Previously, MyFinanceMD, has been clamoring for TAX REFORMS, since our tax system has not been updated to reflect inflation.
See this post: AlDub and Philippine Tax Reform
In fact, our tax system’s last update was made 20 years ago. Imagine that! If you are earning more than 500K per year, you are being taxed at the same tax rate as the rich and famous celebrities like Kris Aquino or Manny Pacquiao.
Now, wish granted, probably many of you know there are major changes in the income tax return this year, which we call now the TRAIN Law. Will it be good or bad for doctors?
Let me break it down to you the most important things I think doctors and non-doctors need to know.
FACT #1: What is TRAIN again?
TRAIN – Tax Reform for Acceleration and Inclusion or RA No. 10963
Tax Reform – It is basically a tax reform that changes the previous tax system. It contains major amendments on income tax, estate tax, donor tax, and excise tax.
Acceleration – means, the government wants to add to economic investment. The 70% of the revenues this law (through excise taxes) will gain will be used in the BUILD, BUILD, BUILD Infrastructure Program. Building bridges, public schools, hospitals and other government facilities to better provide for the people. The 30% of which will be used in subsidy of the poorest 10M families of our country.
Inclusion – means our tax system is designed to be inclusive to all. It aims to simplify the tax system and make it more effective. The bracket was adjusted for inflation. Also, the lowest income families will not be taxed, the middle class will be taxed less and the ultra-rich will be taxed higher.
FACT #2: About 99.9% of the population will enjoy lower income tax rates.
- For those earning below 250,000 annually (below 21,000 per month), you will now enjoy tax-free payouts. Included in this bracket is the 83% of the population.
- Even if you are earning more than 21,000/month, you will still enjoy tax savings. This is good for all unless you belong to the 0.1% of the population who are earning more than 8M per year.
See the new graduated tax rates below:
FACT #3: This TRAIN tax is a little bad news for those earning more than 8M/year. Those belonging to this bracket, which is about 0.1% of the population will have a higher tax of 35% from previous 32%.
FACT #4: The change in tax rates increases the tax savings of both employed and self-employed physicians.
Case #1: EMPLOYED PHYSICIAN
Doctor C is a resident doctor. He is only earning 21,000 per month in a private hospital. His status is employed. Meaning, he is receiving BIR form 2316 and the hospital files for her income tax return yearly.
What is the difference of her salary now under TRAIN from the previous income tax system?
Doctor C now enjoys an additional Php1,862.80 per month or Php22,353.60 per year.
Case #2: SELF-EMPLOYED PHYSICIAN (PRIVATE PRACTICE) – earning less than 3M gross per year
For self-employed physicians:
If the gross receipts/income do not exceed Php3M VAT threshold, the taxpayer may opt to be taxed at:
- 8% of gross receipts in excess of Php250,000 in lieu of the graduated rates and percentage tax;
OR - Use the graduated rates or the new TRAIN tax table above.
Note: The personal exemption (50,000) and additional exemptions (25,000 per dependent) are removed in the new TRAIN tax system, in exchange, all taxpayer regardless of the number of dependents are given the first 250,000 as an exemption.
Example:
Dr. Dy is a practicing internist with a total annual gross income of Php730,000 for the entire year, how much would be his tax due as compared with the previous tax code from the new TRAIN graduated rates and if he opts to use the 8% flat tax? Note: He has 2 dependent kids.
Note: You should decide during the first quarter of the year if you will be using the flat rate 8% because if not, you will be considered to be using the graduated rates under the new tax system. This will be irrevocable for the entire taxable year.
FACT #5: The VAT threshold was raised from Php1,919,500 to 3M total gross receipts/income. If you earn more than 3M in a year or if you are VAT-registered, you cannot use the 8% flat rate. You will be using the graduated rate plus 12% VAT.
FACT #6: If you were previously a VAT registered taxpayer (earning above the previous threshold of Php1,919,500), but now you think you will not earn more than 3M total gross receipts/income this year, you can opt to change from VAT to NON-VAT by filing the duly accomplished BIR Form No. 1905 “APPLICATION FOR REGISTRATION INFORMATION UPDATE” of your RDO on or before MARCH 31, 2018.
FACT #7: For mixed income earners: meaning you are both employed at the same time has a business or earns as a professional, you shall be taxed as follows:
- On your compensation income (employment) – at graduated rates; and/or
- On income from the conduct of a trade or business or practice of profession:
-
- If exceeding the VAT threshold – at graduated rates;
- If below VAT threshold – either flat 8% of gross in excess of 250,000 or use the graduated rates plus percentage tax.
-
FACT #8: Some administrative reforms included in the TRAIN Law:
All I can say is that this is the tax reform we are all been waiting for. It may not be perfect, but definitely, it’s an improvement. Even if there are other prices that increased because of this, we cannot deny the fact that we were given more tax savings, therefore more money to spend or save. The power is in our hands. It’s up to us how to use it. It is up to us if we want to spend all our tax savings. Or is it time to save for our future.
If you choose to be the responsible one, you can contact me here, so I can guide you.
Did you like this article? This was discussed intensively in my latest book:
Don’t forget to grab your copy! To order CLICK HERE. Limited copies available.
For your Financial Health,
Read more:
- FILIPINO DOCTORS AND TAXATION Part 1: The Ultimate Guide on How to Register as a Doctor/Physician in BIR
- Top 6 Saving Tips this 2018 to Start Your Year Right
- How I Got 41,600 from SSS Maternity Benefit
- Rules for Female Doctors: Changing Names after Getting Married
- A Simple Trick for Doctors to Know Whether Their Accountant is Honest
- For Doctors: How to Avoid Tax Mapping Penalties when BIR goes to your Clinic
Do you want to know how to file your taxes online without going out?
These courses will teach you how to file and pay your Income Tax returns at the comfort of your home.
Start to end, step by step, no going out. From encoding, filing and payment. (All done online)
Enroll in our online course:
For Physicians/Doctors/Dentists/Vets:
https://pro.myfinancemd.com/taxcination/
For Financial Advisors:
https://pro.myfinancemd.com/taxcination-for-financial-advisors/
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Dra, yng sa self employed/retainer po kung flat rate na 8% ang piliin po, paano po yng sa 2307? Di po ba aside po sa binabawas ng company may 3% pa po sa percentage tax sa previous tax system po natin. Kapag flat 8% po un na lang po babayaran tama po ba?
2307 is the withholding tax. Part na yun sa 8% flat rate na pwede deduct sayo. When u choose the flat rate 8%, you don’t need to pay the 3% percentage tax. But you still need to file monthly, but you don’t need to pay anything if naka deduct na sayo ng 8%, only those di pa na deduct na tax sayo.
Paano po filling? Basta ilalagay lang po na no payment. Need po bang magpresent ng 2307 per month po?
Good day!
I would just like to clarify why we do not need to pay percentage tax if we choose the 8% flat rate as we are required to file 2551M. How is that going to happen? Thank you!
There is still no clear answer for that as of now. Since we are still waiting for the RR of that law. Since it’s very new. But I was told that you just file it as “no payment”. Will update you when we have the RR na
Hi dra. if Sa graduated rates Ang mapili, Ang Na withheld Na 8% from Hmos, pf from procedures done in hospital , ifile pa rin Sa quarterly. Yung mga pf from walk -in patients from clinics ay Ang masubject Sa 3% monthly tax. Tama po ba?
Pag Sa flat rate Na 8 percent, lahat ng may 2307 ay Hindi Na matax pero ifile pa rin . Pano po Yung mga pf from walk in patients Sa quarterly po ba ifile pa or Sa annual Na Lang?
Yung mga ebir downloads po bale Sa Iibahin po Nila?
At bakit raw po ba Magkaiba Ang total Na tax due Sa graduated rates at Sa flat rates ? Curious Lang po
Marating salamat po Sa Pag reply nila
Withholding 8% is different from that flat 8% rate ha. If you choose the graduated rate, they will still withhold you 8 %, then percentage tax pa na 3% sa gross monthly. And iba pa rin yung annual ITR na subject to graduated rate computation. Ok? 🙂
I have always used eBIR for the Monthly Percentage tax (2551M) and always paid through BPI in my RDO area.
Since (accdg to the comments) there are new rules yet, should I continue to pay the monthly 3% tax? And continue to use eBIR for it?
If you choose to pay with graduated rates and percentage tax, it is still the same as of now. But with flat rate 8%, if you choose this one, we can wait for further RR. You can go ahead still with the percentage tax as you used before.
Good am Dra.
How much is the deduction for non vat for in patients still 10% , if vat 15% whichi will reflect on the 2307? How about walk in patients with senior card or PWD, how much tax deduction if filed monthly? Quarterly? Salamat doc!
The withholding tax is now at 8%. The 10-15% before is changed to 8% withholding. For Vat registered, you still need to add 12% for your output vat.
Vat if 12% not 15%. Still at 12%. For senior and Pwd still will not be given 12% vat, they are vat exempt
Medyo naguluhan po ako sa tanong ng iba? If yng pf mo is from one company lang po pero di ka nila employee and they with held 8%tax (seen in 2307). Mag file ka lang po ng no payment and wala na po yng 3%percentage tax monthly tama po ba? Kung ang gagamitin po is the 8%flat rate, tama po ba yng intindi ko. Thank you po.
Hi Dra. Intal!
Same situation here. I am registered as self-employed, receiving professional fee from only one company for 4 years. I have been withheld 10% monthly in the past years and given BIR 2307 form. I pay monthly percentage tax of 3% (2551M). Annually, I file my ITR deducting the 10% withheld and attaching the 2307 forms.
What will be now the procedure if I want the 8% flat rate as it seems to be saving more? February 20 will be the deadline for filing 2551M. If I filed for it, then it will be my tax system for the whole year. What forms do I need to submit to BIR if I want the flat rate and not to pay the momthly percentage tax anymore?
Thank you for enlightening us
Let me update you all in that. The RR is still not available. So the procedure is still not clear.
Please waif for the RR. I am also waiting for the regulations on that on what to do.
Hi Dra. Intal!
Another question, I noticed that there will be no more 250,000 exemption/personal deduction in the graduated tax system of self-employed for 2018-2022 as compared to the flat rate 8% and the previous year. Will there be none already of this is the tax system used?
Thank you!
Valerie
Look at the new graduated rates, the first 250K taxable income is exempted already. So, it has din. On the table.
Hi Dra. Intal!
Sorry for another question. I just want to know how will the total monthly 8% withholding tax be equal to the annual 8% tax less the 250,000 personal exemption? I mean, the company is withholding 8% monthly without the consideration of the less 250,000 in the year end. Should it be that the company will deduct 20,833 (250,000/12 months) on the monthly gross income before computing for the 8% withholding tax?
Thank you very much Dra.!
Well that would be an effect when you file annual income tax the following year, where you get to consolidate the withholding that you paid and other tax that you paid. If at the end of the year, you paid more that what is due, you get to do refund or tax credit.
Actually if you really compute it, there would be around 20K excess that they have to return to us at the end of the year. Since they did not consider the 250K exemption. Let’s see what they will do if they see this.
Clarification lang po:
For Mixed Income Earners, ang nabasa ko dun sa nakapost na text ng TRAIN Law, walang minus 250,000 sa gross receipts na subject to 8%. Naisip ko na wala yun kasi may minus 250,000 ka na dun sa compensation part.
The RR is still not out. Revenue Regulations. Final rules still not clear to all up to now. But I think you are right. But let’s see once the RR is out.
Hi Dr. Intal.
Regarding annual ITR, can we still deduct the taxes withheld in our 2307 just like before?
Thank you.
Is the awaited new RR not out yet?
If I start paying the usual way (3% monthly percentage tax, 2551M) for my mixed income, will that make me disqualified from being able to be taxed the 8% flat rate?
Also, how convenient/unconvenient is it to file for “no payment” in the RDOs (mine is 039)? I may have to take more than a month’s leave so I wont actually be earning for that month…
Can i file for “no payment” at designated banks?
Thank you for your patience and time!!
The new advisory said that you don’t need to use the 2551M, just the 2551Q. And yes, if you use the percentage tax of 3% you can no longer use the 8%flat rate.
I would just like to clarify if we will use 2551q or 1701q under the new advisory. Are the new forms already available for downloading? How about an updated ebir program–is it also already available? I hope you are able to post a sample filled-up form for this.
I have also seen some internet articles that mention the deadline for the 1st qtr ITR is noe May 15 instead of April (the Annua ITR’s deadline is still April 15 though).
Is there change when paying the 3% in 2251m in the new tax reform or train this 2018
You don’t need to use the monthly, just the quarterly.
Hello, thank you for this article. I have a question, if you are VAT REGISTERED MD, and you receive pf from senior citizens, should the amount they gave you be included in the computation of your VAT payable monthly? For example, monthly total sales is 100,000, but 50,000 is from senior citizen patients, shud the VAT payable monthly be p10,417 12% inclusive in 100,000) or shud we compute only the 50,000, hence only p5357 VAT PAYABLE due for that month? Thank you!
The senior should be VAT free in the first place. You don’t charge them VAT. They are exempted from Vat.
Thank you for this informative post. What are the advantages and disadvantages of using the flat 8% as against the graduated rates?
As of now, I don’t see disadvantage in using the 8%. It’s cheaper, simpler. Let’s see if the future RR will tell us otherwise.
If I choose the 8% flat rate, how can i file my 2551M as no payment? Is there other form for it? Do i have to submit my no payment form to my designated RDO branch?.Thanks.
Hi doc, you can see the update on the in MyFinanceMD’s FB page. Please see it on FB page.
See here: https://www.facebook.com/myfinancemd/
hi doc, same question here..may Tax Advisory sa bir website regarding percentage tax payers, from momthly 2551M,to Quartely Percentage payment na(2551Q)..no need to file and pay the 2551M, kasi nga 2551Q na..question ko ay
1..if i decide to choose the 8% flat rate(if i understand it right para sa Income tax Payments eto(Quarerly income tax 1701Q and Annual Income Tax 1701), hindi na ako mag file/pay ng percentage tax (now quarterly perc.tax2551Q)..?
2..Registered NON VAT ako(therefore percentage tax payer,quarterly and annual income tax payer( as stated in my Cert.of Reg.2303)…if i choose na nga 8% flat rate, paano malalaman ng bir na 8% na nga pinili ko? may forms ba na isasubmit sa kanila,or kelangan papalitan yung c.o.r ko,anong communication ba gagawin sa kanila?eh sa c.o.r nakasulat dun percentage tax payer
3.at kung 8% nga pinili ko( deadline of which ng pagpili whether 8% 0r graduated is until March 31 ba?), hindi na nga rin talaga magfile and pay ng 2551Q?..at paano mag fafile ng no payment? using 2551Q(ilagay dun 0.00 amount no payment, sa offline package na finifilup wala naman space dun for writing words, puro amount lang)..
4. For the Taxable year 2017(last year na income, deadline of which ng filing/payment is this coming Apil 15,2018, hindi pa applicable ang TRAIN Law sa kanya, right?/ so luma or previous system system pa sa offline package ang mag aaply?
5. First Quarter 2018(jan-Feb-Mar) , quartely income tax filing/payment deadline is April 15,2018, may binago na kaya ang bir sa offline package system na finifill up sa computer,?kasi nag cocompute na ng sarili yun right, pag nag entry ka.
Thanks a lot.Dami tanong
Latest advisory says the following:
For Payment of percentage tax – it is already Quarterly using form 2551Q (no need to file and pay monthly)
For those availing the 8% flat tax – use 1701Q to be filled quarterly, no need to file the 2551Q.
please refer to BIR advisory.
Good Day! Just to clarify, if I choose the 8% flat rate, I don’t need to file any percentage tax forms (2551M/2551Q)? Not even as “no payment”? Just the quarterly ITR (1701Q)? Thanks.
Latest advisory says the following:
For Payment of percentage tax – it is already Quarterly using form 2551Q (no need to file and pay monthly)
For those availing the 8% flat tax – use 1701Q to be filled quarterly, no need to file the 2551Q.
please refer to BIR advisory.
Hi Dra. Intal. I tried searching the BIR website for the RR stating to file using 1701Q if availing the 8% flat rate, but did not find it. Can you refer me to the RR? Also, is here a need to change the COR since it is stated there to pay percentage tax? Thank you!
Pls go to my Facebook page myfinancemd. You will see in my Feb 9 post about the RR on that.
Thank you Dra. Intal. Just saw an Advisory #2 supplemental tax advisory in the BIR website for individuals subject to percentage tax. It says there that those who will avail of the 8% income tax shall accomplish form 1905 to effect the end date of the VAT OR Percentage tax registration. Does this mean that even if I am Non-VAT registered but because I will choose to end the percentage tax and avail of the 8% instead, I still have to go to the RDO and accomplish form 1905?
Also, are there updates on the discrepancy of the 8% withholding tax versus the 8% income tax after the 250,000 exemption for those who are purely self-employed? Do BIR refund or just make a credit for the next income tax?
Thank you, Dra. Intal!
Thanks for informing me. I just saw the new advisory today, it was posted yesterday. So you’re right i think all those who wanted to avail of the 8% flat rate, will be needing to accomplish 1905.
and for the discrepancy, yes there is. Even accountants recognize that, we don’t know as of the moment what will the BIR will do to that. If they will refund it or give tax credit. That, we need to see.
hi dra do you have a sampla computation kung VAT ka? thanks
Gud am dra intal , in filing the 1905 form to avail of the 8% flat rate ( tho currently i am registered as non vat ) where do i put the changes….will it be under section G …sa change in tax details only and what will i place na wordings…..application for 8% flat rte lang or do i have to put pa yung np more monthly percentage payments?
please refer here: http://www.myfinancemd.com/8-optional-flat-rate-vs-graduated-tax-rates-better-self-employed-doctors/
Hi Dr. Pinky. I am a mixed income earner – compensation income plus professional fees. How do I determine whether I am vat or non vat? Will that be based on solely my professional fees or the combined income from both?
it will be from your professional fees + other incomes not from salary.
Hi dra. Can u give a sample on how to compute 1701q. Di ba un 8% flat tax rate ay applicable for annual 1701. E kung iba iba ang total mo per month. Say 150000 per quarter and then the next quarter 155 000.E di wala k tax babayaran s 1st quarter? O magpapafile k lang even less than 250000? Hope to hear from you soon.
for Quarterly filing you can use po the form 2307 that you have. since those 2307 will them them that you paid the withholding tax. pwedeng minimal na lang yung need nyo bayaran for 1701q.
Good pm po doctora
Sa table po na 8% flat rate, yung less lang po ba ay 250,000 lang? Di na po kasali sa less ang yung mga na withhold sa form 2307?
Yes, kasama pa rin po yung 2307 sa computation. in fact if you paid na using the 2307, only the difference yung need mo pay when annual ITR filing comes.
kasali pa rin yung 2307 when they deduct. the 250K is the baseline deduction they deduct for all.
Doc goodeve..doc ask ko how about the BIR RESOLUTION 11-2018 stating dun sa section 2 of the resolution that those professional income less than 3 million will be tax if with holding 5 percent only…
Then dun BIR RR 1-2018 namn sabi professional will be tax 8% sa withholding…
Doc nakakalito kasi ano po tlga ang tama dapat ba 5% lng etax sa physician if his income is less tgab 3 million..
Hope get a reply for enlightenment..slamat doc
Hi, don’t confuse yourself between withholding tax and the quarterly income tax return. Yes, 5% na yung withholding, but the 8% flat rate is still available in lieu of percentage tax and graduated rates.
you are confusing the 5% withholding that with the 8% flat rate. they are different forms of tax. the 5% is the one they deduct from you before you even receive your salary and the 8% is the one you file quarterly in lieu of the percentage tax.
Here are my problems, since I have not been reading the RRs:
1. I have filed 2551M for Jan and Feb already and paid for the percentage taxes on the respective deadlines. I am now set to file my 2551M for March and pay for it. Is it Ok if I do that and start with the 2551Q next quarter?
2. I have filled up the 1701Q form, but the computations are still of the 1997. Shall I wait for the new Offline E-BIR forms before filing? Is there a new one?
Thanks and God bless! 😇
Hi. for your questions:
1. Actually percentage tax are needed to be filed quarterly, kindly ask you respective RDO what you need to do.
2. for filing of Annual ITR for this april 2018, that’s your 2017 earning, the computation will still be the old one, the Train will be enforced for this year, meaning, the one that you will file next year.
Hi Doc,
I already updated my COR to ITR only because I am availing the 8% flat tax rate%. By using the 1701Q form do I file it manually or by ebirform online? Am I going to pay every quarter or just notify that I am availing the 8%?
Hi you have to notify them, and every quarter you still need to file 1701Q. Wait for the updated forms, i think they are still making it.
Hi doc,
How do we file 1701Q ? Wala pang new forms and the eFPS is not updated-it auto computes using old method? Thanks …
Wait for the new forms.
Please kindly update me regarding tax new regulations.
please like my page para updated po kayo: https://www.facebook.com/myfinancemd/
Hello, doctor! How about those who are resident doctors who are moonlighting and not regular employees of hospitals, like relievers? How do we file our taxes? Does it depend on the hospital where we work? Newly licensed physicians like me are quite confused with that. Thank you!
You need to registered first as a physician to be able to file taxes.
Good day, Doc. Is the withholding tax back to 10% per day?
I recently received the net PF finance form from the clinic where I’m a reliever and I just noticed that they are now back to 10% WT (from 8% on Jan-Feb and 5% on first 2wks of March) starting end of March until recently. They also still haven’t given us our 2307.
Dra. paano po kung sa isang private hospital nakapgfile ka ng 8% on gross sales, pero sa isang hospital di ka po nakapagsubmit ng sworn declaration of gross receipt at nataxan po ng 10%. kung sa quarterly percentage return under 2551Q, ok lang ung computation. Ang problem po dun sa pagfile ngayon ng 1701q. separate po ba ung pagfile ng 8% na gross sales dun sa sales po na nataxan po ng 10%? Ano po magandang method po of deduction kung sakali po? Thanks.
Yung 10% yun po ay witholding tax, yung 8% sa quarterly income tax. Magka iba po yun. Pero when you file the quarterly income tax, you deduct the withholding tax. Please read my blog on quarterly income tax. Or you can buy the Greenbook, it’s all there.
Good day Dra! I am currently a resident doctor I am earning a measly P18,000/month. I do not get the gross amount due to tax, of course. When I looked at my payslip, the hospital is deducting me 10% withholding tax. My salary would not even reach P250,000 annually. Is it correct that they are withholding that much? They also want us to submit a certificate of registration to bring down the withholding tax to 5%. Apparently, we do not have an employee-employer relationship.
You need to submit a sworn statement to bring down the withholding to 5%. There is a deadline for that. You need to do it now.
Good day Dra Pinky! Just January this year, I started to be a junior consultant to the hospital I finished my residency training and at the same time, i work as a medical specialist in another provincial hospital. I registered as mixed income last january and the provincial hospital made me submit sworn declaration of 8% tax deduction. When I went to BIR last April to file for my 2551q as 8% flat rate, they rejected my computation stating that i cannot be in the 8% rate. I did not quite understand their explanation since I thought that it’s my option to choose the 8% flat rate. I was left to choose OSD which has less savings compared to the 8%. Can you enlighten me as to what happened? and also, thank you for helping colleagues on TAXATION matters as it can also help OCD doctors who want to file manually!
hi divina, what is their reason for rejecting you? are you earning more than 3M per year?
Hi doctor!
I am opting for the flat 8%
Is there monthly filing pa? If yes, what form do I use? 2551?
And in my hospital, they withhold tax from my inpatient PF (reflected in 2307), should I still file it monthly in my 2551m, and therefore taxed again 3%?
if you are using 8%,no need for monthly percentage tax. The withholding tax is already being withhold every month that is reflected in your 2307.
Hello doc. If nagbabayad na po ako ng quarterly percentage tax, kelangan pa ako mg bayad ng anual income tax? Mixed earner po ako doc. Sabi kc ng bookeper ko iba ang percentage tax sa income tax. Thanks
Yes, iba po yung percentage tax sa income tax return.