TRAIN Law Primer or So what do I file now?

The Income Tax Reform Law (Tax Reform for Acceleration and Inclusion of TRAIN) (RA No. 10963 + veto message) changes a lot of things for the DIY taxpayer. Aside from the forms themselves, the tax reform law also changes the frequency, the processes, and the formula & tax tables that we’ve all gotten used to. As a freelancer, professional, or self-employed individual, this can be a confusing change. This article aims to make the tax TRAIN easier to understand.

Does TRAIN exempt me from paying any tax?

According to bir gov ph, if you are earning less than P250,000 annually, you are exempt from paying percentage tax, income tax, and/or, the 8% gross receipt tax. According to the TRAIN Act, this means you are not required to file any tax return. The actual implementation of this, however, would still be dependent on the IRR to be released. (And we’ll update this article once that’s released.)

From VAT to Non-VAT – TRAIN’s New VAT Threshold

The previous threshold for a taxpayer to be required to be a VAT taxpayer was around P1,919,000. TRAIN raises the VAT threshold to P3,000,000. If you were a taxpayer earning below the P1.9 Million threshold, then things don’t change much for you – you’re still a non-VAT taxpayer.

All about that 8% Tax – TRAIN’s “Gift”

As a non-VAT taxpayer you now have 2 choices when it comes to filing your taxes:

  1. Good ol’ Percentage Tax + Income Tax
  2. The brand new 8% Tax

Percentage Tax

Not a lot of changes for percentage tax. Depending on the alphanumeric tax code that applies to your income that percentage is still what is applied to your gross receipts.

For most individuals, this would be 3% (PT 010) of your gross income.

Income Tax

The Income Tax table, on the other hand, has changed a LOT. Your tax dues are now computed thus:
[table id=1 /]
Note: This table is effective from Jan 1, 2018 to Dec 31, 2022 only. It changes (becomes lower!) after that.

8% Gross Receipts Tax

This is a new option for non-VAT taxpayers. Instead of filing the percentage tax and the income tax, they can opt to file 8% Gross Receipts Tax. The computation is very simple:

(GROSS Income – P250,000) * 0.08 = Tax Due

So which one should I choose?

You should choose the option that helps you save more, of course. How do you determine that? We gotchu, fam – we made a calculator for you! Depending on how much expenses you’ve spent, that will determine whether the 8% Gross Receipts Tax is a good option for you OR if you should stick with Percentage + Income Tax. You can find it HERE.

That’s It?

We are still waiting for the DOF to release the Implementing Rules & Regulations (IRR) for the changes in the TRAIN law. There will be more details on frequency, the process, and the actual forms so that we can comply with the latest changes brought about by this Tax Reform.

Once the IRR is released then we start to see the details of the process and the steps that will help the BIR in keeping track of everything. With Taxumo, you are assured that the forms you are filing are the latest forms and that they comply with the latest regulations of the BIR. So if you don’t want to worry about all of this (and you shouldn’t), sign up to Taxumo now!

For more articles relating to the TRAIN LAW, click HERE.  

_____________________________________________________________________

 

TAXUMO is the #1 online end-to-end tax filing platform in the Philippines, that enables freelancers and SMEs to file and pay taxes online in minutes. 

Need help with updating your BIR registration or filing taxes? Make things easy with taxumo.com 

164 thoughts on “TRAIN Law Primer or So what do I file now?”

  1. Hi, I have this questions in mind.
    1.) If you’re a Non-Vat Taxpayer and opted for the 8% Tax TRAIN Gifts, you do not have to file 2551M monthly and 1701Q quarterly and pay 3% percentage and the quarterly income tax respectively?
    2.) Do you only have to file on Annual basis should your income is over P250,000 during the preceding year, while lower than P250,000 exempts you from filing any Income Tax Returns?
    3.) Like wise, when you opted for the new tax rate, are you going to be compelled to file 2551M, 1701Q and Annual Income Tax return and pay based on the new tax rate but will also exempted to file if your income falls below P250,000?
    4.) What happened to the payment you made for the percentage tax and quarterly tax if at the end of the year you’ll just find out that you are exempted in filing income taxes?

    Further, may I request for notification immediately when the IRR, and the new procedure is released.

    1. Hi Manny, to answer your questions:
      1. Yes, that is the idea. You do need to be earning solely from your business. People with mixed income are not eligible for the 8% Gross Receipts Tax.
      2. That depends on what tax option you opt for. If you choose income tax, for example, you still have to file even if it is a zero filing.
      3. I think this is similar to #1? So the answer is: most likely you will still have to file a zero filing. We’ll learn more about that once the IRR is released.
      4. If you mean that you are paid less than 250K in aggregate throughout the year, then most likely you will not be paying anything in the earlier quarters. Note that the 250K is not just for taxable income but for the gross income collected.
      5. We will definitely post once the IRR is released. We will also inform our subscribers as soon as it’s released and as soon as it’s implemented in Taxumo.

      Hope that answers your questions!

      1. Hi EJ, thanks for your reply. However, I understand that Pres. Duterte vetoed some provisions under the new TRAIN which includes the supposed omission of the 3% percentage tax. Does it mean, we Non-Vat tax payers need to file 2551M and pay the 3% percentage tax for the gross income we earned last month (January 2018)? Since the IRR is not yet released to date, (or is it already?) will we be charged a penalty if we wait for the IRR before we file 2551M and pay 3% percentage tax should the IRR is released after the deadline set on February 20, 2018?

        1. Hi Manny, this is probably too late. πŸ˜› But yes, there are still some filings you’ll have to do that are more clearly explained in our later articles. FWIW, [Taxumo] does all of the computations automatically AND also shows you which forms you’re supposed to take action on so you don’t miss any filings.

      2. hi Sir ej,

        follow up on Mr. Manny’s question last January. Now that its April if I availed the 8% percentage tax, what do i need to file ; just the income tax due next month (for 1st qtr)? or i file separate percentage tax for the quarter due this month and income tax for 1st quarter due next month? thank you, hoping for your helpful response.

        1. No exact details yet, unfortunately. πŸ™ But when there is, we’ll be sure to update [Taxumo] with the latest forms and deadlines. SO it may be good for you sign up so you can stop worrying about these things yourself! πŸ™‚

    2. Hi sir how can i amend jan to mar 2018 if i filed it as 2551m?, this should be in 2551q
      Also, how to amend for sept to dec 2017 in 2551m, i filed it under tin id 123-456-789-001 instead of 123-456-789-000.

      1. For the first one, there’s a field in the 2551Q form that will allow you to put in (and deduct) the amount you previously paid.

        For your 2551Ms filed under the incorrect TIN, you will have to go directly to the RDO and work that out directly with them. πŸ™

  2. Hi. I am a professional/self employed. I earned less than 250k last 2017. I used to file my monthly percentage and quarterly income tax upto present. With the new TRAIN law, do I still need to file my taxes? What happens to my BIR registration? do I need to update anything to BIR?

    Thank you.

    1. Hi Angelica. It has changed. According to BIR’s RMC No. 01-2018, the EWT rates for the following are now at 8%:

      1. Professional fees, talent fees, commissions, etc. for services rendered by individuals
      2. Income distribution to beneficiaries of estates and trusts
      3. Income payment to certain brokers and agents
      4. Income payments to partners of general professional partnerships
      5. Professional fees paid to medical practitioners
      6. Commission of independent and/or exclusive sales representatives, and marketing agents of companies.
    1. The BIR releases memos, circulars, and advisories in trickles. They have released some for some changes as per TRAIN but not yet for all. Certainly none yet for how to opt for the 8% Gross Receipts Tax, for example.

    2. Cecilio Abalos Jr

      Hello Sir EJ.., I am computer shop owner and non-vat taxpayer., this April is due for the form 2551Q and listed in my COR that this would file for the 25th day of the following month after the close of each quarter that means due date for filing should be April 25? How to compute for these 3 months?

      Sales for
      January – 18,827.50
      February – 22,278
      March – 19,054

      January + March = P60,159.50

      P60,159.50 x 3% or 8% or 9%…?

      How about 1601EQ..? My monthly rental 7,174.09

      January 2018 – P7,174.09 x 5% = P358.70
      February 2018 – P7,174.09 x 5% = P358.70 using the form 0605

      How about this 1601EQ…?

      Thanks for the help…..

  3. Hi. I’m a newly hired freelancer this mid-January and I am really confused about on how to file a TIN number and our ITR. I’ve read dozens of articles before about applying as a self-employed professional but I don’t know if it still works now that the TRAIN law was passed. Hope you can guide me in the new process of filing of ITR/Tax Exemptions. Will be following your posts.

  4. I’m a mixed income earner (compensation + home-based job). I availed of the substituted percentage tax return filing when I first registered with the BIR which exempts me from getting ORs per BIR RR 14-2003, if I only have one payor for my home-based business which I do. Now that TRAIN is in effect, my payor is withholding 8% of my gross receipts (combined income + percentage) as opposed to the previous system. I just wanted to clarify if this would force me to purchase receipts to show as evidence as opposed to the monthly issued BIR Form 2306 as a substituted OR per BIR RR 14-2003.

    Thank you for your assistance.

  5. Just a follow-up question to the above discussion.

    I’m a self-employed person whose annual income does not exceed P 250,000 annually and I’m thinking of opting for the 8% tax option because this will exempt me fully from paying tax as opposed to choosing the percentage/ income tax option. Is my assumption correct? How do I go about availing the 8% tax option? Do I have to go to the BIR office to update? And what BIR form should I use to file the 8% tax option even if it is zero filing since my annual gross income is less than 250K. Thank you.

  6. Hello sir EJ,

    I would just like to confirm.
    In above post, you mentioned that there are 2 options:

    1. Good ol’ Percentage Tax + Income Tax
    2. The brand new 8% Tax

    However there is this BIR Advisory (https://www.bir.gov.ph/images/bir_files/internal_communications_1/Advisory/tax%20advisory-procedures.pdf) stating:

    “The said non-vat taxpayers shall have the option to avail of:

    1. The graduated rates under section 24(A)(2)(a) of the tax code, as amended.

    or

    2. An eight percent (8%) tax on gross sales or receipts and other non-operating income in excess of two hundred fifty thousand pesos (P250,000.00) in lieu of the graduated income tax rates under section 24(A) and the percentage tax under section 116 all under the tax code, as amended.”
    ———————

    My understanding of the BIR Advisory is that the 2 options would be:
    1. Income Tax
    or
    2. 8% Tax + Percentage Tax.

    Is my understanding correct?
    Does [1] mean you no longer have to pay for Percentage Tax?
    And if you choose [1], this is were Itemized Deduction or OSD can be applied (since Gross Income will be used for [2])?

    Thanks in advance!
    God bless.

    1. Hi Crista, you either go for (1) percentage tax + income tax OR (2) 8% Gross Receipts Tax. You’ll notice in the advisory you linked it says “in lieu of the graduated income tax rates under Section 24(A) and the percentage tax under section 116.”

      If you choose to go with percentage tax + income tax, OSD is still an option.

      Hope that helps!

  7. Hi!

    Isn’t the deadline for the January 2018 filing on the 20th? Should we wait for the IRR for the 8% Gross Receipt Tax and not file the January 2018 tax yet? Or just file it while waiting to ensure that we will not be penalized for late filing?

    Also, what if we already filed and paid the 3% percentage tax for January?

    Thanks!

    1. Hi Jelly – Yes the deadlines haven’t moved. We’re still waiting for the IRR from the BIR but until these are released, we are still bound to follow the old IRR (which pertains to the pre-TRAIN tax laws). We’re expecting an IRR/Advisories from BIR within the week for this so, fingers crossed, we should be able to have more clarity on this soon. In Taxumo, if you want to be sure, you can still file your 2551M as per normal.

      1. Hi EJ,

        For those that will proceed with filing the 2551M for January, do you think we will still have an option to change it to the 8% Gross Receipt Tax once the IRR is released? Or will we be bound to the Percentage Tax + Income Tax for the entire year?

        – Jilly

          1. We’ll just wait a few more days then. I’ll be monitoring your blog for sure. Thanks, EJ! 😊

            – Jilly

  8. “According to bir gov ph, if you are earning less than P250,000 annually, you are exempt from paying percentage tax, income tax, and/or, the 8% gross receipt tax. ”

    May I know where can I find this on the said site or its documents? I’m specifically concerned about apparently not needing to pay the percentage tax as well. Thanks!

  9. Hi Sir,

    May I know when to file the EWT and Withholding tax on compensation? Are we still require to file monthly or is it quarterly?

  10. Hello! I have determined that the 8% Gross Receipts Tax is better for me than the old system (percentage tax + income tax). I have also read that I must indicate in my Q1 income tax return that I intend to use 8% Gross Receipts Tax. But since there’s no IRR on that yet, do you think I should still make a 2551M filing for my earnings in January? The deadline is already in a few days…

    1. Hi K – really it’s up to you. With Taxumo though, we take care of these uncertainties so you don’t have to worry about them. We’ll tell you what to file when to file them. πŸ™‚

  11. Amelia Delos Angeles

    For individuals with annual fixed income of more than 250,000, how do we compute taxable income? Is it Gross Income ( basic salary x 14 i.e. including 13th and 14th month pays) minus 340,000( 250,000 exempt from tax and 90,000 deduction from bonuses) equals taxable income?

  12. Hi, this is super helpful! But the 8%, is that for annual or quarterly tax? I asked my mom’s friend who works in BIR and she said that’s quarterly 8% gross.

    1. It’s 8% Annually. However, do note that filing & remittance (aka payment) is most likely on a quarterly basis.
      The quarterly filings is “cumulative”… let me attempt to explain (and to simplify things, I’m removing the 250K deduction):
      Let’s say you earned 300,000 from Jan to March. When you file Q1, you have a taxable income of 300,000 so you’ll pay 24,000 (8%).
      Now let’s say you earned 250,000 from April to July. When you file your Q2, you now have a taxable income of 550,000. Your due is 44,000. You deduct how much you paid before which is 24,000. So your new payable is 20,000.
      This goes on until you file your annual. You always deduct how much you’ve paid before.

      Note that it’s not true that it’s more expensive if it’s quarterly: 8% broken down applied to your income in different quarters is the same as 8% applied to your income across all quarters. MATH! πŸ™‚

      1. Hi EJ, Isn’t it, you only pay 8% of P50,000 out of the P300,000 gross income for the first quarter as illustrated in the above scenario by virtue of the P250,000 threshold as tax-exemption?

      2. Just a followup question on this. Let’s say I just earned P50,000 for Q1 and P50,000 in the succeeding quarters, does that make me exempted from paying? Thanks.

  13. Hi sir. Just wanna seek your opinion. I’m a job order personnel of dpwh with monthly salary of 21k pesos. I am being taxed at 13% per month. Is the tax rate imposed on me correct? If not correct, can i ask for a refund? Also, dpwh does not give me any documents evidentiary to actual remitting of my tax due to the BIR. What i should i do? Thank you.

    1. Hi Romula, are you a contractual employee of DPWH? If I understood correctly, you should be getting a 2307 when they pay you. That is the document to show the BIR that taxes were withheld from your salary.

      Now if you can ask for a refund… asking any tax specialist normally elicits a chuckle when you ask them about refunds. πŸ˜› The fastest/easiest option would be to get a tax debit memo from the BIR instead for any overpayment – which most likely will be the case if your taxes withheld are 13%. You then use this debit memo to deduct from your future tax dues.

      1. Hi Ej, that’s what I have been doing for the fast 10 years when I decided to ceased being employed and turned self-employed. However, my tax credits have accumulated to more than P50,000 now…last year I decided to file my ITR and opted for a refund. I am turning 60 by November this year and I wanted to get a full refund of my overpayment to BIR. How can I please BIR to refund my P50k+ over payment?

      2. Hi! I think the rate is 10% professional fee and 3% business tax. However, may I ask if this 10% professional fee is still applicable or can opt for 8%? thanks

      3. i believe it’s 10% prof fees and 3% business tax. however my question is are government consultants eligible for the 8% or the professional rate remains the same?

  14. Hi

    I am also waiting for BIR’s update regarding the 8% gross receipts tax if required to file/pay on a monthly basis or if will do during the quarterly return.
    It’s frustrating that the 20th is approaching and no clear advise yet from them. Any news?

    1. Hi Mae Rose, Percentage Tax is now to be paid Quarterly as per the latest advise of BIR. The 8% GRT will also be quarterly it seems as there’s a direction to “note/indicate” in the 1st quarter filing that you’ll opt for 8%. Taxumo is working closely with the BIR for this so that our users don’t have to worry about such things. We’ll tell them what’s needed when their needed and they’re secure in the knowledge that Taxumo takes care of their taxes for them. πŸ˜‰

      1. Hi EJ, this could have answered my first question above. Can you please clarify this.
        1. Does it mean, there’s no more filing of the 2551M on a monthly basis, but only ITR quarterly, consequently paying the 3% percentage taxes for total gross income earned from January to March upon filing the quarterly ITR?; or
        2. Do we still need to file the 2551M monthly only (no payment required) and pay the 3% percentage taxes for total gross income earned from January to March upon filing the quarterly ITR?
        3. How do we go about it if we are an e-filer? BIR seems not yet ready for the TRAIN in cases on the e-filers, since as to this writing the forms are still the same in their e-BIR system.
        Can you please, provide us with the link to BIR’s latest advice: ….”xxx…..Percentage Tax is now to be paid Quarterly as per the latest advise of BIR. The 8% GRT will also be quarterly it seems as there’s a direction to β€œnote/indicate” in the 1st quarter filing that you’ll opt for 8%…xxx”.
        The 20th deadline for filing and payment of the 2551M is fast approaching.

        1. Hi Manny,

          1. Yes
          2. No more.
          3. Unfortunately, I can’t answer with regards to how to on eBIRForms. With [Taxumo] we’re able to forego eBIRForms altogether and submit the forms on your behalf to the BIR. Not to mention we can also remit payment to them (so no more lining up at the bank)
          FYI on the Advisory related to Quarterly Percentage Taxes – you can find it [here].

      2. Hi EJ!

        Thanks a lot for the information! Been really waiting for an update about this.
        I can handle the tax matters, just need good information re: tax updates.
        God bless and more powers to Taxumo.

      3. Hi

        I have mistakenly filed and paid my January and February 2551M. What should I do if it should be now paid quarterly? Can I apply the previous payment as tax credit for 2551Q first quarter? Can you kindly enlighten me? It’s really confusing.

        1. Hi Jollie, welcome to the wonderful world of taxes. πŸ˜‰ That confusion is actually one of the things we’re addressing with Taxumo – so try it out now!

          WRT your question: the BIR hasn’t released any advise on how to treat previous payments. We have a process for our Taxumo users that allow us to credit that payment to them. But I can’t speak for non-Taxumo users, unfortunately.

  15. Good day Sir,

    I am a life and non life insurance agent and a mutual fund representative. I would just like to inquire if I still would need to pay anything else since the companies which I am connected are already taking 8% out of my commission every payday and I make around 1 million a year. From previous years I am deducted 10% from my Php720,000 gross income and 15% for the excess. I also file the percentage tax of 3% every month (2551M), the quarterly taxes (1701Q) and the annual tax (1701).

    1. Hi Jonathan, You can check your COR and see if there are any other tax types aside from Income Tax and Percentage Tax. If none, you should be all good. πŸ™‚ Having said that, you may want to try out [Taxumo] – you can file ALL the forms you mentioned AND we’re updated with the latest TRAIN updates. For example, if you use us, you’ll know that you don’t need to file a 2551M anymore. If you did file through us, we’ll even give you a refund. πŸ™‚

      1. Hi EJ!

        Just a follow up question.

        Let’s say I’ll be electing the 8% tax option on gross sales/receipts. What should my COR contain? Should it just be Income Tax, or still Income Tax and Other Percentage Tax?

        I, too, am a life insurance agent. Thanks!

        1. Seems dependent on RDO at this point. Some remove the “percentage tax” line, some keep the “percentage tax” but change it to quarterly, while some have an added line there showing that you’re opting in to 8%. From what we’ve seen, the implementation varies across the RDOs.

          1. Do I still have to file 2551Q and pay when it is indicated in my COR under tax types “percentage tax quarterly?” I chose the 8% income tax only. I thought there shouldn’t be percentage tax anymore but PT is still in my COR.

  16. I am a self-employed consultant. I have a question with regard to filing of annual income tax on april 15, 2018 for income earned for 2017. Since the TRAIN law takes effect in 2018, this means that we still use the old BIR 1701 form and the old income tax table when we file on april 15 even if an IRR is issued? Is this correct?