Get familiar with the Philippine income tax table for 2023 and know your tax bracket, the amount owed, and how to compute your tax dues.
It’s the new year! It’s time for changes and new beginnings. For the majority of the working class and businesses, it also means the inevitable income tax updates.
This year, expect more changes in the tax system. Filipino taxpayers are generally going to enjoy their hard-earned money a little more in 2023. That is quite welcome news. Individual and foreign resident taxpayers alike now have lower tax rates.
That’s due to the lower annual income tax rates that the Philippines’ TRAIN Law is now enforcing.
The TRAIN Law in Action
On December 19, 2017, then-President Rodrigo Roa Duterte signed into law Republic Act No. 10963, the Tax Reform for Acceleration and Inclusion or TRAIN Act. It is under the Comprehensive Tax Reform Program (CTRP).
What is CTRP?
“The Comprehensive Tax Reform Program (CTRP) is needed to accelerate poverty reduction and to sustainably address inequality,…By making the tax system simpler, fairer, and more efficient, additional – and a more sustainable stream of – revenues will be generated to make meaningful investments in our people and infrastructure, which will help achieve our vision for the Philippines.”
Department of Finance
What Does TRAIN Do?
“The TRAIN aims to make the Philippine Tax System simpler, fairer, and more efficient to promote investments, create jobs and reduce poverty. Along with this objective, the CTRP also aims to raise revenues…that will sustain high and inclusive growth of the country; and finance investments in our people through enhanced education, health and social services.”
National Tax Research Center
Income Tax Rates Imposed
The TRAIN Law amended Section 24 of the National Internal Revenue Code (NIRC) before. This regards the tax rates for individuals.
The amendment assigned two schedules for changing the rates. The second schedule started on January 1, 2023.
The Bureau of Internal Revenue (BIR) is implementing rate changes in people’s income taxes through the TRAIN Law. This year, expect the following:
Lower Income Tax Deductions:
- 15% to 30% (previously 20% to 32%) personal income tax rate (based on the tax bracket) for anyone with an annual taxable income of less than P8 million
- 35% personal income tax rate for anyone with an annual taxable income of more than P8 million
- Still NO personal income tax rate for anyone earning below P250,000
This is the 2023 Revised Annual Income Tax Table:
| Net Taxable Income | Net Taxable Income | Tax Rate |
|---|---|---|
| Over | But not over | |
| 250,000 | 0% | |
| 250,000 | 400,000 | 15% of the excess over 250,000 |
| 400,000 | 800,000 | 22,500 + 20% of the excess over 400,000 |
| 800,000 | 2,000,000 | 102,500 + 25% of the excess over 800,000 |
| 2,000,000 | 8,000,000 | 402,500 + 30% of the excess over 2,000,000 |
| 8,000,000 | 2,202,500 + 35% of the excess over 8,000,000 |
Lower Withholding Tax Deductions
The schedule also affects the rate of withholding taxes on employees’ purely compensation income.
This is the 2023 Revised Withholding Tax Table:
| Taxable Income | Tax Due |
|---|---|
| Not over 250,000 | 0% |
| Over 250,000 but not over 400,000 | 15% of the excess over 250,000 |
| Over 400,000 but not over 800,000 | 22,500 + 20% of the excess over 400,000 |
| Over 800,000 but not over 2,000,000 | 102,500 + 25% of the excess over 800,000 |
| Over 2,000,000 but not over 8,000,000 | 402,500 + 30% of the excess over 2,000,000 |
| Over 8,000,000 | 2,202,500 + 35% of the excess over 8,000,000 |
No More BIR Form 2550M
Companies that are VAT-registered need not file any Monthly VAT Return (BIR Form 2550M). Instead of the usual twelve (12) returns, they are now required to file only four (4) returns starting this year. They must still submit the Quarterly VAT Return (BIR Form 2550Q) within 25 days after every taxable quarter.
The due dates remain.
Previously Lower Income Tax Rates to Go Up
The Corporate Recovery and Tax Incentives for Enterprise (CREATE) Law previously lowered taxpayers’ rates to help individuals and businesses recover from the effects of COVID-19. On July 1, 2023, the original rates will return for those certain taxpayers.
These will be the updates:
- Percentage Tax – from 1% back to 3%
- Minimum Corporate Income Tax – from 1% back to 2%
- Special Income Tax for Non-Profit Proprietary Education Institutions and Hospitals – from 1% to 10%
The changes in the annual income tax rates are considered positive news. That is, with the exception of those that benefitted from the CREATE Law prior to 2023.
No one is exempted from the TRAIN Law, be it individuals paying personal income taxes or businesses taking care of taxable income.
Overall, these changes are designed to improve the Philippines in general.
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