Understanding the TRAIN Law: Key Tax Changes You Need to Know

Republic Act No. 10963, known as the TRAIN Law, took effect on January 1, 2018, and brought sweeping changes to the Philippine tax system.

Personal Income Tax

The TRAIN Law raised the personal income tax exemption threshold to PHP 250,000 annually. Those earning PHP 250,000 and below are now exempt from income tax.

New Income Tax Rates

Individuals earning above PHP 250,000 are taxed at graduated rates ranging from 20% to 35%, depending on income bracket.

VAT Changes

The VAT exemption threshold for small businesses was increased to PHP 3 million in annual gross sales or receipts. Certain previously VAT-exempt transactions were also revised.

Excise Taxes

Significant excise taxes were imposed on fuel products, tobacco, automobiles, and sugar-sweetened beverages.

Estate and Donor's Taxes

Estate tax was simplified to a flat rate of 6% on the net estate. Donor's tax was likewise simplified to a flat rate of 6% on donations exceeding PHP 250,000 per year.

Consult with our CPA-Lawyers at QSP Law Office for personalized tax planning advice.