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The Tax Reform for Acceleration and Inclusion (TRAIN) Law fundamentally changed how individual income tax is calculated in the Philippines starting in 2018, with further adjustments effective January 2023. Understanding the current brackets helps you estimate your tax liability accurately.
Before TRAIN Law (Republic Act 10963), a Filipino earning ₱250,000 annually paid income tax. Under TRAIN Law, individuals earning ₱250,000 and below per year are fully exempt from income tax. This effectively gave a tax cut to most minimum-wage and low-to-middle income earners.
TRAIN Law also simplified the tax bracket structure and reduced the top marginal rate for annual income below ₱8,000,000 while increasing the rate on ultra-high incomes. The new schedule took effect in two phases: 2018 and 2023.
The following applies to employees and individual taxpayers under the graduated income tax schedule:
| Annual Taxable Income | Tax Rate | Tax Formula |
|---|---|---|
| ₱0 – ₱250,000 | 0% | No tax |
| ₱250,001 – ₱400,000 | 15% | 15% of excess over ₱250,000 |
| ₱400,001 – ₱800,000 | 20% | ₱22,500 + 20% of excess over ₱400,000 |
| ₱800,001 – ₱2,000,000 | 25% | ₱102,500 + 25% of excess over ₱800,000 |
| ₱2,000,001 – ₱8,000,000 | 30% | ₱402,500 + 30% of excess over ₱2,000,000 |
| Over ₱8,000,000 | 35% | ₱2,202,500 + 35% of excess over ₱8,000,000 |
Source: TRAIN Law (RA 10963) as amended. Taxable income = gross income minus mandatory contributions (SSS/GSIS, PhilHealth, Pag-IBIG) and other allowable deductions.
Annual taxable income for employed individuals is not your gross salary. It is reduced by:
After these deductions, the remaining amount is your taxable income, which is then applied against the bracket table above.
Annual gross: ₱360,000. After contributions (approximately ₱18,000 total for SSS, PhilHealth, Pag-IBIG) and assuming the 13th month pay falls within the ₱90,000 exempt ceiling, the taxable income may be approximately ₱342,000. Tax: 15% of (₱342,000 − ₱250,000) = ₱13,800 annually, or about ₱1,150 per month withheld.
Annual gross: ₱960,000. After contributions (~₱36,000) and standard 13th month exemption, taxable income is approximately ₱894,000. Tax: ₱102,500 + 25% of (₱894,000 − ₱800,000) = ₱102,500 + ₱23,500 = ₱126,000 annually, or about ₱10,500 per month withheld.
Note on 13th month pay: The first ₱90,000 of 13th month pay and other bonuses is tax-exempt under TRAIN Law. Benefits exceeding ₱90,000 are added to taxable compensation income.
The biggest beneficiaries of TRAIN Law are Filipinos earning below ₱250,000 annually (below approximately ₱20,833 per month gross), who now pay zero income tax. Those earning between ₱250,000 and ₱800,000 annually also saw meaningful reductions in their effective tax rates compared to the pre-2018 schedule.
High-income earners above ₱8,000,000 annually pay more under TRAIN Law than under the old schedule, as the top marginal rate was increased from 32% to 35%.
Yes, but with an additional option. Self-employed individuals can choose between the graduated income tax schedule (same brackets above) or the 8% flat tax on gross receipts above ₱250,000, provided their gross annual receipts do not exceed ₱3,000,000. This choice is made at the start of the taxable year.
Yes. Minimum wage earners are specifically exempt from income tax under the National Internal Revenue Code, independent of the TRAIN Law brackets. They are also exempt from the holiday pay, overtime pay, night differential, and hazard pay taxation.
Your employer withholds income tax monthly using the BIR's withholding tax table, which applies the annual bracket schedule on a monthly or weekly basis. The amounts on your payslip labeled "BIR tax" or "withholding tax" reflect this. The total withheld over the year should match your actual annual tax liability.
Employees with a single employer whose tax is correctly withheld at source are generally not required to file an annual ITR (they are under the substituted filing system). However, those with multiple employers, additional income sources, or certain types of compensation must file BIR Form 1700 annually. Confirm with your employer or a tax professional.
The 2018 schedule had slightly higher rates for the middle income brackets. The 2023 schedule — the current one — reduced the rates in the ₱400,000 to ₱800,000 range from 20% to 15% (₱250K–₱400K) in a restructuring that further benefited the lower-to-middle income range. The top rate of 35% above ₱8M remained unchanged.
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