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UNIVERSITY OF THE EAST

C.M. Recto, Manila


College of Law

A Legal Research on

Republic Act No. 10963

Tax Reform for Acceleration and Inclusion (TRAIN) Law


for the final completion of the Requirements in Legal Research

Section 1-A-1, Tuesday 7:30 - 9:30 P.M.

Presented by Group 1

Aguirre, Tkisha
Guevarra, Patricia Allaine (Leader)
Lasheras, Marry Rose
Ruba, Angelie
Vicente, Ariane

Presented to

Atty. Arnold Apdua, CPA



Table of Contents

Foreword

I. Understanding the Concept


A. Introduction to Republic Act No. 10963
B. History
C. Proponents/Signatories

II. Relating the Concept


D. Arguments before its enactment
E. Pros and Cons

III. Analyzing the Concept


Effects of the law to the Country

IV. Evaluating the Concept


F. Tax Changes
1. Personal Income tax
2. Estate tax
3. Donor’s tax
4. Value-Added tax
5. Excise tax
6. Other excise taxes
7. Documentary Stamp tax
8. Other Taxes
G. Tax Administration
Index for TRAIN Law
1. TRAIN Act

2. Revenue Issuances

3. Forms

4. Advisories

5. Announcements

6. News Articles

V. Conclusion

References

Foreword

TRAIN commences at the beginning of this year – January 1, 2018. Since it is a new

enacted law it is still subject to scrutiny, criticism, controversies and arguments due to its

effect as a whole and to every individual of the Philippines. Thus, there are no books yet or

available resources written by someone that can be cited legally or as a legal reference, not

even a jurisprudence, except the enacted law itself. The available resources vis-a-vis the

TRAIN law can be accumulated from articles written in the newspapers or journals and

websites. In addition are those presentations and videos presenting interviews from

prominent individuals with legal authorities and expertise to speak or deliver a talk and

opinions regarding the said law. Those are lawyers practicing in the field of taxation and tax

experts or whiz. Such individuals really have much to say about R.A. 10963 that can inform

and educate many Filipinos about the TRAIN in a simplified way and in layman’s term

explanation. When one observes some of the articles you can see the differing views of each

resource person. Furthermore, we can notice as well that most of them merely want that

every citizen of the Philippines understand the TRAIN Law and be informed about it

emphasizing and focusing not just on one of its features but the Law as a whole – in general.

As people tend to fix their attention to its feature that greatly affected them.

According to the President, “..lack of consultation or insufficiency of information can, at

times, lead to a rash judgments.” Thus, this paper is created with a main goal of having it as

an additional tool, material or source for talks, meetings and gatherings; to further aid readers

and different individuals from all walks of life to understand the TRAIN Law by heart; and to be

a supplementary material for other researchers with fervent interest on the same topic. As

lawmakers create laws thinking to improve lives and for the country’s progress; researchers
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on the other hand serves as aids and have their function of improving, developing and

showing what are there that need improvement to make things even better by presenting their

conclusions and/or recommendations on their papers based on their observations and tests

utilizing their preferred process and methods.

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I. UNDERSTANDING THE CONCEPT

Introduction

The TRAIN Law, a tax reform fund, which will be allocated for the

education, health services and infrastructure programs. To understand what

the train law is, this part of the paper will answer “what the train law is?” “Its

Legislative History?” ‘Who are the proponents and signatories?”

“What is the Tax Reform Program? We are redesigning our tax system to
be simpler, fairer, and more efficient for all, while also raising the resources
needed to invest in our infrastructure and our people. We will lessen the
overall tax burden of the poor and the middle class.

The Tax Reform for Acceleration and Inclusion (TRAIN) is the first package
of the comprehensive tax reform program (CTRP) envisioned by President
Duterte’s administration, which seeks to to correct a number of deficiencies
in the tax system to make it simpler, fairer, and more efficient. It also
includes mitigating measures that are designed to redistribute some of the
gains to the poor.

Through TRAIN, every Filipino contributes in funding more infrastructure


and social services to eradicate extreme poverty and reduce inequality
towards prosperity for all. TRAIN addresses several weaknesses of the
current tax system by lowering and simplifying personal income taxes,
simplifying estate and donor’s taxes, expanding the value-added tax (VAT)
base, adjusting oil and automobile excise taxes, and introducing excise tax
on sugar-sweetened beverages.1”

This Law undergo a crucial processes before it became a law, process such

as: debates, critics, technical working group and forums inside and outside

1About the Tax Reform - What is TRAIN? • #TaxReformNow. (n.d.). Retrieved October 8, 2018, from http://
www.dof.gov.ph/taxreform/index.php/train/

Most of the funding as to Duterte’s Administration’s Proposal will be allocated for the build

build build program and other social services.

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the government by government officials itself, economist and faculties or

students who were analyzing what the train law is and what will be the effects

of the said law.

Legislative History

HOUSE OF REPRESENTATIVE

In September 26, 2016. The House Bill No. 5636 or the proposed Tax

Reform for Acceleration and Inclusion Act was endorsed by the Department

of Finance (DOF) to the Philippine House of Representatives as the first

package of a wider Comprehensive Tax Reform Program (CTRP)

through letter of Executive Secretary Salvador Medialdea to Speaker

Pantaleon Alvarez dated May 29. Presidential Legislative Liaison Office

head Adelino Sitoy was also furnished copies of the letter.

Finance Secretary Carlos Dominguez III made an appeal in a

memorandum to the Chief Executive, praying that the House of

Representatives could pass the TRAIN. Finance Secretary Carlos

Dominguez III contended in his memo

‘’the ‘dire consequences’ of the Congress’ failure to pass soon enough this
TRAIN bill, given its design to help guarantee a steady revenue flow for the
Duterte administration’s unmatched public investments over the next half-
decade to support its envisioned ‘Golden Age of Infrastructure,’ attract
investments and create jobs, cut the poverty rate from 21.6 percent to 14
percent, and transform the Philippines into an upper middle-income
economy by the time the President leaves office in 2022…Given the
significance of the tax reform in funding the priority programs of the
President that will uplift the lives of the poor, in particular the Golden Age of
Infrastructure, and in maintaining strong macroeconomic fundamentals, we
request the President’s full endorsement and support for the tax reform,”
In January 17 2017. Quirino Representative Dakila Carlo Cua, the chairman

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of the House ways and means committee that is in charge of writing tax

laws, filed House Bill No. 4774 which was submitted by DOF as CTRP’s first

package to the Congress last September 26. Prior to 13 public hearings in

the course of four months, the House Bill No. 7890 with 54 other tax-related

bills was consolidated into a House Bill No. 5636, a substitute bill which had

"moderate" changes from House Bill No. 4774 which was approved on May

8.

On May 23. HB 5636 is formally submitted for plenary deliberations and

was also taken up and approved by the House committee on

appropriations, which was chaired by Davao City Representative Karlo

Alexei Nograles, to which it was referred to undergo the bill’s fund

earmarking provisions.2

SENATE

Senate President Aquilino Pimentel III filed Senate Bill No. 1408, the Senate

version of the measure and thus far conducted six public hearings on it with

the chamber’s Committee on Ways and Means chaired by Juan Edgardo

Angara. Following the provision of 1987 Constitution, the Senate had to wait

for the passage of House of Representatives version before it could start

plenary discussions.

The Senate voted 17-1 to approve the Tax Reform Acceleration and

Inclusion (TRAIN) bill.

2A. (2017, May 29). PRRD certifies tax reform bill as urgent • #TaxReformNow. Retrieved October 9, 2018, from http://
www.dof.gov.ph/taxreform/index.php/2017/05/29/prrd-certifies-tax-reform-bill-as-urgent/
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On November 28, 2017. Duterte's certification of the TRAIN as "urgent"

allowed the bill to get passed the second reading. Within the same day, the

Senate bill passed the third and final reading.3

BICAMERAL CONFERENCE COMMITTEE

The bills passed by the House of Representatives and the Senate was

consolidated by the Bicameral Conference Committee.

On December 11, 2017. A bill which favored the Senate version was

then approved by the committee and prepared a report after for ratification

of both chambers of the Congress and signing of the President.

On December 13, 2017. The version of the bill prepared by the

Bicameral Conference Committee was ratified by the House of

Representatives and the Senate.4

SIGNING INTO A LAW AND PARTIAL VETO

On December 19, 2017 in Malacanang. President Rodrigo Roa Duterte

signed into law Republic Act No. 10963 or the Tax Reform for Acceleration

and Inclusion (TRAIN) Act, the first package of the Comprehensive Tax

Reform Program (CTRP).

“President Duterte has vetoed certain provisions of the TRAIN. The vetoed

3A. (2017, May 29). PRRD certifies tax reform bill as urgent • #TaxReformNow. Retrieved October 9, 2018, from http://
www.dof.gov.ph/taxreform/index.php/2017/05/29/prrd-certifies-tax-reform-bill-as-urgent/

4I. (2017, December 13). House, Senate ratify TRAIN tax bill. Retrieved October 9, 2018, from http://www.interaksyon.com/
breaking-news/2017/12/13/113019/house-ratifies-train-tax-bill-despite-quoru m-question/
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five line items are the following provisions:
1. Reduced income tax rate of employees of Regional Headquarters
(RHQs), Regional Operating Headquarters (ROHQs), Offshore Banking
Units (OBUs), and Petroleum Service Contractors and Subcontractors;
2. Zero-rating of sales of goods and services to separate customs territory
and tourism enterprise zones;
3. Exemption from percentage tax of gross sales/receipts not exceeding five
hundred thousand pesos (P500,000.00);
4. Exemption of various petroleum products from excise tax when used as
input, feedstock, or as raw material in the manufacturing of petrochemical
products, or in the refining of petroleum products, or as replacement fuel for
natural gas fired combined cycle power plants; and
5. Earmarking of incremental tobacco taxes.”

Signatories

(source: https://www.senate.gov.ph/republic_acts/ra%2010963.pdf)

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II. RELATING THE CONCEPT

Pros and Cons

The TRAIN Law has really affected the lives of people in many different ways. Some

experienced advantages when the law has been effective but also some experienced the

downsides in a manner that this both affect the lives of the poor and the rich.

In order to fully understand the TRAIN Law and its effect, it is important to weigh both

sides by looking to its pros and cons. Many people support the imposition of the said law

because of its help in reducing the payment of income taxes, in the infrastructure projects and

many other reasons.

First, income tax payers who earn approximately P22,000 monthly and below are now

exempted from income taxpayment.5 Workers with an annual salary of P250,000 that were

once deducted 5% to 32% in tax rate now have 0% tax and also accorded with a mandatory

13th month bonus and other bonuses.6 This effect is one of the remarkable advantages this

TRAIN law offers because the workers get to spend their money on basic necessities

because of the reduction in income tax. They will be benefited in a way that their salary will be

having no deductions anymore. Before, tax payment for those low wage earners are really a

burden but because of this law they have been given a chance to fully enjoy it. It has been

contended that this new tax law is pro-people because of this effect. With this, a simplified tax

filing and payment process will be the result because worker who are exempted from the

payment of income tax will no longer have to file their income tax returns.

5Pros and cons of tax reform package law in PH. (2017, December 20). Retrieved from https://filipinotimes.net/
news/2017/12/20/pros-cons-tax-reform-package-law-ph/

6 Here's How the TRAIN Law Will Affect Everyone. (2018, January 9). Retrieved from https://8list.ph/heres-how-
the-train-law-will-affect-everyone/#read-more
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Second, the TRAIN law will lower estate tax and made fairer the value-added tax.

Presidential Spokesperson Harry Roque said that “taxpayers would now have to pay a fix rate

of 6 percent for the net estate with the standard deduction of P5 million.” This law also

revoked 54 special laws that provided nonessential VAT exemptions. It also provided

exemptions from VAT especially for those small businesses, senior citizens and PWDs,

renewable energy, and drugs and medicine for diabetes, hypertension, and cholesterol.7 This

will help in giving more chance for Filipinos to engage more in business and be entrepreneurs

which in return will make and give more infrastructures and job offers.

Third, revenues to be generated from the TRAIN will go to infrastructure projects.

These are very important because it will help in the development and advancement of the

country. This initiative will also have a domino effect in a way that it will open more job

opportunities for people. The making of these projects that the government plans to have will

result in hiring the people to build and manage it in which the people will be benefited

because nowadays looking for a job is a tough one especially that people became more

competitive and has greater perseverance.

TRAIN law also became more controversial because of some problems and

disadvantages it caused in the country. The people did not anticipate the would be effects of

this law once passed.

TRAIN law resulted to an increase in prices of products and other services. The

reduced in taxes was covered up by the imposition of taxes on the consumer goods in which

other contends that the reduction has become meaningless because they get to spend more

on these basic necessities. The result was a higher prices for fuel and gas, electricity,

7TRAIN benefits outweigh higher consumer prices - Palace. (2018, January 2). Retrieved from https://
www.philstar.com/headlines/2018/01/02/1773865/train-benefits-outweigh-higher-consumer-prices-palace
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vehicles, tobacco, and other products and services. This also affected other things because

the additional tax will increase the selling price of every consumer product and that the twelve

percent value added tax will be computed on a higher selling price. 8

The TRAIN law imposes excise tax on oil of up to P6 over the next three years, and

raises taxes on other products including motor vehicles because automobiles are also not

exempted from the excise tax. It also imposes a P6 tax per liter on drinks containing caloric or

non-caloric sweetener and P12 per liter tax on drinks containing high fructose corn syrup or

combination. Sugar-sweetened beverages which are once without taxes became a burden to

the consumption of people. With this increased in the taxes of these commodities and goods,

it is presumed that it will raise transport fares, electricity costs and consumer prices.

One of the most affected with these are the people in the agricultural field. PhilRice

stated that "TRAIN increases the production cost of pump-dependent farmers by 50 centavos

for every kilogram of palay produced, which diminishes their income by 10%,".9 It doubled

their expenses which is actually not beneficial to their work.

Despite of these disadvantages, Filipinos should still be positive that this TRAIN law

will soon be truly beneficial to the country.

8 Pros and cons of TRAIN. (2018, January 16). Retrieved from http://manilastandard.net/opinion/columns/hail-to-
the-chair-by-victor-avecilla/256378/pros-and-cons-of-train.html
92018 study: Rice farmers' income drops due to TRAIN. (2018, May 3). Retrieved from http://
cnnphilippines.com/news/2018/05/03/PhilRice-farmers-income-TRAIN.html

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III. ANALYZING THE CONCEPT

The TRAIN has a long way to go. Filipinos can see it, every family can feel it, the

country is experiencing it. Nevertheless, we are not living yet its full impact and effects. As we

have read and learned, this is just the initial package of the Comprehensive Tax Reform

Program (CTRP) signed into law by President Rodrigo Duterte. It is just one of the primary

ways in which the 2020 and 2040 vision of the current administration is to be achieved. If we

examine it carefully the Congress have expected changes that will take place every year for

the TRAIN. The President further said that we need this law “for sustainable growth that

leaves no Filipino left behind.” The law has a goal of eradicating extreme poverty in the

country but not in an instant – through a process.

TRAIN greatly affects the country’s economy. The BIR and other government agencies

reported that there is an increase in their collection when the law started to take effect. Others

also enjoy their exemption from the personal income tax. Meanwhile, in the goal of alleviating

poverty, we can hear that many, most of them are from the poor sector of the country, blame

the implementation of the TRAIN Law for the soaring inflation of the basic commodities. Since

TRAIN Law commences in the beginning of the year, later the nation began to notice the rapid

high inflation rate. Worse those products that mount up in prices are used for their daily

consumption and survival. When the government imposes higher taxes to fuels, which is

mainly used to run almost everything to transport and manufacture the basic commodities and

to run even the tiny jeepney of ‘Mang Juan’ that is the source of his livelihood, the prices

began to swiftly go up and the domino effect in the lives of every Filipino is felt.

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Those who are greatly and directly affected are those who earn less and are jobless in

the country. However, experts say that not all can be blame to the TRAIN Law. What the

Filipinos may be experiencing right now are the natural effects of change of the new passed

law. It has been said that we need to “always think big.” What the Filipinos may be seeing is

the present and not its later or future effect to the country. “Apparently,” as one of the

columnists have written, “the Philippine tax system is a very complicated one and this was

certainly considered by Congress when they enacted the TRAIN Law.” In other words, the

citizens are rest assured that this is for everybody’s welfare and/or social justice.

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IV. EVALUATING THE CONCEPT
Tax Changes10

A. Personal Income Tax

RA 10963 restructures the personal income tax (PIT) schedule, with separate
schedules for compensation income earners (CIEs), purely self-employed and/or
professionals (SEPs) whose gross sales or gross receipts and other non-operating income do
not exceed the Value-Added Tax (VAT) treshold of P3 million and mixed income earners.

Old tax schedule

New Tax Schedule

a. For compensation Income Earners

10“Tax Changes You Need to Know - TRAIN” by Department of Finance National Tax Research
Center, Republic of the Philippines (March 2018)
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b. For Self-employed and Professionals

c. For Mixed Income Earners

Other Reforms:

• Reduces the number of tax brackets from 7 to 6;


• Exempts the first P 250, 000 annual taxable income of taxpayers;
• Sets the highest amount of taxable income at more than P8 million and subjects it to a
higher marginal rate of 35%;
• Repeals the provision on basic personal and additional exemptions and premiums paid
on health and/or hospitalization insurance which are deemed integrated into the P250,
000 exempt treshold;
• Retains the income tax exemption of minimum wage earners;
• Retains the exemption from tax of de minimis benefits as well as the non-taxability of
mandatory contributions such as those made to the GSIS, SSS, PhilHealth, Pag-IBIG
Fund and union dues;
• Increases the amount of tax-exempt benefits ceiling (13th month pay and other benefits)
from P82, ooo to P90, 000;
• Imposes a 20% final tax on PCSO and lotto winnings exceeding P10, 000;
• Removes the preferential tax rate of 15% for employees of regional or area
headquarters, regional operating headquarters, offshore banking units and petroleum
service contractors and subcontractors;
• Increases the fringe benefits tax (FBT) rate from 32% to 35%; and
• Inserts a provision that the Optional Standard Deduction by a general professional
partnership (GPP) may only be availed once, either by the GPP or the partners
comprising such partnership.

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B. Estate Tax

RA 10963 simplifies the estate tax schedule, from a six-bracket schedule with rates
changing from 5% to 20%, to a single rate of 6% based on the value of the net estate:

Old tax schedule

New tax rate

On the computation of Estate Tax:

• Removes the deductions from gross estate pertaining to actual funeral expenses or 5%
of the gross estate, whichever is lower; judicial expenses; and medical expenses but
increased the amount of standard decution from P1 million to P5 million;
• Increases the amount of deduction for family home from up to P1 million to up to P10
million and removes teh sine qua non condition for the exemption or deduction, that the
family home must have been the decedent’s family home as certified by the barangay
captain of the locality;
• Removes the deductions of nonresident etates pertaining to expenses, losses,
indebtedness, and taxes but provides for a standard deduction amounting to P500, 000;
• Deletes the provisions that requires executor, administrator or anyone of the heirs to
include in the estate tax return that part of the nonresident alien’s gross estate not
situated in the Philippines to be able to claim deductions;
• Increases the amount of gross value of estate provided in estate tax returns that requires
to be supported with a statement duly certified by a Certified Public Accountant (CPA)
from P2 million to P5 million.

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On administrative procedures:

• Filing of Notice of Death


• Repeals the provision requiring the filing of notice of death of the decedent by his/her
executor, administrator, or any of the legal heairs within two (2) months after the
decedent’s death.
• Deadline of Filing
• Extends the period within which the estate tax return should be filed, from 6 months to 1
year from the decedent’s death.
• Payment on Installment Basis
• Provides for the payment by installment basis in case available cash is insufficient to pay
the estate tax due. Payment shall be allowed within 2 years from the statutory date for its
payment without civil penalty and interest.
• Withdrawal Limit
• Removes the P20, 000 limit that may be withdrawn from the bank account of the
decedent without certification from the BIR and allows for the withdrawal of any amount
but subjectg to a final withholding tax of 6%.

C. Donor’s Tax

RA 10963 simplifies the donor’s tax schedule from an eight-bracket schedule with rates
ranging from 2% to 15% to a single rate of 6% of total gifts in excess of P250, 000. The 6%
tax rate likewise applies if the donee is a stranger.

Old tax schedule

a. If donee is a relative

b. If donee is a stranger: 30% of the net taxable gift

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New tax rates

Other changes:

• Inserts an additional provision under Section 100 of the NIRC of 1997, as amended,
which provides that a bona fide, at arm’s length and donative intent free sale, exchange
or other transfer of property made in the ordinary course of business shall be considered
as made for an adequate and full consideration in money or money’s worth and is
therefore not subject to the donor’s tax.
• Deletes the provision exempting from the donor’s tax dowries or gifts made by account
of marriage.

D. Value-Added Tax

Broadening the VAT base

• RA 1093 repeals 54 provisions on VAT Exemption and zero-rating under special laws to
broaden the VAT base.
• It also includes electric cooperatives in the definition of sale or exchange of services
subject to VAT

Withdrawal of Zero-rated transactions

• RA 10963 removes foreign currency denominated sales from VAT zero-rating and
subjects to the VAT indirect exporterd and agents only upon the establishment and
implementation of an enhanced VAT refund system.

Retention of VAT Exemptions

RA 10963 retains the VAT-exempt status of the following:

• Raw agricultural and marine products


• Educational services
• Senior citizens
• Health services
• Cooperatives
• Persons with Disabilities

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Inclusion to VAT-Exempt transactions

RA 10963 includes the following transactions to the list of VAT-exempt transactions


under Section 109 of the NIRC of 1997:

• Sale of gold to the Bangko Sentral ng Pilipinas (BSP)


• Sale of drugs and medicines prescribved for diabeted, high cholesterol, and
hypertension, beginning January 1, 2019
• Assocaition dues, membership fees, and other assessments and charges collected by
homeowners’ associations and condominium corporations
• Transfer of property in pursuance of a plan or merger or consolidation

Adjustments to VAT-Exempt Tresholds

• Increases the VAT-exempt treshold from P1,919, 500 to P3 milliom which is to be


adjusted to inflation not later than January 31, 2021 and every 3 years thereafter.
• Increases the present VAT-exempt treshold on lease of residential unit with a monthly
rental of P12,800 to P15,000
• Reduces the VAT-exempt treshold from P3,199,500 to P2,000,000 on sale of house and
lot and other residential dwelling beginning January 1, 2021

E. Excise Taxes

i. Automobiles

RA 10963 restructures the tax schedule on the excise tax on automobiles by imposing
ad valorem tax rates that are directly applied to the net manufacturer’s price/importer’s selling
price instead of imposing marginal tax rates, as follows:

Old Tax schedule

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New Tax Schedule

Notes:

Hybrid vehicles or vehicles powered by electric energy in combination with gasoline,


diesel, or any other motive power shall be subject to 50% of the applicable excise tax
rates on automobiles.

Purely electric vehicles and pick-up trucks shall be exempt from excise tax on
automobiles.

Pick-ups shall be considered as trucks.

The term “jeep” was deleted from the definition of jeep/jeepney/jeepney substitutes
which shall now read as jeepney/jeepney substitutes.

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ii. Petroleum Products

RA 10963 increases the tax rates on petroleum in three (3) tranches beginning January
1, 2018 to January 1, 2020, as follows:

(For the period 2018 to 2020, the scheduled increase in the excise tax on fuel shall be
suspended for 3 months prior to the increase of the month when the average Dubai crude oil
price based on Mean of Platts Singapore (MOPS) reaches or exceeds US $80 per barrel.)

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iii. Sweetened Beverages

P6.00 per liter of volume capacity P12.00 per liter of volume capacity

Tax on sweetened beverages using purely Tax on sweetened beverages using


caloric sweeteners, and purely non-caloric purely high fructose corn syrup or in
sweeteners, or a mix of caloric ans non- combination with any caloric or non-
caloric sweeteners caloric sweeteners

(Sweetened beverages using purely coconut sap sugar and purely steviol glycosides are
exempt from this tax.)

Beverages covered: Beverages excluded:

• Sweetened juice drinks • All Milk productd, including plain mllk,


• Sweetened Tea infant formula milk, powdered milk, etc.
• Flavored water • Meal replacement and medically-
• All Carbonated beverages indicated beverages
• Energy and Sports drinks • Ground cofffee, instant soluble coffee
• Cereal and grain beverages and pre-packaged powdered coffee
• Other powdered drinks not classified as products
milk, juice, tea and coffee • 100% natural vegetable juices
• Other non-alcoholic beverages that • 100% natural fruit juices
contain added sugar

iv. Other Excise Taxes

a. On Cigarettes

RA 10963 increases the excise tax rates packed by hand and packed by machine, as
follows:

Old tax rates

New tax rates

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b. On Mineral Products

RA 10963 increases the excise tax rate on domestic or imported coal and coke in 3
tranches beginning January 1 , 2018 to Januray 2020, as follows:

Old tax rate

New tax rate

RA 10963 also increases the excise tax rate on other mineral products as follows:

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F. Documentary Stamp Tax

RA 10963 increases the DST rates by 100% except the DST on debt instruments
(Section 179) which only increases by 50% and the DST on policies of insurance upon
property (Sec. 184), fidelity bonds and other insurance (Sec. 185), indemnity bonds (Sec.
187), and deeds of sale, conveyances and donation of real property (Sec. 196) which
remained unchanged.

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G. On other Taxes

Other Taxes Changes by RA 10963


Foreign Currency Increases the final tax imposed on interest income derived by an
Deposit Unit (FCDU) individual (except a nonresident individual) and a domestic
corporation from a depository bank under the expanded foreign
currency depost system from 7.5% to 15%. The law, howeverm
retains the 7.5% final tax on such interest income of a resident
foreign corporation.
Capital gains of Non- Increases the 5%-10% tax rates to a single 15% single tax rate on
traded stocks net capital gains realized by an individual and a domestic
corporationthat are not traded in the local stock exchange. The
law, however, retains the 5%-10% capital gains tax of a resident
foreign corporation and nonresident foreign corporation.
Stock Transactions tax Increases the STT from 0.5% to 0.6% of the gross selling price or
gross value in mobey of the shares of stock sold, bartered,
exchanged, or otherwise disposed through the local stock
exchange.
Cosmetic Procedures Levies a new excise tax equivalent to 5% of gross receipts, net of
excise tax and VAT, derv=ived from performance of services on
invasive cosmetic procedures, surgeries, and body enhancements
directed solely towards improving, altering, or enhancing the
patient’s appearance.

Tax Administration Reforms

Fuel Marking

Provides for fuel marking of petroleum products that are refined, manufactured, or
imported into the Philippines, and that are subject to the payment of taxes and duties and
provides for the mechanism on how fuel marking will be done including imposition of penalties
for possible violations.

Registry of Petroleum Manufacturers and Importers

Requires the DOF to maintain a registry of all petroleum manufacturers and/or


importers and the articles manufactured and/or imported by them including real-time inventory
of such products in storage depots.

Tax Incentive Report

Requires the submission by the Cooperative Development Authority to the BIR and
DOF of a tax incentive report which shall contain information on the income tax, VAT, and

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other tax incentives availed of by cooperatives enjoying incentives under RA 6938, as
amended.

Income Tax Returns

Sets the maximum number of pages of the income tax returns of individuals and
corporations to a maximum of 4 pages, in paper or electronic form, and the information that
they should contain.

VAT Refund Centers

Requires the establishment of VAT refund centers in the BIR and in the BOC and the
earmarking of 5% of the total VAT collection for the purpose of funding claims for VAT refund.

Zonal values

Inserts a provision on the automatic adjustment of zonal values once every 3 years
and the publication or posting requirement in order for the said adjustment in zonal valuation
to be valid.

Sweetened beverages

The Food and Drug Administration (FDA) shall require all manufacturers and importers
of sweetened beverages covered by the law to put the required labeling with unique
identification of exciseable sweetened beverages.

Audit Treshold

Provides for electronic sales reporting system for taxpayers engaged in the export of
goods and services and Large Taxpayers at their own expense within 5 years from the
effectivity of the Act.

Electronic Sale Reporting System

Increases the treshold amount required to be examined and audited by independent


CPAs, from gross quarterly sales, earnings, receipts, or output of more than P150,000 to
gross annual sales, earnings, receipts or output of more than P3,000,000. It also remove the
treshold before taxpayers are required to keep books of accounts.

Electronic Receipts

Requires the issuance of electronic receipts or electronic sales/commercial invoices in


lieu of the manual receipts and sales/commercial invoices for taxpayers engaged in the export
of goods and services, e-commerce and the Large Taxapyers within 5 years from the
effecivity of this Act and upn establishment of a system capable of storing and processing the
required data.

26
Rules and Regulations
Index for TRAIN Law 11

A. TRAIN Act

B. Revenue Issuances

C. Forms

D. Advisories

E. Announcements

F. News Articles

Revenue Issuances
(as of September 14, 2018)

No. of Issuance Subject Matter Date of Issue

Implements Section 249 of the NIRC of 1997, as amended under


RR No. 21-2018 Section 75 of the TRAIN Law. 
September 14,
(Published in Manila Bulletin on September 17, 2018)
2018

Provides the implementing rules and guidelines on the imposition


RR No. 20-2018 of Excise Tax on sweetened beverages pursuant to the provisions August 22, 2018
of RA No. 10963 (TRAIN Law)

(Published in Manila Bulletin on August 24, 2018)


Amends RR No. 13-2018, particularly on the use of invoices/
RR No. 19-2018 receipts of previously registered VAT taxpayers who are now non- August 9, 2018
VAT taxpayers

(Published in Manila Bulletin on August 13, 2018)


Amends RR No. 8-2018 particularly on the due date for the
RR No. 15-2018 updating of registration from VAT to Non-VAT
April 5, 2018
(Published in Manila Bulletin on April 7, 2018)

Amends the provisions of RR No. 11-2018, particularly Sections 2


RR No. 14-2018 and 14 relative to withholding of Income Tax
April 5, 2018
(Published in Manila Bulletin on April 7, 2018)

Prescribes the Regulations implementing the Value-Added Tax


(VAT) provisions under RA No. 10963 (TRAIN Law), which further
RR No. 13-2018 amends RR No. 16-2005 (Consolidated VAT Regulations of 2005), March 15, 2018
as amended

(Published in Manila Bulletin on March 19, 2018)

Consolidates Revenue Regulations on Estate Tax and Donor's Tax


incorporating the amendments inroduced by RA No. 10963 (TRAIN
RR No. 12-2018 Law)
March 15, 2018
(Published in Manila Bulletin on March 19, 2018)

11As issued in the Official Website of the Bureau of Internal Revenue


https://www.bir.gov.ph/index.php/train.html#train-advisories

27
Amends certain provisions of RR No. 2-98, as amended, to
implement further amendments introduced by RA No. 10963
RR No. 11-2018 (TRAIN Law) relative to withholding of Income Tax
March 15, 2018
(Published in Manila Bulletin on March 19, 2018)

Prescribes the rules and regulations implementing the increase in


RR No. 9-2018 the Stock Transfer Tax pursuant to RA No. 10963 (TRAIN Law)
February 26, 2018
(Published in Manila Bulletin on February 28, 2018)

Implements the amended provisions on Income Tax pursuant to RA


RR No. 8-2018 No. 10963 (TRAIN Law)
February 20, 2018
(Published in Manila Bulletin on February 22, 2018)

Implements the adjustment of rates on Excise Tax on Automobiles


pursuant to the provisions of RA No. 10963 (TRAIN Law), amending
RR No. 5-2018 for the purpose Revenue Regulations No. 25-2003
January 15, 2018 
(Published in Manila Bulletin on January 18, 2018)

Provides the rules and regulations implementing the Documentary


RR No. 4-2018 Stamp Tax rate adjustment under RA No. 10963 (TRAIN Law)
January 15, 2018 
(Published in Manila Bulletin on January 18, 2018)

Provides the revised tax rates on Tobacco Products pursuant to the


provisions of RA No. 10963 (TRAIN Law), amending for the
RR No. 3-2018 purpose Revenue Regulations No. 17-2012
January 15, 2018 
(Published in Manila Bulletin on January 18, 2018)

Provides the revised tax rates  and other implementing guidelines


on Petroleum Products pursuant to the provisions of RA No. 10963
RR No. 2-2018 (TRAIN Law)
January 24, 2018
(Published in Manila Bulletin on January 26, 2018)

Provides the revised tax rates on Mineral Products pursuant to the


provisions of RA No. 10963 (TRAIN Law), amending for the
RR No. 1-2018 purpose Revenue Regulations No. 13-94
January 15, 2018 
(Published in Manila Bulletin on January 18, 2018)

Revenue Memorandum Circulars


(as of July 10, 2018)

Subject Matter
No. of Issuance Date of Issue

Clarifies the requirements on the withdrawal from the bank deposit


RMC No. 62-2018 account/s of a deceased/joint depositor without the required July 10, 2018
electronic Certificate Authorizing Registration

Clarifies the imposition of penalties and interest on the filing of an


RMC No. 54-2018 amended return pursuant to the provisions of TRAIN Law.
June 21, 2018

28
Provides clarifications on certain provisions of RR Nos. 8 and
RMC No. 50-2018 11-2018 implementing the Income Tax provisions of RA No. 10963 June 8, 2018
(TRAIN Act)

Reiterates the imposition of Value-Added Tax on goods disposed


RMC No. 39-2018 of or existing as of the date of change in or cessation of status of a May 24, 2018
person as VAT-registered taxpayer pursuant to TRAIN Law

Prescribes and circularizes the Revised BIR Form No. 1701Q


RMC No. 32-2018 (Quarterly Income Tax Return) January 2018 (ENCS)
May 9, 2018

Advises taxpayers to disregard the penalties computed by the


RMC No. 28-2018 Electronic Filing and Payment System (eFPS) in BIR Form Nos. April 30, 2018
1602 and 1603 of the eFPS

Circularizes the new and revised BIR Forms affected by the TRAIN
RMC No. 27-2018 Law
April 27, 2018

Circularizes the Revised BIR form No. 2551Q (Quarterly


RMC No. 26-2018 Percentage Tax Return) January 2018 (ENCS)
April 25, 2018

Amends RMC No. 89-2017 and certain provisions of RMC No.


RMC No. 17-2018 54-2014 regarding the processing of claims for issuance of tax March 8, 2018
refund/Tax Credit Certificate in relation to amendments made in the
NIRC of 1997, as amended by RA No. 10963 (TRAIN Law)

Provides the transition procedures for all eFPS filers in the filing of
RMC No. 4-2018 tax return affected by the revised Excise Tax rates on cigars and January 11, 2018
cigarettes, petroleum products, automobiles, non-essential
services (invasive cosmetics procedures), sweetened beverages
and mineral
Provides theproducts
transitionpursuant to RA
procedures forNo. 10963 (TRAIN
all taxpayers Law)

affected by the
RMC No. 3-2018 revised tax rates on Documentary Stamp Tax pursuant to the January 9, 2018 
provisions of RA No. 10963 (TRAIN Law)

Prescribes the transition procedures for all taxpayers filing tax


RMC No. 2-2018 returns affected by the revised tax rates pursuant to the provisions January 8, 2018 
of RA No. 10963 (TRAIN Law)

Prescribes the procedures on the use of Withholding Tax Table on


RMC No. 1-2018 Compensation Income and advises on the change of Creditable January 4, 2018 
Withholding Tax Rate on certain income payments to individuals

Prescribes the Revised Withholding Table on Compensation


RMC No. 105-2017 pursuant to the amendments to the NIRC of 1997 introduced by December 29, 2017
RA 10963 (TRAIN Law)

Revenue Memorandum Orders


(as of September 12, 2018)

29
No. of Issuance Subject Matter Date of Issue

Amends certain portion of RMO No. 29-2014 relative to the


RMO No. 42-2018 prescribed uniform format and procedures for the issuance of September 12, 2018
Certifications on the Existence of Outstanding Tax Liabilities of
Taxpayers

Modifies the Alphanumeric Tax Code (ATC) for Petroleum Products
RMO No. 41-2018 under RA No. 10963 (TRAIN Act)
 September 5, 2018

Creates, modifies and drops Alphanumeric Tax Code (ATC) of


RMO No. 38-2018 selected revenue source under Republic Act No. 10963 (TRAIN August 29, 2018
Act)

Creates Alphanumeric Tax Code (ATC) for petroleum products


RMO No. 31-2018 under Republic Act No. 10963 (TRAIN Act)
July 10, 2018

Creates and modifies Alphanumeric Tax Codes (ATC) for selected


RMO No. 29-2018 Excise Taxes under Republic Act No. 10963 (TRAIN Law)
July 3, 2018

Creates and modifies Alphanumeric Tax Codes for Individual


RMO No. 28-2018 Income Tax under Republic Act No. 10963 (TRAIN Law)
July 3, 2018

Prescribes the policies, guidelines and procedures in the availment


RMO No. 23-2018 of the eight percent (8%) Income Tax Rate option for individuals May 21, 2018
earning from self-employment and/or practice of professions


Modifies the Alphanumeric Tax Code (ATC) for sweetened
RMO No. 16-2018 beverages
 April 5, 2018

Creates the Alphanumeric Tax Code (ATC) of selected revenue


RMO No. 14-2018 source under RA No. 10963 (TRAIN Law)
March 9, 2018

Creates and modifies the Alphanumeric Tax Code (ATC) of selected


RMO No. 9-2018 revenue source under RA No. 10963 (TRAIN Law) 
February 6, 2018

Creates the Alphanumeric Tax Code (ATC) for sweetened


RMO No. 1-2018 beverages
January 8, 2018 

Forms
Excise Tax

Form No. Form Title

 BIR Form No. Excise Tax Return for Sweetened Beverages 

2200-S

Advisories

30
Excise taxpayers who will be paying Excise Tax on invasive cosmetic procedures shall use BIR Form No. 0605
(Payment Form). 

BIR Form No. 1701Q has been revised and is already available for manual use. 

Taxpayers are advised to disregard the penalties computed by the Electronic Filing and Payment System (eFPS) in
BIR Form Nos. 1602 and 1603 of the eFPS. 

The Quarterly Alphabetical List of Payees (QAP) that shall accompany BIR Form Nos. 1601-EQ and 1601-FQ shall
be submitted either through esubmission@bir.gov.ph or through the dedicated e-mail account of the RDO. 

Advisory on the automatic registration of BIR Form Types 1601-EQ, 0619-E, 1601-FQ, 0619-F and 2551-Q. 

The amount to be indicated in the BIR Forms 1601-EQ and 1601-FQ shall be the total amount of taxes  withheld
for the calendar quarter. 

Advisory on Availability/Accessibility of BIR Forms 1601-EQ and 1601-FQ in eFPS.

BIR Form No. 1601-EQ and BIR Form No. 1601-FQ are now available in the eBIRForms Package Version 7.

Instructions for taxpayers subject to Percentage Tax and those required to withhold other Percentage Taxes and
VAT, including VAT on government money payments and payments to non-resident. 

All National Government Agencies shall use BIR Form No. 0605 in the filing and remittance of creditable and final
withholding taxes thru the Electronic Filing and Payment System. 

Withholding Agents shall remit their creditable and final withholding taxes for the first two (2) months of every
quarter using BIR Fom No. 0605 and indicating MC 200 for the ATC and WE or WF for the tax type, whichever is
applicable.

Taxes withheld within the first two (2) months and on the 3rd month of every taxable quarter shall be remitted thru
BIR Form 0605 and BIR Form 1601EQ, respectively. 

All employees of Regional Headquarters and Regional Operating Headquarters of multinational companies;
offshore banking units; and petroleum service contractors and subcontractors enjoying preferential tax treatment
prior to 2018 subject to regular Income Tax rates. 

Transitory guidelines relative to the implementation of TRAIN Law governing Excise Tax on petroleum products,
automobiles and sweetened beverages, pending the issuance of the Implementing Rules and Regulations.

Advisory for purely self-employed individuals and/or professionals who are VAT-registered taxpayers and whose
gross sales/receipts and other non-operating income do not exceed the new VAT threshold of P 3,000,000 in the
preceding year.

Advisory on dedicated e-mail account for attachment to Excise Tax Return BIR Form No. 2200-S (for sweetened
beverages) and BIR Form No. 1620-XC (for cosmetic procedures). 

Taxpayers subject to Excise Tax and using eFPS are mandated to e-file and e-pay the corresponding Excise Taxes
due on removals, effective January 1, 2018. 


Advisory on withholding of Final Tax of 6% on amounts withdrawn from decedent's deposit account. 

Payment Form for Excise Tax due on sweetened beverages. 

Advisory to all eDST System Users.

31
Announcements

The Public Consultation on the TRAIN Law scheduled on January 12, 2018 will be held in ABS-CBN Vertis Tent,
Vertis North, Quezon City. 

Public Consultations on the proposed Revenue Regulations on the Tax Reform for Acceleration and Inclusion
(TRAIN) Act.

News Articles

The BIR has prepared and issued twelve (12) Revenue Regulations as of April 5, 2018 to implement the TRAIN Law.

The BIR is fast-tracking the finalization of revenue issuances that will provide the guidelines for the implementation
of Tax Reform for Acceleration and Inclusion (TRAIN) Act.

BIR issues first circular on the revised Withholding Tax table implementing RA 10963. 

BIR: TRAIN Law to take effect next year, taxpayers urged to participate in discussions to implement the law.

BIR set to issue Implementing Rules on RA 109633 (TRAIN Law). 

32
V. CONCLUSION

“A basic test of a functioning democracy is its ability to create a new wealth AND see
to its fair distribution, when a democratic society does not meet the test of fairness...
freedom is in jeopardy.”

- Senator Sonny Angara, Chair of the Committee on Ways and Means

The Tax Reform for Acceleration and Inclusion (TRAIN) was designed to help build the

country’s theme of “social justice” – which is its dominant purpose. This aims to reduce the

income tax of 99 percent of taxpayers without sacrificing the government’s mission to build

programs and projects that are beneficial to the Philippines, such as rebuilding Marawi and

upgrading our Defense and police forces.

TRAIN will address the following:

1. Bracket creep on income tax affecting individual income taxpayers

2. Tax relief for public and private sector employees by raising the annual income tax

exemption and the ceiling for the 13th month and other benefits

3. Issue on paying the right tax for the self-employed and professionals

4. Building the country’s physical and human infrastructure

- Better roads, highways, bridges, seaports, airports and railways

- Attract more investments

- Lead to better industries

- Poor will have access to education, healthcare, and social services

- Better opportunities for the poor

33
- Better income for their families

(President Rodrigo Duterte, December 19, 2017)

We have been long suffering from high taxes, that we find it a burden for the mass to

follow, especially for the working class, which is the source of the largest chunk of TAX. The

TRAIN has managed to not only decrease it, but totally abrogate the tax for workers that does

not earn over P250, 000.00 per year. The Senate has totally removed the tax. So the

employees could enjoy their salary, giving them more leeway to spend it wisely. They would

no longer have to file their ITR’s (Income Tax Returns)

We would have a lower Estate Tax and VAT (Value Added Tax). According to

Presidential Spokesperson Harry Roque, “taxpayers would now have to pay a fixed 6 percent

for the net estate with the standard deduction of P5, 000,000” This has revoked 54 special

laws that have nonessential VAT exemptions. It also provided exemptions for small

businesses, senior citizens, PWDs, renewable energy, and various medicines. This will

engage more in businesses and give more job offers.

Most importantly, the income from TRAIN will go to infrastructure projects. This will

have domino effect because the industries that will be built out of these projects would be the

source of livelihood for many FILIPINOS.

On the other hand, there are some disadvantages of this TRAIN.

Enormous increase of goods and services has caused issues of the inflation rate of our

economy. Some citizens were complaining that they have to spend more on their basic

necessities. Price of fuel gas, electricity, vehicles, tobacco and other products and services

has increased, big time. 12 percent VAT will be added on a higher selling price.

34
TRAIN imposes excise tax on oil of P6 on the next 3 years. It also imposed P6 tax per

liter on drinks containing caloric and non-caloric sweetener, and P12 per liter taxon drinks

which has high fructose corn syrup or combination. Also, sugar-sweetened beverage has

increased.

People in agricultural field were greatly affected because of the increase of production

cost of pump-dependent farmers. Every kilogram of rice bran was added 50 cents. This

removed the 10% of their income. According to them, their expenses were doubled.

Well, no government is perfect. For every law and statute that was written for every

purpose to resolve and uplift the Philippine Society, there will always be a flaw. We have to

work together to change our lives for the best.

35
References

About the Tax Reform - What is TRAIN? • #TaxReformNow. (n.d.). Retrieved October
8, 2018, from http://www.dof.gov.ph/taxreform/index.php/train/

  A. (2017, May 29). PRRD certifies tax reform bill as urgent • #TaxReformNow.
Retrieved October 9, 2018, from http://www.dof.gov.ph/taxreform/index.php/
2017/05/29/prrd-certifies-tax-reform-bill-as-urgent/

  A. (2017, May 29). PRRD certifies tax reform bill as urgent • #TaxReformNow.
Retrieved October 9, 2018, from http://www.dof.gov.ph/taxreform/index.php/
2017/05/29/prrd-certifies-tax-reform-bill-as-urgent/

  I. (2017, December 13). House, Senate ratify TRAIN tax bill. Retrieved October 9,
2018, from http://www.interaksyon.com/breaking-news/2017/12/13/113019/house-
ratifies-train-tax-bill-despite-quoru m-question/

https://www.senate.gov.ph/republic_acts/ra%2010963.pdf)

 Pros and cons of tax reform package law in PH. (2017, December 20). Retrieved from
https://filipinotimes.net/news/2017/12/20/pros-cons-tax-reform-package-law-ph/

  Here's How the TRAIN Law Will Affect Everyone. (2018, January 9). Retrieved from
https://8list.ph/heres-how-the-train-law-will-affect-everyone/#read-more

TRAIN benefits outweigh higher consumer prices - Palace. (2018, January 2).
Retrieved from https://www.philstar.com/headlines/2018/01/02/1773865/train-benefits-
outweigh-higher-consumer-prices-palace

Pros and cons of TRAIN. (2018, January 16). Retrieved from http://
manilastandard.net/opinion/columns/hail-to-the-chair-by-victor-avecilla/256378/pros-
and-cons-of-train.html

 2018 study: Rice farmers' income drops due to TRAIN. (2018, May 3). Retrieved from
http://cnnphilippines.com/news/2018/05/03/PhilRice-farmers-income-TRAIN.html

  “Tax Changes You Need to Know - TRAIN” by Department of Finance National Tax
Research Center, Republic of the Philippines (March 2018)

https://www.bir.gov.ph/index.php/train.html#train-advisories

36