Powers and Authority of the Commissioner
- Authorized to obtain information from various government entities regularly for tax evaluation.
- Empowered to summon and examine persons to ascertain tax liabilities.
- Authorized to determine fair market values of real properties by zone for tax computation, with mechanisms for periodic adjustment and transparency.
Income Tax Provisions
- New graduated income tax rates effective from 2018 with reduced rates from 2023 onward.
- Exemption of minimum wage earners from income tax and on holiday pay.
- Optional 8% tax on gross sales or receipts for self-employed individuals below VAT threshold.
- Tax treatments distinguished for mixed income earners, passive incomes (interests, royalties, dividends), and capital gains.
- Specific tax rates for nonresident aliens, including those employed by multinational companies, offshore banking units, and petroleum contractors.
Corporate Income Tax and Passive Income
- Corporate income tax rates defined with special rules for government-owned corporations.
- Final tax on interest, royalties, and capital gains at specified rates.
Definition and Computation of Taxable and Gross Income
- Taxable income defined as gross income less authorized deductions.
- Regulatory changes on exclusion from gross income, including 13th month pay and other benefits capped at P90,000.
Fringe Benefits Tax
- 35% final tax imposed on fringe benefits provided to employees other than rank and file, computed on grossed-up value.
- Exceptions for fringe benefits necessary for trade or convenience of employer.
Deductions and Optional Standard Deduction
- Allowance for ordinary and necessary business expenses.
- Optional standard deduction capped at 40% of gross sales or gross income, irrevocable for the taxable year.
Filing of Returns and Substituted Filing
- Certain individuals with taxable income below P250,000 are exempted from filing.
- Substituted filing allowed for employees with purely compensation income with correct withholding.
- Corporate quarterly and final tax return requirements outlined.
Payment and Assessment of Taxes
- Installment payment allowed when tax exceeds P2,000; delinquency penalties apply for late payment.
- Withholding tax rates established, with a scheduled reduction starting 2019.
- Timelines for filing and payment of withholding taxes defined.
Estate and Donor Taxes
- Estate tax levied at 6% on net estate with detailed permissible deductions including standard deduction, secured debts, claims, and family home exemption up to P10 million.
- Tax credit allowed for estate taxes paid abroad.
- Donor's tax fixed at 6% on gifts exceeding P250,000 annually.
- Rules for considering transfers at less than adequate consideration as gifts.
Value-Added Tax (VAT)
- 12% VAT imposed on sale of goods, importation, sale of services, and lease of property.
- Zero-rated VAT for export sales, certain services, and registered enterprises in special zones.
- Specific exemptions from VAT covering educational, medical services, agricultural cooperatives, small nongovernmental entities, and residential property sales within thresholds.
- VAT refund mechanism with established timelines and special funds.
- Government entities to withhold VAT on payments with a shift from final to creditable withholding starting 2021.
Excise Taxes
- Specific and ad valorem excise taxes imposed on manufactured goods including tobacco, petroleum products, minerals, automobiles, and selected miscellaneous articles.
- Schedules for phased increases in excise taxes, especially on petroleum and tobacco products.
- Mandatory fuel marking program for petroleum products with penalties for violations.
- Excise tax on non-essential cosmetic services and sweetened beverages with detailed definitions, exclusions, and labeling requirements.
Enforcement and Compliance Measures
- Requirement for manufacturers and importers subject to excise tax to use metering devices for inventory control.
- Authority granted to Internal Revenue officers for inspections, field tests, and seizures; fuel testing procedures detailed.
- Mandatory issuance of official receipts and sales or commercial invoices with phased electronic reporting system implementation.
Penalties and Offenses
- Hefty fines and imprisonment for tax evasion attempts, failure to issue receipts, use of fraudulent receipts, failure to transmit sales data electronically, and possession/use of software for sales suppression.
- Specific penalties for offenses related to fuel marking violations.
- Administrative penalties for government officials committing or ignoring violations.
Allocation and Use of Incremental Revenues from TRAIN
- Incremental revenues earmarked for five years: 70% for infrastructure projects and 30% for social development programs including support for sugar farmers, social welfare, education, health, employment, and housing.
- Creation of an interagency oversight committee to supervise implementation and reporting.
Implementing Rules, Repeals, and Effectivity
- Secretary of Finance tasked to promulgate implementing rules within 30 days.
- Repeal of inconsistent laws and provisions, especially VAT exemptions granted under prior laws.
- Effectivity set for January 1, 2018 upon publication.
Reporting and Transparency
- Agencies implementing tax provisions required to submit detailed expenditure reports to Congress and publish these on official websites.
- Continuous monitoring and review mechanisms mandated for critical tax provisions such as VAT refunds and sweetened beverage tax impacts.