Feeling the effects of Tax Reform

“Oh I love tax season,” Said no one ever!

On the first day of 2018, I jogged and after doing that looked to a bakeshop to get some Gatorade. The attendant informed me that prices have increased – but I was already expecting it. As I was heading back home I passed by some sari-sari stores with some softdrinks delivery person talking with the store owners about tax reform.

I was startled at first but was happy that people are actively immersed in the impacts of a law as well as discussing about their finances. This was the biggest surprise to me. I was eavesdropping a bit and they were discussing that it should take some time for the full implementation since old stocks (fuel, flavored drinks) should still be consumed before adjustments in the prices (transport, meals) are affected.

More on Income Tax Implementation:

Effective January 1, 2018, changes were implemented related to personal income taxes and PhilHealth premium contributions due to the new Tax Reform for Acceleration and Inclusion (TRAIN) law and PhilHealth’s revised contribution scheme, respectively.

Employers and businesses will have to comply with the Bureau of Internal Revenue (BIR) RMC No. 105-2017 entitled Revised Withholding Tax Table on Compensation in line with Republic Act No. 10963, otherwise known as the TRAIN law. The following changes were implemented:

A revised tax table with new income tax brackets and tax rates. Employees who earn up to Php250,000 annually will no longer pay any income tax, while those earning P8 million and above annually will be subject to a higher income tax rate. All other employees will be subject to lower income tax rates.

The revised tax table no longer considers the civil status of the taxpayer with the deletion of personal/additional tax exemptions for single or married individuals, heads of families and those with disabled or PWD (person with disability) dependents.

The tax-free threshold for 13th month pay and other bonuses increased from P82,000 to P90,000. Also, for companies providing fringe benefits to its employees occupying managerial and/or supervisory positions, there is an increase in the fringe benefit tax (FBT) rate from 32 percent to 35 percent effective as well.

For PhilHealth premium contributions, the Philippine Health Insurance Corporation (PHIC) issued Circular No. 2017-0024 to adjust the premium contributions of the employed sector to sustain the National Health Insurance Program (NHIP).

Beginning January 2018, PhilHealth monthly premium contributions, which are excluded from gross taxable compensation income, will increase from 2.5 percent to 2.75  percent of an employee’s monthly basic salary, based on a salary floor of P10,000 and ceiling of P40,000 (existing salary brackets had been removed). Contributions will remain equally divided between employee and employer.

Lastly, the deadline for filing the Quarterly Income Tax Return (BIR Form 1701Q) for the first quarter will be moved on or before May 15 of the same taxable year. On another note, for those availing of the installment payment for payment in excess of P2,000, the second installment payment shall be made on or before October 15 following the close of the taxable year.

This should be a very interesting year of adjustments in both people’s behaviors and businesses. I think people are fine paying the taxes provided it is easy and fair, but overall let’s wait and see.

I’m still hoping to have a more easy and automated way of paying and reporting taxes – even though for now it is but a fool’s hope!

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The writer wears many hats: RFP®–Registered Financial Planner | Licensed Real Estate Broker | Content Creator- www.vernongo.com; Vice-Chair- www.cebucontentcreators.com