TRAIN Law: Revised Withholding Tax Table on Compensation
The Tax Reform for Acceleration and Inclusion (TRAIN) Law, otherwise known as Republic Act No. (RA) 10963, became effective last January 1, 2018. Pursuant to this, the Bureau of Internal Revenue (BIR) has issued Revenue Memorandum Circular (RMC) 105-2017 releasing the new withholding tax table on compensation effective January 1, 2018 to December 31, 2022. Under RA 10963, those with an annual income of Php250,000 and below or approximately a monthly income of Php20,833 and below will be exempt from income tax. Subsequently, the BIR also issued RMC 1-2018 which prescribes the procedures on the use of the Withholding Tax Table on Compensation Income and advises on the change of Creditable Withholding Tax Rate on Certain Income Payments to Individuals.
Under RMC 1-2018, the following income payments to self-employed individuals or professionals are now subject to 8% withholding tax:
1. Professional fees, talent fees, commissions, etc. for services rendered by individuals; 2. Income distribution to beneficiaries of estates and trusts; 3. Income payments to certain brokers and agents; 4. Income payments to partners of general professional partnerships; 5. Professional fees paid to medical practitioners; and 6. Commission of independent and/or exclusive sales representatives, and marketing agents of companies
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