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What Every Doctor Should Know About the Train Law

Tax Filing for Doctors

For Filipino doctors, understanding the nuances of the TRAIN Law implemented in 2018 is crucial, as it has introduced several significant adjustments to the tax landscape. This law aims to modify personal income tax rates among other tax-related changes, directly impacting medical professionals. With Taxumo’s tax calculator, doctors can easily navigate these changes and ensure accurate tax compliance. Here are some of the things that you may know about tax filing for doctors.

Changes in personal income tax

When it comes to TRAIN Law, the basic understanding of some people is that it aims to lower the income tax of Filipinos so that they will have a higher net take-home pay. This would, then, allow them to manage their finances better. However, it’s more complicated than that.

The TRAIN Law fundamentally redesigned the personal income tax rates to allow Filipinos, including doctors. Here’s a summary of how these changes may affect doctors:

  • Those with an annual salary amounting to less than or equal to P250,000 will be exempted.
  • Those with an annual salary amounting between P250,000 to P400,000 have to pay 20% of their specific income amount (ex. If your annual income is P350,000, then you must pay 20% which is P70,000).
  • Those with an annual salary amounting between P400,000 to P800,000 have to pay 25% of their specific income amount plus a fixed amount of P30,000.
  • Those with an annual salary amounting between P 800,000 to P2 million have to pay 30% of their specific income amount plus a fixed amount of P130,000.
  • Those with an annual salary amounting between P2 million to P8 million have to pay 32% of their specific income amount plus a fixed amount of P490,000.
  • Those with an annual salary amounting over P8 million have to pay 35% of their specific income amount plus a fixed amount of P2,410,000.

In 2023, TRAIN will bring down the tax rates further. Be sure you have the right calculations to your personal income tax. You can get it with the help of Taxumo’s tax calculator in the Philippines. For doctors and other medical professionals, check out Taxumo to assist you in your taxation needs.

Changes in value-added tax (VAT)

TRAIN also increased the VAT threshold from P1,919,500 to P3 million in total gross income and receipts. This means that if you are earning above P3M, then you cannot avail the flat rate of 8%. Instead, you will pay the graduated rate plus 12% VAT.

Previously registered VAT payers, who will not reach the P3M threshold, can change their status to NON-VAT. All you have to do is complete and file BIR Form No. 1905.

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Percentage tax is now filed quarterly

Percentage tax is a business tax imposed on freelancers and companies that sell goods or services. People, who pay this type of business tax, are professionals that:

  • Have services and products exempted from VAT.
  • Have gross sales or gross receipts that are P3 million and below per year.

Before TRAIN, business tax had to be filed and paid monthly. In 2018, all doctors have to pay 25 days after the end of a taxable quarter. Thus, they will have to file BIR Form No. 2551Q instead of form No. 2551M.

Cosmetic surgery procedures now have excise tax

Another things that you should know about tax filing for doctors is excise tax. Medical services are generally exempted from excise tax, but the medical service of cosmetic surgery procedures done by plastic surgeons is now an exemption thanks to the TRAIN Law (need to pay excise taxes for these services).

Plastic surgeons must file the BIR Form 2200-C if they do the following:

  • Cosmetic surgeries for the sake of only improving the appearance of their patients.
  • Invasive cosmetic procedures (surgery is done inside the body through an anatomical opening)

Every cosmetic procedure will definitely become pricier; each one will be subject to a 5% excise tax. Some examples of procedures that fall under this tax include:

  • Liposuction
  • Lip injections
  • Rhinoplasty
  • Breast augmentation
  • Facelift
  • Hair restoration

Of course, there are plastic surgeries meant for physical altering that will not be affected. These are:

  • Reconstructive
    • To make a body part function again.
    • To make a deformed body part look normal again after it went through life-changing events like illness, accidents, etc.
  • Non- invasive cosmetic procedures
    • Does not remove tissue
    • Does not need to break the skin to perform the procedure
    • Examples: Botox and laser treatment

Doctors will have to pay their excise tax 10 days after the end of each month. With TRAIN Law, beauty literally comes with a price.

Key Takeaway

The TRAIN Law brought a lot of changes to the way citizens in the Philippines pay their taxes. This affected everyone, including tax filing for doctors and those with a medical profession.

Payment exemptions that require recalculations are some examples of these changes. In addition, the guidelines for personal income, value-added, and percentage taxes have been altered starting 2018.

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