[Ask The Tax Whiz] What are the upcoming tax updates in 2023?

What are the tax updates for 2023 under TRAIN Law?

The Tax Reform for Acceleration and Inclusion (TRAIN) law will be undergoing some changes, pursuant to its own provisions. Here are some of the salient features of this law that will take effect for the 2023:

1. Changes in graduated tax rates for individuals

Individual taxpayers who are earning below P250,000 annually are still exempt from income tax.

Those earning between P250,000 to P8,000,000 will now be subject to 15% to 30% (down from 20% to 32% prior to 2023).

However, individuals with taxable income exceeding P8,000,000.00 will still face the same tax rate of 35%.

For ease of reference, here is the summary of tax schedule of individuals effective January 2023:

Annual Income	Tax Rate
Not over P250,000	0%
Over P250,000 but not over P400,000	15% of the excess over P250,000
Over P400,000 but not over P800,000	P22,500 + 20% of the excess over P400,000
Over P800,000 but not over P2,000,000	P102,500 + 25% of the excess over P800,000
Over P2,000,000 but not over P8,000,000	P402,500 + 30% of the excess over P2,000,000
Over P8,000,000	P2,202,500 + 35% of the excess over P8,000,000

2. Quarterly Reporting of VAT returns

Starting January 1, 2023, the filing and payment of VAT returns shall be done on quarterly basis. The filing of monthly Value Added Tax return (BIR Form No. 2550M) would no longer be required. With this, VAT taxpayers will only need to file four (4) Quarterly Value Added Tax returns (BIR Form No. 2550Q) within 25 days following the close of each taxable  quarter.

What are the tax updates for the year 2023 under the CREATE Law?

The Corporate Recovery and Tax Incentives for Enterprise (CREATE) Law  was enacted to help the taxpayer to recover to the undue effect of COVID-19 by lowering the taxes to certain taxpayers. For the year 2023, certain taxes would be reverting back to their original rate:

1. Percentage Tax (PT)

CREATE Law lowered the Percentage Tax to 1% from July 1, 2020 to June 30, 2023. Starting July 1, 2023, taxpayers must pay the original tax rate of 3%.

2. Minimum Corporate Income tax (MCIT)

The Minimum Corporate Income tax, which was also reduced from 2% to 1% under the CREATE Law and pursuant Revenue Regulations 5-2021, would also be reverting back to its original 2% rate starting July 1, 2023.

3. Special Income tax for Non-Profit Proprietary Educational Institution and Hospitals 

The 10% tax for Non-Profit Proprietary Educational Institution and Hospitals was also reduced to 1% effective July 1, 2020 to June 30, 2023, with the qualification that their gross income from unrelated activities shall not exceed 50% of their total gross income. 

Starting July 1, 2023 the tax rate for such institutions will return to 10% again.

If you have any questions about the updates on your taxes this 2023, you may download TaxWhizPH Mobile app and use the unli-chat feature or book a consultation. Download the app here: https://linktr.ee/taxwhizph

– Rappler.com