Tax reform exempts 6 million from personal income tax

MANILA, Philippines - Some six million Filipinos earning P250,000 and below annually would be exempted from paying the personal income tax under the final version of the tax reform bill approved last week by the House of Representatives.

In a statement, the Department of Finance (DOF) said House Bill 5636 or the Tax Reform for Acceleration and Inclusion Act (TRAIN) would lift the burden on four million more Filipinos who are paying personal income taxes.

The DOF said this is on top of the two million minimum-wage earners who are already enjoying personal income tax exemptions, resulting in a total six million to be exempted from the tax once the bill is implemented.

The new estimate is higher than the 4.66 million previously estimated under the DOF’s original proposal.

House Bill 5636 contains the first package of the Comprehensive Tax Reform Program of the DOF, which proposes for the reduction of personal income taxes.

Under the bill, taxpayers with net taxable income (NTI) of P250,000 and below are exempted from the personal income tax. It also exempts the first P100,000 of an employee’s 13th month pay and other bonuses from being taxed.

Meanwhile, those with net taxable income of over P250,000 to P400,000 will pay 20 percent of the excess of P250,000; those with over P400,000 to P800,000 will pay P30,000 plus 25 percent of the excess of P400,000; those with P800,000 to P2 million will pay P130,000 plus 30 percent of the excess of P800,000; those with P2 million to P5 million will pay P490,000 plus 32 percent in excess of P2 million; and those with above P5 million will pay P1.45 million plus 35 percent in excess of P5 million.

With the reduction of personal income tax collections, the DOF estimates government losses to reach P141.4 billion in the first year of its implementation in 2018.