or community property
ESTATE TAX
What are the allowable deductions for Estate Tax Purposes?
For a non-resident alien
1. Standard deduction – P500,000.00
2. Proportion of the following deductions
a. Claims against the estate.
b. Claims of the deceased against insolvent persons where the value of the
decedent’s interest therein is included in the value of the gross estate
c. Unpaid mortgages, taxes and casualty losses
3. Property previously taxed
4. Transfers for public use
• Tax clearance is required before any transfer of shares may be made in the
name of new owners, however,
2% on P100,001 to P200,000
Stranger 30% 6%
Exemption
Dowries or gifts on allowed none
account of marriage
DONOR’S TAX
THE LAW THAT GOVERNS THE IMPOSITION OF DONOR’S TAX
The donor’s tax is not a property tax, but is a tax imposed on the transfer of property by way of gift inter
vivos. (Lladoc vs. Commissioner of Internal Revenue, L-19201, June 16, 1965; 14 SCRA, 292)
The donor’s tax shall not apply unless and until there is a completed gift. The transfer of property by gift is
perfected from the moment the donor knows of the acceptance by the donee; it is completed by the delivery,
either actually or constructively, of the donated property to the donee.
Thus, the law in force at the time of the perfection/completion of the donation shall govern the imposition of
the donor’s tax.
DONOR’S TAX
Donations or gifts with at least P250,000 worth will be
charged a donor’s tax of 6% flat rate. This will be charged
regardless of the relationship between the donor and the donee.
DONOR’S TAX
TRANSFER FOR LESS THAN ADEQUATE AND FULL CONSIDERATION
Where property, other than real property referred to in Section 24(D), is transferred for
less than an adequate and full consideration in money or money's worth, then the amount
by which the fair market value of the property exceeded the value of the consideration
shall, for the purpose of the tax imposed, be deemed a gift, and shall be included in
computing the amount of gifts made during the calendar year: Provided, however, 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.
DONOR’S TAX
EXEMPTION OF CERTAIN GIFTS:
Gifts made to or for the use of the National Government or any entity created by any of its agencies
which is not conducted for profit, or to any political subdivision of the said Government; and
Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation,
institution, accredited nongovernment organization, trust or philanthropic organization or research
institution or organization:
SAMPLE COMPUTATION
ILLUSTRATION:
SOLUTION/COMPUTATION:
TOTAL 3,250,000