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Philippines: Tax system reform

On December 19 2017, President Rodrigo Roa Duterte signed into law the Tax Reform for Acceleration and Inclusion (Train) which took effect on January 1 2018 and introduced Phase 1A of a massive reform of the tax system of the Philippines. A notable change is the overhaul of the tax rates on individual compensation income (see table)

The rates above are applicable to both individual citizens and individual resident aliens of the Philippines.

Importantly, the Train, as vetoed by the President, revoked the preferential tax treatment of 15% provided to alien individuals employed by regional or area headquarters (RHQ), regional operating headquarters (ROHQ) of multinational companies, offshore banking units (OBU) and petroleum service contractors and subcontractors. Thus, starting January 1 2018, employees of RHQs, ROHQs, OBUs, and petroleum service contractors and subcontractors have become subject to the same individual compensation tax rates shown above.

The Bureau of Internal Revenue is issuing guidelines for transitioning from the old provisions of the Philippines' revenue code to the new provisions of the Train.

Effective January 1 2018 - December 31 2022Effective January 1 2023 onwards
Not over P250,0000%Not over P250,0000%
Over P250,000 but not over P400,00020% of the excess of P250,000Over P250,000 but not over P400,00015% of the excess of P250,000
Over P400,000 but not over P800,000 P30,000 + 25% of the excess over P400,000Over P400,000 but not over P800,000 P22,500 + 20% of the excess over P400,000
Over P800,000 but not over P2,000,000 P130,000 + 30% of the excess of P800,000Over P800,000 but not over P2,000,000 P102,500 + 25% of the excess of P800,000
Over P2,000,000 but not over P8,000,000 P490,000 + 32% of the excess of P2,000,000Over P2,000,000 but not over P8,000,000P402,500 + 30% of the excess of P2,000,000
Over P8,000,000P2,410,000 + 35% of the excess of P8,000,000Over P8,000,000P2,202,500 + 35% of the excess of P8,000,000

Sylvette Y TankiangKristin Charisse C Siao

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