As of May 31, 2017, the Philippines’ House of Representatives approved the third (3rd) and final reading of the proposed tax reform bill.
Under what is called the HB 5636, the new maximum rate of personal income tax will drop from 32% to 25%.
This excludes high income earners, who are actually required to pay a higher income tax in the new proposed bill.
Also called as the Tax Reform for Acceleration and Inclusion or TRAIN, this new tax reform proposal in the Philippines is still to be put in the microscope for review in the Senate.
So far, nothing has been set in stone as far as implementation of TRAIN. But this article will give you a more comprehensive look into how this new tax reform bill will play out.
Tax Reform Bill Overview
The photo below from the Department of Finance, shows how the new tax system in the Philippines can potentially look like:
The income tax brackets will be simplified and reduced into six (6) brackets.
Although this new and simplified tax system will increase majority of the Filipino workforce’s take-home pay, there will be other income brackets (such as the high-income earners) that will receive lower take home pay.
You may refer to this image below from the Department of Finance.
According to sources, under HB 5636, the new maximum rate of personal income tax will be reduced over time from the current 32% to 25%, except for high income earners as illustrated in the infographic above.
For employees earning P250,000 or below every year, there is a 100% income tax exemption.
Meaning that if you are earning that amount (or less) annually, you will not be deducted income tax from your payroll.
Although this is very exciting news for most employees in the Philippines, this tax reform bill is expected to drag on for at least a couple of months while it pushes to get through Senate approval.
Click here to read how the new tax reform will affect Filipinos.
Conclusion
The good news though, is that after decades, the Philippine government is finally looking into revamping the tax landscape in the country.
It will be exciting to see what happens in the coming months as far as if the tax reform bill gets passed in its current state, or it will undergo revision under the Senate.
Regardless, this shakeup in Philippine tax will prove to be a game-changer for all hardworking Filipino employees.
For more updates regarding the latest news on the tax reform bill, you may bookmark this article.
We will be updating this blog post about tax reform in the Philippines in real-time, so you’ll always be in the know.
Sprout Solutions is an HR (human resources) and payroll software company in the Philippines that powers HR for companies like Rappler, Xurpas, Shakey’s, and Century Pacific.
Click here to see the testimonials of our happy customers.
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