Understanding your taxes with the new TRAIN Law

Published January 14, 2018, 2:06 AM

by manilabulletin_admin

By Kaye Estoista-Koo

Illustration by Eugene Cubillo
Illustration by Eugene Cubillo

The TRAIN or Tax Reform for Acceleration and Inclusion is intended to give those who make less money leeway to bring home more money from what they make, distributing the burden of the taxes more evenly across the categories of taxpayers who make more money.

The TRAIN Law was recently passed as of Dec. 19, 2017, to create a just, simple, and more effective taxation system. Since the days of its signing into law, President Rodrigo Roa Duterte vetoed some items, but none that affect the lowering of personal income tax, which is what affects the most number of Filipinos.

For years, the Philippines has been labeled as one of the most tax-unfriendly nations, with tax rates that have befuddled even our more affluent, first-world Asian neighbors. Singapore, as an example, has a progressive taxation system, which means higher income earners get taxed more, with the highest personal income tax rate at just 22 percent.

The current TRAIN is in its first phase, made effective last Jan. 1 on and on until 2020. By 2021, phase two of TRAIN will take effect.

Here are the most important changes, using fictional names and income levels to reflect the changes taxpayers should expect as 2018 opens:


The whole scheme makes everything easier on the pocket for those who make less and taxes those who can afford it more. In fact, the first bracket of those who earn less than P250,000 taxable income annually, covers 83 percent of Filipino taxpayers according to the Department of Finance.


Other notable TRAIN items



  • If the car ranges from over P600,000 and up to P1,000,000, the tax will be 10 percent. (Old rate: P12,000 + 20 percent in excess of P600,000).
  • If the car costs up to P600,000, it’s going to cost you four percent in taxes (old rate: two percent).
  • If the car ranges from P600,000 and up to P1,000,000, the tax will be P24,000 + 40 percent in excess of P600,000 (old rate: P12,000 + 20 percent in excess of P600,000).
  • Eyeing a car in the over P1,000,000 to P4,000,000 range? The tax will be 20 percent. (Old rate: P112,000 + 40 percent in excess of P1,100,000).
  • Luxury cars with over P4,000,000 above will not be charged 50 percent. (Old rate: P512,000 + 60 percent in excess of P2,100,000).

Gas/ Diesel

  • Gas prices and diesel are yet another high-impact item under TRAIN, especially because these excise taxes have not been touched since 1997. Excise taxes cover those consumer products and goods with negative effects and affect those who use more of it by asking them to pay more.
  • Since 1997, diesel has been taxed zero pesos per liter. In a progressive scheme, its excise tax will be at P2.50 and P4.5 in 2018 and 2019, respectively, before hitting P6.00 in 2020 onwards.
  • Since 1997, gasoline has been taxed P4.35 per liter. In a progressive scheme, the levy will range from P7 to P9 from next year until 2019 and P10 by 2020 onwards.


  • Excise tax on sugar Sweetened beverages means your favorite drinks like carbonated drinks, sports and energy drinks, and sweetened juice drinks will all get taxed.
  • P6 per liter for drinks with caloric or non-caloric sweetener.
  • P12 per liter for drinks with high-fructose corn syrup.

Real Estate and Donor’s Tax

  • Real estate and donor’s tax have been lowered to make the process easier for those passing away, those who want to simply transfer property.
  • Estate tax: Flat rate of six percent based on estate’s net value with a deduction of P5 million and exemption for the first P10 million for the family home.
  • Donor tax: Flat rate of six percent for gifts above P250,000 on a yearly basis.

The TRAIN Law seeks to generate enough revenue over the next three years, and on and on, so that the government can provide better services, work on infrastructure projects that will help us develop economically, and put an end to the country’s complex tax system.

We still have a number of items not explained here such as the excise taxes on tobacco which you can check with the Department of Finance.