'With income tax collections expected to drop due to the implementation of TRAIN, this year will be extra challenging for the Bureau of Internal Revenue'
How will an individual top taxpayer be affected by the changes brought by the Tax Reform for Acceleration and Inclusion (TRAIN) law?
Under Section 5 of TRAIN, the first P250,000 annual income is exempt from income tax for all individuals, whether employed or self-employed. This means those who are earning P500,000 will be taxed at 25% from 32% personal income tax, in excess of 250,000, while those earning above P8 million will be taxed at 35%.
In addition, self-employed individuals and professionals earning P3 million or below in gross sales or receipts may avail of the optional 8% flat tax rate based on gross sales or receipts, net of P250,000 exemption in lieu of regular income tax and percentage tax.
More than 80% of personal income tax collections are from the withholding taxes on the compensation of employees.