Money & Power

How Will the Newly Ratified Tax Reform Bill Affect Your Personal Income Tax Next Year?

President Duterte just needs to sign the bill and it will take effect 15 days later.
IMAGE PEXELS
Comments

With the ratification of the reconciled version of the Tax Reform for Acceleration and Inclusion (TRAIN) bill by the two houses of Congress on Dec. 13, the government moves closer to its promise to sharply lower personal income taxes next year. The only remaining step is for President Rodrigo Duterte to sign the proposed law and it will take effect 15 days after.

ADVERTISEMENT - CONTINUE READING BELOW

One of the most important provisions in the TRAIN bill is the lowering of personal income tax rates. Taxpayers earning a taxable income of P250,000 a year or less will be exempted from paying personal income taxes. At present, only minimum wage workers are exempted from income taxes. Those earning higher incomes will pay sharply lower rates.

To help our readers see how the new TRAIN law will impact their personal income tax obligations next year, we prepared the infographic on this page. It provides information on the tax due on selected annual net taxable income levels under the current tax regime and under the TRAIN law. (Just a reminder, taxable income is not the same as total income for the year. The taxable income is part of your total income subject to income tax and is calculated by deducting personal and other deductions and allowable expenses from your total income).

ADVERTISEMENT - CONTINUE READING BELOW

For example, the table shows that somebody with a taxable income of P100,000 used to pay P14,500 under the prevailing tax law. Under TRAIN, his or her tax due drops to zero. Another whose net taxable income is P250,000 pays an income tax of P50,000 under the present tax regime. With the onset of TRAIN, his or her tax due also becomes zero. Somebody with a net taxable income of P300,000 will pay P65,000 in taxes due under the current tax system. Under TRAIN, his or her tax obligation falls to only P10,000 in 2018 and by another P7,500 by 2023 (assuming he or she still has the same income level).

For those who want to calculate exactly how much they’ll be paying under the TRAIN law, we also provided the new personal income tax schedule. We also provided the current tax schedule for comparison purposes.

Of course, the change in personal income taxes is just one of the many important components of the TRAIN law. To offset the revenue losses from lower income tax rates, the new tax package will also increase excise taxes on motor vehicles and fuel products as well as reduce tax exemptions and incentives for selected sectors and economic activities. It also imposes a tax on sugary drinks.

ADVERTISEMENT - CONTINUE READING BELOW

*****

This story originally appeared on Entrepreneur.com.ph.

* Minor edits have been made by the Townandcountry.ph editors.

Comments
View More Articles About:
About The Author
Entrepreneur Staff for Entrepreneur.com.ph
View Other Articles From Entrepreneur Staff for Entrepreneur.com.ph
Comments
Latest Stories
 
Share
These soon-to-be It bags feature a whole lot of logos and warm tones.
 
Share
Tom Cunanan, Margarita Manzke, and Sheldon Simeon were each nominated in three different categories.
 
Share
It's time to expand your palate to the other great whiskeys of the world.
 
Share
 
Share
According to Vicky Ward's eye-opening new book Kushner, Inc., the family refused to meet the model for six years.
 
Share
The royals paid tribute to the victims of last week's attack in Christchurch, and signed a book of condolence during this afternoon's previously unannounced visit.
 
Share
Plus, how much it costs to charter each vessel.
 
Share
Even if it isn't summer here, "it's always summer somewhere," says Lilly Pulitzer.
 
Share
The lifelong advocate of gender equality was also a National Scientist and an eminent historian.
 
Share
The King of Rock 'n' Roll met an tragic, and controversial, end.
 
Share
Here's an update on what the disgraced Theranos founder has been up to-from the ongoing legal proceedings to her new fiancé.
Load More Articles
CONNECT WITH US