TRAIN Law

Title: Tax Reform for Acceleration and Inclusion (TRAIN)

Declaration of Policy (Section 2):
- Enhance progressivity of tax system for sustainable and inclusive economic growth
- Provide equitable tax relief to taxpayers and improve disposable income
- Ensure government can provide for needs through better infrastructure, health, education, jobs, and social protection

Income Tax Provisions:

Individual Income Tax (Sections 3-12, 24-25, 51, 51-A, 74, 79):
- New income tax rates for individuals from 0% to 35% effective 2018-2023 (Section 24)
- Standard deduction of 40% of gross sales/receipts up to ₱3M (Section 34)
- Exemption for minimum wage earners and holiday pay (Section 24)
- 8% flat tax option for self-employed/professionals with gross sales/receipts not exceeding VAT threshold of ₱3M (Section 24)
- Substituted filing for employees receiving purely compensation income (Section 51-A)
- Individuals not required to file return if taxable income does not exceed ₱250,000 (Section 51)
- Simplified income tax return of maximum 4 pages (Sections 51, 52)

Corporate Income Tax (Sections 6, 27):
- Government-owned and controlled corporations subject to regular corporate income tax rates (Section 27)
- Final tax rates on certain passive incomes like interest, dividends, capital gains (Section 27)

Estate and Donor's Tax (Sections 22-23, 28-30, 84, 86, 90-91, 97, 99-101):
- Estate tax rate of 6% based on net estate value (Section 84)
- Standard deduction of ₱5M for estate of citizens/residents (Section 86)
- Donor's tax of 6% on total gifts in excess of ₱250,000 (Section 99)

Value-Added Tax Provisions (Sections 31-38, 106-114, 116):
- VAT rate of 12% on sale of goods, properties, and services (Sections 106-108)
- Zero-rating of certain export sales and services (Sections 106-108)
- Repeal of certain VAT exemptions (Section 86)
- Increase in VAT threshold to ₱3M gross sales/receipts (Section 109)
- Creditable input tax spread over 60 months for capital goods over ₱1M (Section 110)
- Shift to creditable VAT withholding system in 2021 (Section 114)
- 3% percentage tax for exempt VAT taxpayers with gross sales/receipts not exceeding ₱3M (Section 116)

Excise Tax Provisions (Sections 39-48, 145, 148, 148-A, 149, 150-A, 150-B, 151, 155, 171):
- Increase in excise tax rates on cigarettes, alcohol, petroleum products, automobiles, and minerals (Sections 145, 148, 149, 151)
- New taxes on sweetened beverages and non-essential services (Sections 150-A, 150-B)
- Mandatory fuel marking system for petroleum products (Section 148-A)

Documentary Stamp Tax Provisions (Sections 49-67, 174-197):
- Increase in documentary stamp tax rates on various instruments (Sections 174-197)

Tax Compliance and Administration (Sections 68-81, 232, 236-237, 237-A, 249, 254, 264, 264-A, 264-B, 265-A, 269):
- Requirement for electronic receipts/invoices and sales reporting system (Sections 237, 237-A)
- Stiffer penalties for tax evasion, use of sales suppression devices, and fuel marking violations (Sections 254, 264, 264-A, 264-B, 265-A)
- Stricter requirements for keeping books of accounts and registration (Sections 232, 236)
- Interest on deficiency taxes at double the legal interest rate (Section 249)
- Penalties for government officers violating tax laws (Section 269)

Disposition of Incremental Revenue (Section 82):
- 70% for infrastructure projects like Build, Build, Build Program
- 30% for social mitigating measures like cash transfers, fuel vouchers, fare discounts, skills training, and other social benefits

Repealing Provisions (Section 86):
- Repeal of certain tax exemptions and preferential rates previously granted

Implementing Rules and Regulations (Section 84):
- Secretary of Finance to issue implementing rules within 30 days