3 Things you should know about the tax reform bill
The third and final reading of the House Bill (HB) No. 5363 was passed last Wednesday May 31st. A total of 246 lawmakers voted yes while only 9 voted no and one abstained on the bill containing the first batch of tax reforms proposed by the administration of President Rodrigo Duterte.
Among the ASEAN-6, the Philippines rank second as having the highest personal and corporate income tax.
Under the HB No. 5636, the maximum rate of personal income tax will be reduced except for the high income earners, while drawing out the tax base reform in consumption taxes such as the excise tax on automobiles, fuel, and sugary drinks.
1. Workers taking home a bigger pay
One of the key indicators of the new government’s implementation is the lowered income tax rates being shouldered by working Filipinos. A proposed balancing act is needed to provide to both the welfare of taxpayers and the government, hence, the proposed Tax Reform for Acceleration and Inclusion (TRAIN) bill. Among all the others, TRAIN aims to reduce the personal income tax (PIT) on a certain level of income, allowing entry-level workers take home a bigger pay.
2. Tax exemptions
After revisions, one relevant change in the amended bill is the retention of VAT exemptions for cooperatives, mainly on sales by agricultural cooperatives, non-electric and non-credit cooperatives, sales by non-agricultural and gross receipts from lending activities by credit or multi-purpose cooperatives.
As the VAT on cooperatives persist, HB 5636 will revoke exemption on sectors such as:
• exemptions found in special laws, except those under senior citizens and people with disability
• low-cost and socialized housing, but in the condition of the housing voucher system establishment
• power transmission
• domestic shipping importation
• lease of residential units
• boys and girls scouts of the Philippines
Moreover, the increase on the tax exemption for the 13th month pay and other benefits will continue.
3. Pricier cars, fuel and sugar-sweetened beverages
Despite the strong opposition from various quarters, the controversial excise tax on petroleum products was retained. Effective Jan 1st next year, a P7 tax on leaded and unleaded gasoline and P3 for kerosene, diesel fuel oil, and liquefied petroleum gas and per kilo asphalts will be imposed, as well as a P10 tax on sugar-sweetened beverages such as caloric and artificial sweeteners.
Another hot issue is the implementation of the new vehicle excise tax moving up a notch. The measure proposes a staggered imposition of increased levies in 2018 and 2019. According to the Family Income and Expenditure Survey, the top 10% – or around 2 million households consume more than half of the fuel in the country.
If you are looking for a tax or accounting firm to guide over these changes, to consult you on how can your company benefit from these changes or how we can assist you with general accounting services, do not hesitate to contact us.
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