Income Tax Brackets under TRAIN Law
and CREATE Act
2023 Onwards (Final TRAIN Rates)
Taxable Income per Year (₱) Tax Due
0 – 250,000 0% (Exempt)
250,001 – 400,000 15% of excess over ₱250,000
400,001 – 800,000 ₱22,500 + 20% of excess over ₱400,000
800,001 – 2,000,000 ₱102,500 + 25% of excess over ₱800,000
2,000,001 – 8,000,000 ₱402,500 + 30% of excess over ₱2,000,000
Over 8,000,000 ₱2,202,500 + 35% of excess over
₱8,000,000
CREATE Act (RA 11534) – Corporate Income Tax Rates
Type of Corporation Tax Rate
Regular corporations (domestic and 25% of taxable income
resident foreign)
Small corporations (net taxable income ≤ 20% of taxable income
₱5M and assets ≤ ₱100M excluding land)
Minimum Corporate Income Tax (MCIT) 1% for 2020–2023; 2% thereafter
Non-resident foreign corporations 25% of gross income from Philippine
sources
De Minimis Benefits (DMBs) –
Philippine Taxation
De minimis benefits (DMBs) are small benefits given to employees that are NOT subject to
income tax, withholding tax, or fringe benefit tax (FBT), provided they do not exceed the
prescribed ceilings under Philippine tax regulations.
List of De Minimis Benefits and Limits
Benefit Formula / Limit Tax Treatment
Monetized unused vacation Up to 10 days per year Exempt (DMB)
leave (private employees)
Vacation & sick leave Up to 10 days per year Exempt (DMB)
credits (government
employees)
Medical cash allowance to ₱1,500 per semester OR Exempt (DMB)
dependents ₱250 per month
Rice subsidy Up to ₱2,000 per month OR Exempt (DMB)
1 sack of 50kg rice
Uniform & clothing Up to ₱6,000 per year Exempt (DMB)
allowance
Laundry allowance Up to ₱300 per month Exempt (DMB)
Medical benefits Up to ₱10,000 per year Exempt (DMB)
(employee)
Employee achievement Up to ₱10,000 per year Exempt (DMB)
awards (tangible form only)
Gifts for Christmas/major Up to ₱5,000 per year Exempt (DMB)
anniversary
Daily meal allowance Up to 25% of basic Exempt (DMB)
(OT/night shift/holiday minimum wage
work)
CBA & productivity Up to ₱10,000 per year Exempt (DMB)
incentives (aggregate)
Formulas for Determining Taxability
1. Compare actual benefit vs. ceiling
Taxable Portion = Actual Benefit – DMB Ceiling
(If actual ≤ ceiling → fully exempt)
2. Aggregate rule for CBA/productivity incentives:
Exempt = min(Actual, ₱10,000 per year)
3. De minimis + 13th month pay + bonuses:
Separately exempt up to ₱90,000 (TRAIN Law).
Excess over ₱90,000 → taxable.
Two Methods of Deduction in
Philippine Taxation
1. Itemized Deductions
Taxpayer deducts actual and allowable expenses incurred in earning income. These
deductions must be supported by receipts and records.
Examples of itemized deductions:
Ordinary & necessary business expenses
Interest expense
Taxes & licenses
Losses
Bad debts
Depreciation
Charitable contributions
Formula:
Taxable Income = Gross Income – Itemized Deductions
2. Optional Standard Deduction (OSD)
A simplified method of deduction that does not require receipts or substantiation. The
taxpayer deducts a fixed 40% of gross income (for corporations) or gross sales/receipts (for
individuals).
Rates:
Individuals (self-employed/professionals, sole proprietors): 40% of Gross
Sales/Receipts
Corporations (domestic and resident foreign): 40% of Gross Income (gross sales – cost
of sales/services)
Formulas:
For Individuals:
Taxable Income = Gross Sales/Receipts – (40% × Gross
Sales/Receipts)
For Corporations:
Taxable Income = Gross Income – (40% × Gross Income)
