PICPA Seminar

TRAIN Law and its application on Government & Private Transactions and Other Updates
7-8 September 2018
Atty Josephine Gomez, CPA, LLM
DAY-1: TRAIN Law and its application on Government Transactions
 TRAIN (Tax Reform for Acceleration and Inclusion Law)
 Where will TRAIN go
- 70% Infra, 30% services
 What Changed
 No Personal exemption, No additional exemption, No Premium on Health Insurance
 250k threshold on exempted taxable income
 13th month pay exemption from 82k to 90k
 Self-employed & Professional (or mixed income earner)
 Gross Sales/Receipts <3M (optional)
o 8% income tax on gross sales/ receipts, OR
o Graduated income tax rates (0-35%) with 3% percentage tax
 VAT
 Increase of threshold from 1.9M to 3M
- Exempt:
o small business with total annual sales of 3M and below
o raw food
o agricultural products
o health and education
o senior citizens
o PWDs
o Cooperatives
o Renewable energy
o Tourism enterprises
o BPOs in special economic zones
o Socialized housing
 Effective 2019
- Sale of Drugs and medicines for Daiabetes, High Cholesterol & hypertension
- Socialized Housing
 For VAT refunds which BIR failed to act on (within 90days, 30 days to appeal), it is “deemed
approved”
 Estate Tax
- Less than 5M, 0% tax rate
- Over 5M, flat rate of 6%
- 10M family home
 Documentary Stamp Tax
- Increase by two-fold
 Sugar-sweetened drinks
- Artificial sweetener: P6 per liter
- High Fructose: P12 per liter
- Exempt: milk, instant coffee, fruit juices
 Tax on Cars
- Exempt: pick-up trucks and electric vehicles
  Tax on Cosmetics Surgery (invasive surgery)
- 5% for purely aesthetic purposes
 Donor’s Tax
- Flat rate of 6% for gifts exceeding 250K, regardless of relationship between donor and
donee
 Fringe Benefit Tax
- From 32% to 35%
- Applicable to managerial positions only
 Withholding tax rates
- Form 1%-32% to 1%-15%
 Excise Tax on Petroleum products
- With detailed changes

 TRABAHO (Tax Reform for Attracting Better and Higher Quality Opportunities
 Corporate income tax of 30% is the highest in the ASEAN
 Wants to rationalize tax incentives on CIT (Corporate Income Tax)
 Fair and accountable tax incentives systems, criteria:
o Performance-based
o Targetted
o Time-bound
o Transparent

 RRs, RMSs, RMCs

 Withholding Tax
- 1600, 1601E,2306&2307
- Not a tax, just a method of collecting the income tax currently upon receipt of the income
 Kinds of Withholding Tax
1. WHTax on Compensation
2. WHTax at Source
a. Final WHTax
 Final WHTax are taxes on special income subject to final tax; not included in the computation of
the taxable income and therefore corresponding final tax cannot be claimed as tax credit
 Creditable Withholding Tax:
 Income Tax
- Goods: 1% or
- Services: 2%
 Business Tax
- Non-VAT: 3%
- VAT registered: 5%
 Duty to withhold: payments subject to WHTax:
- Supplies
- Repairs
- Catering services
- Rental of equipment
- Utilities
- Contractors
 - Salaries

 BIR advisories
 to use Form 0605 instead of 1601F &160E
- MC200 ATC code
- ‘e-submission
 RR 6-2014:
 RR 1-2014: itemized Alphalist (version 6.0)

 Professional Fee, talent fees..service rendered

 Individual Payee
- Gross Income: below 3M: 5%
- Gross Income: above 3M: 10%
 Required submission:
- Annex B
- One payor: Annex B-2
 Non-individual Payee
 Without declaration, rate is 10%

 De Minimis benefits
1. Monetized unused vacation leave (private only) and sick leave (both for Government)
2. Medical cash allowance
3. Rice subsidy
4. Uniform and clothing allowance, not exceeding 6K
5. Actual medical assistance
6. Laundry allowance
7. Employee achievement awards, not exceeding 10k
8. Christmas gifts not exceeding 5k
9. Daily meal allowance
10. Benefit under CBA & productivity

 Group insurance is treated as included in the 90k threshold

 Individual Insurance paid to selected managerial or supervisory shall be subject to FBT

 MWE (Minimum wage earners) is exempt from income tax on basis, OT, etc
 Who are not qualified to avail of 8% income tax rate
1. Purely compensation earners
2. VAT registered taxpayers
3. Non-VAT taxpayers with income above 3M
4. Partners of GPP
5. Individual enjoying income tax exemption such as those registered under BMBE
DAY-2: TRAIN Law and its application on Private Transactions

 Amendments introduced by TRAIN Law

 RR 1-2018: Revised tax rates for Mineral products
 RR 2-2018: Revised tax rate for Petroleum Products
 RR 3-2018: Revised tax rates on Tobacco Products
 RR 4-2018: New Guidelines on DST
 RR 5-2018: Adjustment on Excise Tax rates
 RR 9-2018: Guidelines in the increase in Stock Transfer Tax
 RR 12-2018: Consolidates the RR on Estate and Donor’s Tax
 RR 13-2018: VAT provisions under the TRAIN Law
 RMC 62-2018: Clarifying the requirements on the Withdrawal from Bank Deposits

 4th Tax Advisory: There is no need to file & pay monthly Percentage Tax (Form 2551Q)
 BIR Form 1600 shall continue to be filed and paid monthly

 RA 10963: TRAIN Law, approved 19Dec 2017

 Features:
1. Creates 8 sections
2. Amends 69 sections
3. Repealed 3 sections
 Removal of Exemptions
a. Personal and Additional Exemptions
b. Premium payments
c. Exemption for PWDs
 Increase of threshold for Other benefits: PhP 82k to 90k
 Filing of Quarterly ITR:
o 1st Quarter: from April 15 to May 15
o 2nd Quarter: same deadline at August 15
o 3rd Quarter: same deadline at November 15
o Annual ITR: same deadline at April 15
 Annual Income Tax Return: shall consist of maximum of 4 pages
 Keeping of Book of Accounts: ALL taxpayers are required to keep and use relevant & appropriate
set of Bookkeeping records
 Fringe Benefits: from 32% to 35% based on Grossed up Monetary Value
 Interest income under FCDU: from 7.5% to 15%
 Documentary Stamp Tax: mostly doubled the rate from previous rates
- ‘constructive DST’, just put in the document “DST paid under OR number__”
 Other Penalties
 Failure or Refusal to issue receipts or invoices: PhP500k to 10M (6-10yrs)
 Attempt to evade or defeat tax: PhP500k to 10M (6-10yrs)
 Minimum Wage Earner (MWE): exempt from income tax
- If with other compensation, only excess of the 250k shall be taxed
 Rules on 8% option for Taxpayers engaged in Business or Practice of Profession
 Applicable only for Taxpayers engaged in Business or Practice of Profession, those earning
from compensation as always on graduated rates
 Criteria to qualify and avail of the 8% income tax rate option:
 1. Individuals only (single proprietor or professional or mixed), not applicable to
Corporations
2. Gross sales/ receipts did not exceed 3M VAT threshold
3. Registered an subject only to tax percentage tax
4. Must have signified their intention to elect 8% income tax rate
 NOT qualified for the 8% option
1. Purely compensation
2. VAT registered, regardless of amount of gross receipts or sales
3. Those who exceeded 3M threshold
4. Those subject to percentage tax
5. Partners in GPP
6. Individual enjoying income tax exemptions
 Gross Receipts:
1. Contract price
2. Compensations
3. Service fee
4. Rental or royalty
5. Amount charged for materials
6. Deposits
7. Advance payments
 Gross Sales (for purposes of availing 8%)
 When to avail 8% option: required to be signified and selected every taxable year
 For Self-employed/ Practice of Profession (income below 3M): option to avail only Graduated
rates OR 8% tax on gross sales in excess of PhP250k in lieu of graduated income tax and
Percentage tax
 VAT system
