Here's Exactly How Much Will Be Taken Out of Your Salary With the TRAIN Law
The tax reform bill signed into law by President Duterte this week affects Filipinos in two ways: First, it significantly slashes taxes across all income brackets, and second, it increases taxes on various goods and services. The following are simplified summaries of the new tax law.
New Tax Schedule for Salary Earners
One of the most salient features of the amended tax law is how it completely eliminates income taxes for Filipinos whose salaries are not more than 20,833 pesos a month (250,000 pesos a year). For all other salary earners, while they will still be taxed on their income, the rates will be significantly lower. The following table summarizes this:
We have two examples based on the given information:
Emily (Monthly Salary: 35,000 pesos)
For Example #1, we have Emily (not a real person) who has a monthly salary of 35,000 pesos. Emily falls in the third bracket in the table because her salary is between 33,334 and 66,666 pesos. So how much will she pay in taxes under the new scheme? How much income tax will be deducted from her monthly salary?
To compute her income tax, we must total her annual income, which is 420,000 pesos (35,000 pesos times 12 months equals 420,000 pesos). The law states that she must pay 30,000 pesos annually plus 25 percent of the excess over 400,000 pesos. This means that she needs to pay a fixed amount of 2,500 every month (30,000 pesos spread over 12 months), plus 25 percent of 20,000 pesos which is 5,000 pesos (the 20,000 pesos is the excess over 400,000 pesos).
This means that for an entire year, Emily only has to pay about 35,000 pesos annually and 2,916 pesos monthly.
The same procedure will be followed in 2023 onward, but with bigger tax cuts on personal income.
Maria (Monthly Salary: 85,000 pesos)
Maria has a monthly salary of 85,000 pesos (which translates to an annual salary of 1,020,000 pesos), putting her in the fourth bracket
Using the same steps in Example #1, we compute for 30 percent of 220,000 (on top of the fixed 130,000 pesos she needs to pay annually, the 220,000 is the only taxable part of her annual salary, which represents the excess over 800,000).
So, 30 percent of 220,000 is 66,000 pesos. We add this to the fixed 130,000, and we get 196,000 pesos she needs to pay annually. This translates to a monthly income tax of 16,333 pesos.
We understand you may be too busy to compute your new taxes, so we did it for you. Here is a table where you can find your approximate monthly salary and the corresponding monthly income taxes.
But wait... before you start rejoicing, know that the government will have to get its tax income elsewhere. Expect huge tax increases on gasoline, sugary beverages, electricity (indirectly, through coal taxes), tobacco, and more.
This story originally appeared on Townandcountry.ph.
*Minor edits have been made by the Esquiremag.ph editors.