Tax Reform for Acceleration and Inclusion

This Tax Alert is issued to inform all concerned on Senate’s Committee on Ways and Means version of the Tax Reform for Acceleration and Inclusion (TRAIN) under Senate Bill (SB) No. 1592.

Below are the significant changes being proposed under SB No. 1592 in relation to the House of Representative’s House Bill No. 5636:

 

  1. On the Commissioner’s power to inquire and receive information on bank deposit accounts on order of any court, SB No. 1592 proposes to include cases of failure to file return, supply correct and accurate information, pay tax, withhold and remit tax and refund excess taxes withheld on compensation.
  2. Under SB No. 1592, proposed non-taxable individual income is P150,000 and the maximum rate of 32% is applicable on income over P2M. Additional personal exemption shall still be allowed up to four (4) qualified dependent.
  3. Self-Employed and/or Professional shall have the option to be subject to 8% income tax on gross receipts in excess of P150,000, or graduated tax rates to be applied on income from business or practice of profession. Choice is irrevocable for the next three years.
  4. Optional Standard Deduction (OSD) of individuals shall be based on gross income (sales less COS) at the rate of 40%.
  5. The 15% preferential tax treatment on RHQ, ROHQ, OBUs and petroleum contractors on qualified employees shall not be applicable to individuals employed beginning Jan. 1, 2018. Those currently enjoying preferential rate shall still be entitled until the end of current employment.
  6. Individual’s income received from PCSO and Lotto winnings exceeding P10,000, interest on FCDU, cash or property dividends received by individuals, and capital gains from sale of shares of stocks not traded in the stock exchange shall be subject to 20% final tax.
  7. Estate tax shall be subject to a flat rate of 6% with removal of certain deductions, increase in standard deduction, and proposed additional deduction for family farm. Certain changes on filing and notification requirements are also being proposed.
  8. Donor’s tax shall be a flat rate of 6% on donations in excess of P100,000.
  9. Removal of certain VAT zero-rated sales subject to enhanced VAT refund system.
  10. VAT threshold shall be increased to P3M.
  11. Residential dwellings located outside Metro Manila with selling price of not more than P2M shall be exempt from VAT.
  12. Transfer of property pursuant to 40 (c) (2) shall be VAT exempt.
  13. Excise tax rates on petroleum products should be increased at different schedules and excise tax on automobiles shall be increased to a top rate of 100% for automobiles with NMP/ISP in excess of P3.1M.
  14. Excise tax of 20% on cosmetic procedures shall be imposed.
  15. Sugar Sweetened Beverage Tax of P5/P10/P3 based on type of sugar content were imposed.
  16. Deficiency interest rate shall be reduced to twice the legal rate as set by BSP (currently at 6%, hence, interest rate shall be 12%).

 

Download Senate Bill No. 1592