Workers earning P250,000 or less a year will be exempted from paying personal-income tax (PIT) should the 17th Congress approve the first tranche of the Department of Finance’s (DOF) tax-reform package.
To make up for the estimated P179 billion in foregone revenues annually from lowering income-tax rates, the DOF is planning to expand the value-added tax (VAT) base by reducing the coverage of
its exemptions, such as scrapping the privileges granted to senior citizens and persons with disabilities.
The DOF will also adjust excise taxes imposed on petroleum and restructure the excise tax on automobiles except for buses, trucks, cargo vans, jeeps, jeepney substitutes and special purpose vehicles.
Under the DOF bill, which was recently submitted to Congress and will be authored by House Committee on Ways and Means Chairman and Quirino Rep. Dakila Carlo Cua, the tax will be computed in accordance with and at the rates established in the two schedules.
For 2018, the new tax brackets are:
■ those earning not over P250,000 will be exempted from paying tax;
■ those earning over P250,000 but not over P400,000 would pay a fixed tax 20 percent in excess of P250,000;
■ those earning over P400,000 but not over P800,000 would pay a fixed tax of P30,000 with an additional 25 percent of the amount over P400,000;
■ those earning over P800,000 but not over P2 million would pay an excess tax of P130,000 with an additional 30 percent of the amount exceeding P800,000;
■ those earning over P2 million but not over P5 million would pay a fixed tax of P490,000 with an additional 32 percent of the amount exceeding P2 million.
■ those earning over P5 million would pay a fixed tax of P1,450,500 with an additional 35 percent of the amount over P5 million.
For 2019, the new tax brackets are:
■ those earning not over P250,000 will be exempted from paying tax;
■ those earning over P250,000 but not over P400,000 would pay a fixed tax of 15 percent of the amount over P250,000;
■ those earning over P400,000 but not over P800,000 would pay a fixed tax of P22,500 with an additional 20 percent of the amount exceeding P400,000;
■ those earning over P800,000 but not over P2 million would pay an excess tax of P102,500 with an additional 25 percent of the amount exceeding P800,000;
■ those earning over P2 million but not over P5 million would pay a fixed tax of P402,500 with an additional 30 percent in excess of P2 million; and
■ those earning over P5 million would pay a fixed tax of P1,303,000 with an additional 35 percent of the amount exceeding P5 million.
In the current setup, those earning P10,000 or less per month pay a 5-percent income tax while those with yearly earnings of P500,000 and above pay a 32-percent income tax.
The measure will amend Sections 24, 31, 32, 34, 35, 79,106, 107, 108, 109, 110, 148 and Title VI of the RA 8424 of the National Internal Revenue Code, as amended.
Offsetting measures
Included as offsetting measures is the imposition of higher taxes on petroleum products and eliminating certain exemptions, including senior citizens, from VAT.
The bill will repeal Section 4 of the Expanded Senior Citizens Act of 2010 as well as Sections 32-A and 33-A of the Magna Carta for Persons with Disabilities.
Section 4 of the Expanded Senior Citizens Act of 2010 provide VAT exemption for medicines, professional fees of attending physicians in all private hospitals, land mass transit, airfare, seafare, and utilization of services in hotels, admission fees in theater and cinema houses, funeral and burial services for the death of senior citizens.
Sections 32-A and 33-A of the Magna Carta for Persons with disabilities provides tax incentives to the family of persons with disabilities. Under the bill, effective on January 1, 2017, excise tax will be imposed on:
■ Lubricating oils and greases, including but not limited to, base stock for lube oils and greases, high vacuum distillates, aromatic extracts, and other similar preparations, and additives for lubricating oils and greases, whether such additives are petroleum based or not, per liter and kilogram respectively, of volume capacity or weight, P10 (from P4.50);
■ Processed gas, per liter of volume capacity, P6 (from P0.05);
■ Waxes and petrolatum, per kilogram, P10 (from P3.50);
■ On denatured alcohol to be used for motive power, per liter of volume capacity, P6 (from P0.05):
■ Naphtha, regular gasoline and other similar products of distillation, per liter of volume capacity, P10 (from P4.35).
■ Leaded premium gasoline, per liter of volume capacity, P10 (from P5.35); unleaded premium gasoline, per liter of volume capacity, P10 (from P4.35);
■ Aviation turbo jet fuel, per liter of volume capacity, P10 (from P3.67);
■ Kerosene, per liter of volume capacity, P6 (from P0.00);
■ Diesel fuel oil, and on similar fuel oils having more or less the same generating power, per liter of volume capacity, P6 (from P0.00);
■ Liquefied petroleum gas, per liter, P6 (from P0.00);
■ Asphalts, per kilogram, P6 (from P0.56); and
■ Bunker fuel oil, and on similar fuel oils having more or less the same generating power, per liter of volume capacity, P6 (from P0.00).
The bill also said the tax rates shall be increased by 10 percent every year thereafter effective January 1, 2018 through revenue regulations issued by the secretary of Finance.
Zero VAT
Also, the DOF bill said the following sales by VAT-registered persons will be subject to zero-percent rate:
■ The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported and paid for in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
■ The sale of goods, supplies, equipment and fuel to persons engaged in international shipping or international air transport operations; provided that the goods, supplies, equipment and fuel have been sold and used and used for international shipping and air transport operations;
■ Foreign Currency Denominated Sale;
■ Sales to persons or entities whose exemption under international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate;
■ sale of gold to the Bangko Sentral ng Pilipinas;
■ direct exports by a registered export producer of exports products, or the sales of export products to another producer or to an export trader:
The DOF is proposing to exempt from the VAT the following transactions:
- Sale or importation of agricultural and marine food products in their original state, livestock and poultry generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials.
- Sale or importation of fertilizers; seeds, seedlings and fingerlings; fish, prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported, used in the manufacture of finished feeds (except specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals and other animals generally considered as pets);
- Importation of personal and household effects belonging to the residents of the Philippines returning from abroad and nonresident citizens coming to resettle in the Philippines;
- Services subject to percentage tax under Title V;
- Services by agricultural contract growers and milling for others of palay into rice, corn into grits and sugar cane into raw sugar;
- Medical, dental, hospital and veterinary services, except those rendered by professionals;
- Educational services rendered by private educational institutions, duly accredited by the Department of Education, the Commission on Higher Education, the Technical Education and Skills Development Authority and those rendered by government educational institutions;
- Services rendered by individuals pursuant to an employer-employee relationship;
- Services rendered by regional or area headquarters established in the Philippines by multinational corporations, which act as supervisory, communications and coordinating centers for their affiliates, subsidiaries or branches in the Asia-Pacific region and do not earn or derive income from the Philippines;
- Transactions that are exempt under international agreements to which the Philippines is a signatory or under special laws, except those under Presidential Decree 529;
- Sales by agricultural cooperatives duly registered with the Cooperative Development Authority to their members; their importation of direct farm inputs, machineries and equipment, including spare parts thereof, to be used directly and exclusively in the production and/or processing of their produce;
- Export sales by persons who are not VAT-registered;
- Sale of real properties not primarily held for sale to customers Nor held for lease in the ordinary course of trade or business; N. Sale, importation, printing or publication of books and any newspaper, magazine review or bulletin, that appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements;
- Transport of passengers by international carriers;
- Services of bank, nonbank financial intermediaries performing quasi-banking functions, and other nonbank financial intermediaries;
- Sale or lease of goods or properties or the performance of services other than the transactions mentioned in the preceding paragraphs, the gross annual sales and/or receipts do not exceed the amount of P3 million (from P1.5 million); and
- Sale of power or fuel generated through renewable sources of energy, such as, but not limited to, biomass, solar, wind, hydropower, geothermal, ocean energy, and other emerging energy sources using technologies, such as fuel cells and hydrogen fuels.
Tax on cars
The bill said there shall be levied, assessed and collected an ad-valorem tax on automobiles based on the manufacturer’s or importer’s selling price, net of excise and VAT.
Under the measure, if the net manufacturer’s price/importer’s selling price is P600,000 the excise tax will be 5 percent.
If the net manufacturer’s price/importer’s selling price is P600,000 to P1.1 million the excise will be 20 percent of net manufacturing/importation price.
If the net manufacturer’s price/importer’s selling price is P1.1 million to P2.1 million, the excise will be 40 percent of net manufacturing/importation price.
If the net manufacturer’s price/importer’s selling price is P2.1 million, the excise will be 60 percent of net manufacturing/importation price.
The bill said the brackets reflecting the manufacturer’s price or importer’s selling price, net of excise and VAT, will be indexed by the secretary of finance once every two years if the change in the exchange rate of the Philippine peso against the US dollar is more than 10 percent from the date of effectivity of the law.
Cua said he is eyeing to file the DOF bill next week for his committee deliberation.
He said the ways and means committee will also consider the 25 bills filed seeking to reduce the income tax imposed on individuals and corporations by amending the National Internal Revenue Code.
The lowering personal income tax are among those of the proposed comprehensive tax-reform packages of the DOF, which include corporate-income tax, property tax and capital-income tax.
1 comment
There are six brackets on personal income tax rates,I feel that three out of the six brackets (tax rates) should be modified much lower since a big portion of the working Filipino class belong to this particular brackets.The second and third bracket with tax rates of 20 and 25 percent should be reduced to 6 and 10 percent. I ask our government to continue the tax exemption privileges being given to senior citizens and persons with disability since most of them depend on their children and relatives for daily sustenance.
Mr President Duterte,you have been quoted more than several times by broadcast and TV media that you will firmly pursue the doubling of salaries of military and police personnel.What is so special about these two gov’t organizations? Remember in the post election results that 40% of the Filipino voters chose you to become our president.I hope that you live up to their dreams & aspirations of achieving a better and prosperous Republic of the Philippines.