(Eagle News) – The Department of Finance (DOF) has reported that over six million or 86 percent of compensation earners with taxable income of P685 per day or P20,833 per month and below will be exempted from paying the personal income tax (PIT) starting January 2018.
This, according to Finance Secretary Carlos Dominguez III, is one of the benefits of the provisions under the Tax Reform for Acceleration and Inclusion Act (TRAIN) which was signed into law by President Duterte in December 2017.
Under the TRAIN law, compensation earners and self-employed individuals with annual taxable income of P250,000 and below are exempted from paying the PIT.
The law also exempts the 13th month pay and other bonuses not exceeding a total of P90,000 from income tax.
Dominguez said this will benefit clerks, call center agents earning P21,000 and below, and public school teachers with the rank of Teacher I with a basic salary of P20,179 to Teacher III with a basic pay of P22,149 starting this year.
Cuts in PIT rates
Dominguez also noted that 99 percent of the country’s individual taxpayers would benefit from TRAIN owing to hefty cuts in PIT rates.
Thus, those with a taxable annual income of P250,000, on average, would be able to take home an extra income equivalent to a substantial one-month’s pay per year.
Also under TRAIN, the tax brackets have been adjusted so that those with taxable income of more than P250,00 but not above P2 million pay only between 20 and 30 percent PIT.
Those who earn P2 million annually but not above P8 million are taxed 32 percent, while 35 percent tax rate is reserved for those earning P8 million taxable income and above.
“This reform (TRAIN) is an important milestone in our economic history. This is the first time that we are doing a tax reform not because of a crisis or because it was imposed by external forces. It is also the first time that the main purpose of the reform is to reduce poverty and inequality and not because of deficit or debt reduction,” said Dominguez.