TRAIN Law: What it is and how it affects the Filipinos

what-is-train-law

The Tax Reformation for Acceleration and Inclusion or TRAIN law was signed by President Duterte on December 19, 2017 to simplify the government tax system. The bill has already started last January 1, 2018, and many Filipinos are already happy with it, but some are not.

what-is-train-law

 

What exactly is the TRAIN law? In this article, you’ll know the changes and how will affect every Filipinos.

Increased take-home money and bonuses:

Employees or workers with an annual salary of ₱250,000 are exempted now from tax. Includes the mandated 13th month bonus and other taxable bonuses. You’ll have 0% tax deduction compared with old tax system which has 5% to 32% deductions. You’ll have higher take-home pay and more chances of saving money.

Increased price on sugar-sweetened beverages and cigarettes:

Sugar-sweetened beverages have ₱6 per liter tax, while high fructose corn syrup beverages have ₱12 per liter. Milk products, 100% natural fruit and vegetable juices, and pre-packaged coffee products are exempted. This aims to reduce obesity and diabetes problems of the Filipinos.

Cigarette prices have ₱2.50 increments starting this year until 2023. By 2024, an increase of 4% every year will be implemented.

Increased on petroleum price:

An ₱8 per liter increase in petroleum products and gradually increase until 2020. As for diesel and kerosene, will now have a tax of ₱2.50-P3 per liter and ₱1 per liter for LPG gas.

Increased on automobile tax:

Vehicles worth ₱600,000 and below will have a 4% increase.
Vehicles over ₱600,000 to ₱1 million will have a 10% increase.
Vehicles over P1 million to P4 million will have 20% increase.
Vehicles over ₱4 million will have 50% increase.
For Hybrid cars, tax is cut to half.
Electric powered vehicles and pick-ups are exempted.
Also, an increase of 10-20% tax in 2019.

Estate tax, donor tax and Higher Documentary Stamp Tax:

Under the TRAIN law, estate tax has now a flat rate of 6%. Estates worth ₱5 million and below will have zero tax rate, for ₱5 million and above will have 6% of the excess over ₱5 million.
The donor’s tax has also a flat rate of 6% tax regardless of the relationship between donor and the receiver.
For all documentary Stamp Taxes, they have doubled it under the TRAIN law.

Higher threshold for value-added tax:

The threshold for Value Added Tax has now increased from ₱1.9 million to ₱3 million. Small businesses with less than ₱3 million annual income, health and education, persons with disability, drugs and medicines for diabetes, hypertension, cholesterol and senior citizens are still VAT exempted.

If you’re renting your home, the increase of VAT exemption from ₱10,000 to ₱15,000 is also a welcome addition.

Conclusion: 

You’ll have higher take-home pay because of the decreased income taxes, however, there will be an increased tax for basic goods and commodities. Budgeting your money and minimize spending on stuffs that you don’t need are what TRAIN law wants for every Filipinos.

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