A lot of people have been discussing the TRAIN law and how will it affect us. I’ve been reading about it and I’ll be sharing some of the things that I read about with you. Also, I’ll be sharing a Philippines BIR Tax Software that I have been using.
What is TRAIN?
President Rodrigo Duterte signed the Tax Reform for Acceleration and Inclusion (TRAIN) into law last December 19, 2017. It’s the first package among the other tax reform measures to be issued by his administration. It expected to make a considerable impact on the prices of goods and services, take-home pay of Filipinos and their purchasing power.
About 70% of collected revenues will go to infrastructure projects that the Duterte’s administration plan to build. His administration has planned to allocate P8.44 trillion for its “Build, Build, Build” program for 2017-2022. They plan to build more road networks and better mass transportation rides for the public. These will enhance the economy and create more investment opportunities, thereby creating more jobs or income sources for the Filipinos.
The other projects under the 70% collected revenues are the following: infrastructure for the military, drinking water facilities in all public places and sports facilities for public schools. The remaining 30% will be spent on social mitigating measures and investments for health, nutrition, hunger and education.
What is it to Employees?
Under this law, there is a zero percent tax for low-income earners with an annual income of P250,000 and below. Those with an annual income of P8 million and above are taxed with 35 percent. The 13th month pay and other bonuses at P90,000 and below will remain not to be taxed. This new law lightens the financial burden among low-income earners. With the previous income tax law, about 5 percent is deducted from earners with P10,000 and below income. Those with an annual income of P500,000 and above get to have 32 percent of off their income.
What is it to us Business Owners, Freelancers and Professionals?
For business owners, sole proprietorships and licensed and non-licensed individuals, those earning below Php 250,000 per year will be tax exempt. Those who earn Php 3 Million and below per year now have the option to file and pay for a 3% percentage tax + income tax (paid quarterly) or an 8% percentage tax of gross receipts (paid annually).
Although the 8% percentage tax paid annually may seem attractive, you may want to check what is better for your business. There is still a level where 3% percentage tax + income tax (paid quarterly) is a better option.
Here’s how to check:
One – Download this calculator by a my friend Mark Ong, who is a CPA.
Train bill – compare: Train bill – compare
Second Option – This is a blog from Taxumo, Philippines’ BIR tax software.
What else did change?
The BIR placed a higher tax rate on coal, mining, tobacco, sweetened beverage petroleum, and automobiles. Some may not find it as good news. They fear that companies will increase the prices of their goods for consumers to shoulder the higher tax rates.
Everyone’s awaiting the other packages and the Implementing Rules and Regulations of the BIR. If you want to know more about the Philippines Tax Reform law, join the workshop of Manila Workshops on January 27. Check it out in this link: http://manilaworkshops.com/events/understanding-tax-reform-for-msmes-self-employed-professionals-freelancers
Personally, our team in Taxumo studied the law and thought about how to easily cascade it to our users. If you haven’t checked out this Philippines BIR Tax Software, you should. It really makes your life as an entrepreneur, freelancer and professional easier. How? Taxumo is the first in the industry to have automated calculations of your tax dues. And guess what? The Taxumo Income Tax calculations now uses the formula from the TRAIN law (RA No. 10963).
Once the Implementing Rules & Regulations are released by the BIR, Taxumo will be updating the forms & formula speedily and accurately to make sure that you’re using the latest forms when you’re filing your taxes.
If you want to try out Taxumo, sign up now for a FREE trial.