TAXATION LAW 1 Atty. Vicente V. Cañoneo
AMENDMENTS AMENDMENTS ON R.A. No. 8424 OR THE NATIONAL NATIONAL INTERNAL INTERNAL REVENUE REVENUE CODE CODE OF 1997 AND IMPOSITION OF NEW TAXES ACCORDING TO R.A. No. 10963 OR THE TAX REFORM FOR ACCELERATION AND INCLUSION (TRAIN) LAW OF 2018
I.
Amendments
SUBJECT MATTER
NIRC
TRAIN
Personal Income
An individual employee or selfemployed taxpayer would normally have to pay income tax at the rate of 5% to 32% depending on one’s bracket.
An individual with a taxable income of P250,000 or less is exempted from income tax. Those with taxable income of above P250,000 will be subject to the rate of 20% to 35% effective 2018, and 15% to 35% effective 2023. The deductible 13 th month pay and other benefits amount to P90,000. Personal exemption of P50,000, and additional exemption of P25,000 per dependent child, and the premium for health and hospitalization insurance of P2,400 per year are no longer available. Flat rate of 6%. Deductions from gross estate includes: P5,000,000 as standard deduction, and P10,000,000 for family home. Single rate of 6% regardless of the relationship between the donor and the donee. Donation of real property is subject to Documentary Stamp Tax of P15 for every P1,000. VAT threshold of P3,000,000. By 2019, sale of drugs and medicines for diabetes, high cholesterol, and hypertension will be VAT-exempt. VAT exemption of residential unit amounts to P15,000. Association dues, membership fees, and other assessments and charges collected by homeowners associations and
The deductible 13th month pay and other benefits amount to P82,000. Personal exemption of P50,000, and additional exemption of P25,000 per dependent child, and the premium for health and hospitalization insurance of P2,400 per year. Estate
Donation
Value-Added Tax (VAT)
5% to 32% of the net estate. Deductions from gross estate includes: P1,000,000 as standard deduction, and P1,000,000 for family home. Donor’s tax is 2-15% if the donor and donee are related; 30% if not. Donation of real property is not subject to Documentary Stamp Tax. VAT threshold of P1,919,500. VAT is imposed on the sale of drugs and medicines for diabetes, high cholesterol, and hypertension. VAT exemption of residential unit amounts to P12,800. VAT is imposed on association dues, membership fees, and other assessments and charges collected by homeowners
GEMMA F. TIAMA 2nd Sem SY 2017-18, Sunday Class 9:00AM-12:00PM Page 1 of 3
TAXATION LAW 1 Atty. Vicente V. Cañoneo
Passive Income
Sale of Shares of Stock
associations and condominium corporations. Interest income from foreign currency deposits is 7.5%. Interest income from preterminated long-term deposits is 5.20%. PCSO winnings are exempted. Sale of shares of stock not traded through stock exchange is taxed by 5-10%. Sale of shares of stock listed and traded through Local Stock Exchange is taxed by 1/2 of 1%.
Excise Tax
Hybrid vehicles, electric vehicles, and pick-ups are subject to exemption from excise tax. Documentary Stamp Tax (DST)
condominium corporations are expressly VAT-exempt. Interest income from foreign currency deposits is 15%. Interest income from preterminated long-term deposits is 20%. PCSO winnings are taxed by 20% if more than P10,000. Sale of shares of stock not traded through stock exchange is taxed by 15%. Sale of shares of stock listed and traded through Local Stock Exchange is taxed by 6/10 of 1%. Imposition of higher excise tax on cigarettes, manufactured oils (petroleum products), mineral products and automobiles. Hybrid vehicles is subject to 50% of the applicable excise tax rates. Purely electric vehicles and pick-ups are exempted from excise tax. Increased DST on the following taxable documents: original issue of shares of stock; sales agreement to sell, memoranda of sales, deliveries or transfer of due-bills, certificate of obligation, or shares of certificate of stock; stamp tax on certificates of profits or interest in property or accumulations; bank checks, drafts, certificates of profits or interest in property or accumulations; debt instruments; bills of exchange or drafts; acceptance of bills of exchange; foreign bills of exchange and letters of credit; life insurance policies; policies of annuities; pre-need plans; certifications; warehouse receipts; Jai-Alai, horse racing tickets, lotto, or other authenticated numbers of
GEMMA F. TIAMA 2nd Sem SY 2017-18, Sunday Class 9:00AM-12:00PM Page 2 of 3
TAXATION LAW 1 Atty. Vicente V. Cañoneo
games; bills of ladings or receipts; proxies; powers of attorney; lease or other hiring agreements; mortgages, pledges, and deeds of trust; deeds of sale and conveyance of real property; and charter parties and similar instruments.
II.
New Tax Provisions
SUBJECT MATTER
TRAIN
Excise tax on sweetened beverages
P6.00 per liter on the use of purely caloric sweeteners, and purely non-caloric sweeteners, or a mix of the two sweeteners. P12.00 per liter on the use of purely high fructose corn syrup or in combination with any caloric or non-caloric sweetener. Excise tax of 5% is imposed on invasive cosmetic procedures directed solely towards improving, altering, or enhancing the patient’s appearance.
Non-essential services (invasive cosmetic procedures) Simplified tax compliance
Income Tax Returns (ITR) shall not be more than four (4) pages. The Tax Return for final and creditable withholding taxes shall be filed quarterly instead of monthly. Some measures for estate tax were adopted to simplify the computation and payment which includes the following: a. Standard deduction on actual funeral and medical expenses were increased from P1,000,000 to P5,000,000. b. Notice of death is no longer required. c. CPA certification is now required only if the gross estate is above P5,000,000 (up from P2,000,000). d. Deadline from filing of estate tax return is now one year from death (before, 6 months from death) e. Bank deposits left by the decedent may be withdrawn by the heirs subject only to 6% withholding tax. Before certification from the BIR that estate tax has been paid was required. f. Beginning January 01, 2023, the filing of VAT Return and payment of tax shall be done quarterly instead of monthly. g. The BIR is required to act on application for VAT refund within 90 days. Otherwise, the BIR official, agent, or employee will be criminally liable. h. The Financial Statements of a taxpayer should be audited if the gross annual sales, earnings, receipts, or output exceed P3,000,000 (up from P150,000,000).
GEMMA F. TIAMA 2nd Sem SY 2017-18, Sunday Class 9:00AM-12:00PM Page 3 of 3
