Train Law

What is Train Law 2018?
On December 19, 2017, President Duterte signed into Law

the Comprehensive Tax Reform Program (CTRP) also
known as the Tax Reform for acceleration and inclusion
(TRAIN) as RA NO 10963. The Law took effect on January
1, 2018. This Law gives provision for better infrastructure,
health, education, jobs and social protection.
Content of the Law
The lower personal income tax will mean higher consumer
spending and private investments. These effects are
immediate. TRAIN provides much-needed tax relief for 99%
of income tax filers. The tax liability of 99% of Filipino will
be lower as the highest marginal rate of 32% is reduced to
25%.
Lowering the personal income tax (PIT)
 TRAIN will lower personal income tax (PIT) for all taxpayers
except the richest.
 Those with taxable income below P250,000 will be exempt
from paying PIT, while the rest of taxpayers, except the richest,
will see lower tax rates ranging from 15% to 25% by 2020.
 The personal income tax system of TRAIN will exempt some
83% of current taxpayers.
TRAIN and the Government’s DEV.
AGENDA:
To make the Phil. Economy into becoming an upper-middle
income status by 2022. This implies having per capita
income of at least $4,000.00. It also means achieving
economic growth of 7% to 8% annually. That is why the goal
of Duterte’s administration is to reduce poverty – from
21.6% in 2015 to 14% by the time the Pres. terms end. The
goals are clearly articulated in the Phil. Dev. Plan (PDP
2017-2022).
Upon implementation of TRAIN (2018-2020)

Annual taxable income Tax rate Tax rate
0 - 250,000 0%
Over 250,000 - 400,000 20% of the excess over 250,000
Over 400,000 - 800,000 30,000 + 25% of the excess over 400,000
Over 800,000 - 2,000,000 130,000 + 30% of the excess over 800,000
Over 2,000,000 - 5,000,000 490,000 + 32% of the excess over 2,000,000
Over 5,000,000 1,450,000 + 35% of the excess over 5,000,000
2021 onwards
Annual taxable income Tax rate Tax rate
0 - 250,000 0%
Over 250,000 - 400,000 15% of the excess over 250,000
Over 400,000 - 800,000 22,500 + 20% of the excess over 400,000
Over 800,000 - 2,000,000 102,500 + 25% of the excess over 800,000
Over 2,000,000 - 5,000,000 402,500 + 30% of the excess over 2,000,000
Over 5,000,000 1,302,500 + 35% of the excess over 5,000,000
Simplifying the estate and donor's tax
In the current system, the tax rates can reach up to 20% of the net estate value and up to 15% on net
donations. TRAIN seeks to simplify this. Estate and donor’s tax will be lowered and harmonized so it does not
matter if the person passed away, donated a property, or simply wants to transfer a property. This will result in loss
revenues but the key here is to make the land market more efficient so that the land will go to its best use.
Estate Tax - Instead of having a complicated tax

schedule with different rates, TRAIN reduces and Donor Tax - TRAIN also simplifies the payment of
restructures the estate tax to a low and single tax rate donor’s taxes to a single tax rate of 6% of net
of 6% based on the net value of the estate with a donations is imposed for gifts above P250,000
standard deduction of P5 million and exemption for the yearly regardless of relationship to the donor.
first P10 million for the family home.
Expanding the Value-Added Tax (VAT)
base
 TRAIN repeals 54 out of 61 special laws with non-essential VAT
exemptions, thereby making the system fairer.
 Purchases of senior citizens and persons with disabilities, however,
will continue to be exempt from VAT.
 Housing that cost below P2 million will be exempt from VAT
beginning 2021
 Medicines for diabetes, high cholesterol, and hypertension will be
exempt beginning 2019.
 The reform also aims to limit the VAT zero-rating to direct
exporters who actually export goods out of the country. This will
be implemented together with an enhanced VAT refund system that
will provide timely cash refunds to exporters.
Increasing fuel excise tax
 TRAIN proposes to increase the excise of petroleum products, which
has not been adjusted since 1997.
 An excise tax is an indirect tax on selected goods to discourage too
much consumption of scarce resources and limit the bad effects of
some products, such as pollution and congestion.
 It is a progressive form of taxation since those who consume more will
pay more.
 The government proposes to stagger the increase in to P3 immediately
after implementation, P2 the year after, and P1 in the third year.
 Afterwards, the excise shall be increased annually based on the inflation
rate. In the event that Dubai crude oil exceeds $100 per barrel, the
increase in the excise will be temporarily frozen so as to not unduly
affect the public.
Increasing fuel excise tax
Increasing Automobile Excise Tax
 TRAIN simplifies the excise tax on automobiles, but
lower-priced cars continue to be taxed at lower rates
while more expensive cars are taxed at higher rates.
 When we consider the TRAIN as a package, the increase in
take home pay from the personal income tax reduction will
be more than enough to offset the increase in prices
resulting from adjustments in excise taxes.
 For a typical buyer, the additional take home pay from the
PIT reform will more than fully offset the increase in
amortization.
Increasing Automobile Excise Tax
Introducing a Sugar-Sweetened Beverages
(SSB) Excise Tax
Why impose a tax on SSBs?
● Most of the sugar-sweetened beverage, with some notable
exceptions provide unnecessary or empty calories with little or no
nutrition. SSBs are not a substitute for healthy foods such as fruits and
rice.
● SSBs are relatively affordable especially to children and the poor
who are the most vulnerable to its negative effects on health.
● SSB products are easily accessible and can be found in almost any
store, unlike other sweetened products. Most often, the poor and the
children are not aware of their consequences.
The SSB excise tax will help promote a
healthier Philippines.
Phil’s has underinvested in public structure
spending a measly 2.6% of GDP during the
past administration.
❖As a result
• Massive traffic congestion
• Crumbling roads, bridges
• Unreliable Metro Rail System
• Poor telecommunication
• Etc.
Facts:
 Phils. Ranks the worst in global infrastructure among ASEAN-5
countries in The World Economic Forum Competitiveness
rankings.
 Poor mobility drives up the cost of doing business. This drives
away many investors and dampens Economic Growth.
 Need to consider the importance of young population whose
age is between 18 to 23 y.o. – they are the future drivers of
growth. There is a need to improve their health. Give them
access to best education and provide for their nutritional needs,
among others.
Economic Implications of TRAIN Law?
 Under this Law Phil. will spend 8 to 9 Trillion or ($160 to

180 B $) for public infrastructure from 2017 to 2022.
 Budget will rise from 5.4% of GDP in 2017 up to 7.3% of
GDP in 2022.
2 Major Drivers of Growth: Identified
under the TRAIN Law.
 The Planned Upgrading of Public Infrastructure.

 The Investment in Human Capital Development.
Effect is Medium to long term. 70% of TRAIN
revenues will be earmarked for the “Build,
Build, Build Program” and 30% will be
allotted to social services.
Mitigating Measures and Inflation Outlook
(TRAIN)
 To compensate for inflationary impact of TRAIN (Gov’t have
set aside Php. 200.00/month per household to the poorest
50% of households. This is around 10 Million households will
benefit from this mitigating measure.
 In addition this unconditional cash transferee will be
increased to Php. 300.00/month by the year 2019 to 2020.
 With good roads, railways, and transport services – it will
lead to the reduce of transport-cost of both goods and
services.
To sum it up:
Who will benefit the TRAIN Law?
 Revenues generated by TRAIN will be used to
finance the Build, Build, Build Program and Social
Services.
➢The poor will benefit the most from :

❖Impound public transport system.
❖Good and better quality education of public school.
❖Improved services and facilities of public hospitals.
❖Better health care programs.
❖Improved peace and order situation.

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What is Train Law 2018?

On December 19, 2017, President Duterte signed into Law

Upon implementation of TRAIN (2018-2020)

Estate Tax - Instead of having a complicated tax

 Under this Law Phil. will spend 8 to 9 Trillion or ($160 to

 The Planned Upgrading of Public Infrastructure.

➢The poor will benefit the most from :

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