The new Tax Reform for Acceleration and Inclusion (TRAIN) law has since been making waves, particularly its provision on lowering personal income taxes, thus increasing take-home pay.
Before you rejoice, however, it is important to note that our taxes wouldn’t be completely gone. Instead, it will be collected in the form of increased excise taxes on petroleum products, automobiles, and sugar-sweetened beverages.
But what exactly is TRAIN and how will it affect entrepreneurs like you? Is there still something that we need to know about it?
As it is in its early stages of implementation the first month of 2018, here’s what you need to be informed and what you can expect from the tax reform law, also known as Republic Act 10963:
A first part, that is.
According to the Department of Finance (DOF), the TRAIN is “the first package of the comprehensive tax reform program (CTFRP) envisioned by President Duterte’s administration, which seeks to correct a number of deficiencies in the tax system to make it simpler, fairer, and more efficient”.
Given this, it is safe to assume that the public can anticipate more changes in the tax system in the future.
Lower income taxes, higher excise taxes, and effects on other taxes
In a Rappler article, Atty. Edward G. Gialogo dissected the changes brought by the TRAIN law, aside from these two known facts about the mandate, about which he, nevertheless, provided additional details.
To know how much your income tax will be under the new TRAIN law, use this tax calculator provided by the DOF.
Aside from the new tax scheme, “the deductible 13th month pay and other benefits are now higher at P90,000 compared to P82,000 under the old law”, said the tax lawyer.
Excise tax on cigarettes and mineral products, as well as taxes on passive income and documentary stamps will also be increased, while there will be a decrease in donor’s tax, estate tax, and value added tax, he stated in his article.
The case for small entrepreneurs
In a report by GMA News, Senator Sonny Angara said that tax filing and payment, which have been made simple under the TRAIN law, will enable small entrepreneurs to run their businesses with less difficulty.
“We are hopeful that these reforms would not only incentivize our self-employed and professionals to pay correct taxes, but also encourage more Filipinos to engage in business,” said the senator.
Small entrepreneurs with an income of P250,000 and below are also exempted from income taxes, like professionals and employees who have earnings that fall under the said bracket.
Despite the exemption, income tax returns (ITRs) of the self-employed still need to be filed for record and monitoring of the Bureau of Internal Revenue (BIR).
On the other hand, those that exceed P250,000 but not higher than P3,000,000 may opt to pay a flat tax rate of 8%, as stated in the news report.
Such is a new feature brought by the law, according to Atty. Gialogo.
It was also mentioned that filing and payments will now be made quarterly, instead of the old monthly schedule, which is just another one of the many simplified reforms expected from the BIR to do for the self-employed, as mandated by the TRAIN law.
But beyond all these, it is also important for the small entrepreneur to take note of the other changes like the hiking prices of certain goods, depending on the type of business you are running. If you are growing and hiring employees, the reform on income taxes may also be very relevant to you, as well as other details.
As a responsible entrepreneur, keep in mind to always be informed.
You may obtain a copy of the TRAIN law and its provisions from the DOF website.