Salient Features of Republic Act No.

10963
TAX REFORM FOR ACCELERATION AND INCLUSION (TRAIN) ACT

B. ESTATE TAX:
1. EXEMPTIONS ALLOWED TO ESTATES AND TRUSTS AMOUNTING TO P20,000 IS NOW REPEALED.

2. The rate for ESTATE TAX IS REDUCED TO A FLAT RATE OF 6% BASED ON THE VALUE OF THE NET
ESTATE.

3. STANDARD DEDUCTION, FOR PURPOSES OF COMPUTING THE NET ESTATE, WAS INCREASED FROM
P1,000,000 TO P5,000,000.

4. IF THE CURRENT FAIR MARKET VALUE OF THE DECEDENT’S FAMILY HOME IS MORE THAN
P10,000,000, THE EXCESS SHALL AUTOMATICALLY BE SUBJECT TO ESTATE TAX.

5. FUNERAL EXPENSES, JUDICIAL EXPENSES AND MEDICAL EXPENSES, FOR PURPOSES OF

COMPUTING THE NET ESTATE, ARE NOW REPEALED.

6. Non-Resident Alien decedent is now entitled to a STANDARD DEDUCTION amounting to P500,000

7. NON-RESIDENT ALIEN DECEDENT CAN NOW AVAIL THE DEDUCTION PROVIDED FOR UNDER THE
LAW EVEN IF THE RETURN DOES NOT INCLUDE HIS GROSS ESTATE NOT SITUATED IN THE
PHILIPPINES.

8. By express repeal of Sec. 89 of the NIRC, Notice of Death is no longer needed to be filed with the
Commissioner.

9. Timing of filing of the estate tax return shall now be filed within 1 year from the decedent’s
death.

10. IN CASE THE AVAILABLE CASH OF THE ESTATE IS INSUFFICIENT TO PAY THE TOTAL ESTATE TAX
DUE, PAYMENT BY INSTALLMENT SHALL BE ALLOWED WITHIN TWO (2) YEARS FROM THE
STATUTORY DATE FOR ITS PAYMENT WITHOUT CIVIL PENALTY AND INTEREST.

11. Withdrawal to the Bank Deposit of the decedent is now allowed subject to the FINAL
WITHHOLDING TAX OF 6%

C. DONOR’S TAX:
1. DONOR’S TAX is now reduced to 6%, regardless whether the donee is a stranger or not.

2. Sale, exchange or transfer of PROPERTY made in the ORDINARY COURSE OF BUSINESS (A

TRANSACTION WHICH IS BONA FIDE, AT ARM’S LENGTH, AND FREE FROM ANY DONATIVE INTENT),
will be considered as MADE FOR AN ADEQUATE AND FULL CONSIDERATION IN MONEY OR MONEY’S
WORTH.

3. Dowries or gifts made on account of marriage by parents to their children is now subject to
DONOR’S TAX.
D. VALUE-ADDED TAX:
1. Sale of raw materials or packaging to nonresident buyer, export oriented enterprise, and those
considered as export sales under EO 226, shall be subject to the 12% VAT and no longer be considered
as Export Sale Subject to 0% upon satisfaction of the following:

a. SUCCESSFUL ESTABLISHMENT AND IMPLEMENTATION OF AN ENHANCED VAT REFUND SYSTEM

THAT GRANTS REFUNDS OF CREDITABLE INPUT TAX WITHIN NINETY (90) DAYS FROM THE FILING
OF THE VAT REFUND APPLICATION WITH THE BUREAU; AND
b. ALL PENDING VAT REFUND CLAIMS AS OF DECEMBER 31, 2017 SHALL BE FULLY PAID IN CASH BY
DECEMBER 31, 2019.

2. Deletion of the “Foreign Currency Denominated Sale” provision.

3. Electric Cooperatives are now subject to VAT;

4. Services rendered to persons engaged in international shipping or international air transport

operations, including leases of property for use thereof SHALL BE SUBJECT TO 0% VAT ONLY IF SUCH
SERVICES SHALL BE EXCLUSIVELY FOR INTERNATIONAL SHIPPING OR AIR TRANSPORT
OPERATIONS.

5. Processing, manufacturing or repacking goods for other persons doing business outside the
Philippines which goods are subsequently exported and Services performed by subcontractors
and/or contractors in processing, converting, or manufacturing goods for an enterprise whose
export sales exceed seventy percent (70%) of total annual production WILL BE SUBJECT TO VAT AND
NO LNGER BE SUBJECT TO 0% VAT RATE UPON SATISFACTION OF THE FOLLOWING CONDITIONS:

a. SUCCESSFUL ESTABLISHMENT AND IMPLEMENTATION OF AN ENHANCED VAT REFUND SYSTEM

THAT GRANTS REFUNDS OF CREDITABLE INPUT TAX WITHIN NINETY (90) DAYS FROM THE FILING
OF THE VAT REFUND APPLICATION WITH THE BUREAU; AND
b. ALL PENDING VAT REFUND CLAIMS AS OF DECEMBER 31, 2017 SHALL BE FULLY PAID IN CASH BY
DECEMBER 31, 2019.

6. Transport of passengers and cargo by FOREIGN air or sea vessels from the Philippines to a
foreign country is now subject to VAT.

7. FILIPINOS OR THEIR FAMILIES AND DESCENDANTS WHO ARE NOW RESIDENTS OR CITIZENS OF
OTHER COUNTRIES will now be exempt from VAT on their IMPORTATION OF PROFESSIONAL
INSTRUMENTS AND IMPLEMENTS, TOOLS OF TRADE, OCCUPATION OR EMPLOYMENT, WEARING
APPAREL, DOMESTIC ANIMALS, AND PERSONAL AND HOUSEHOLD EFFECTS IN QUANTITIES AND OF
THE CLASS SUITABLE TO THE PROFESSION, RANK OR POSITION OF THE PERSONS IMPORTING
SAID ITEMS, FOR THEIR OWN USE AND NOT FOR BARTER OR SALE, ACCOMPANYING SUCH
PERSONS, OR ARRIVING WITHIN A REASONABLE TIME.

8. BEGINNNING JANUARY 1, 2021, THE VAT EXEMPTION SHALL ONLY APPLY TO SALE OF REAL
PROPERTIES NOT PRIMARILY HELD FOR SALE TO CUSTOMERS OR HELD FOR LEASE IN THE ORDINARY
COURSE OF TRADE OR BUSINESS, SALE OF REAL PROPERTY UTILIZED FOR SOCIALIZED HOUSING AS
DEFINED BY REPUBLIC ACT NO. 7279, SALE OF HOUSE AND LOT, AND OTHER RESIDENTIAL
DWELLINGS WITH SELLING PRICE OF NOT MORE THAN TWO MILLION PESOS (P2,000,000).
9. Lease of a residential unit EXEMPT from VAT is increased to P15,000/month.

10. Importation of fuel, goods and supplies by persons engaged in international shipping or air
transport operations shall be EXEPT FROM VAT PROVIDED, THAT THE FUEL, GOODS, AND SUPPLIES
SHALL BE USED FOR INTERNATIONAL SHIPPING OR AIR TRANSPORT OPERATIONS.

11. SALE OR LEASE OF GOODS AND SERVICES TO SENIOR CITIZENS AND PERSONS WITH DISABILITIES
shall be EXEMPT from VAT.

12. TRANSFER OF PROPERTY PURSUANT TO SECTION 40(C)(2) [MERGER OR CONSOLIDATION] shall

be EXEMPT FROM VAT.

13. ASSOCIATION DUES, MEMBERSHIP FEES, AND OTHER ASSESSMENTS AND CHARGES COLLECTED
BY HOMEOWNERS ASSOCIATIONS AND CONDOMINIUM CORPORATIONS shall be EXEMPT FROM VAT.

14. SALE OF GOLD TO THE BANGKO SENTRAL NG PILIPINAS shall be EXEMPT FROM VAT.

15. BEGINNING JANUARY 1, 2019, SALE OF DRUGS AND MEDICINES PRESCRIBED FOR DIABETES, HIGH
CHOLESTEROL, AND HYPERTENSION shall be EXEMPT FROM VAT.

16. Sale or lease of goods or properties or the performance of services with gross annual sales and/or
receipts not EXCEEDING P3,000,000.00 shall be EXEMPT FROM VAT.

17. Amortization of Input VAT on Capital Goods shall only be allowed UNTIL DECEMBER 31, 2021
AFTER WHICH TAXPAYERS WITH UNUTILIZED INPUT VAT ON CAPITAL GOODS PURCHASED OR
IMPORTED SHALL BE ALLOWED TO APPLY THE SAME AS SCHEDULED UNTIL FULLY UTILIZED.

18. The Commissioner shall grant a refund for creditable input taxes within NINETY (90) days from
the date of submission of THE OFFICIAL RECEIPTS OR INVOICES AND OTHER DOCUMENTS.
PROVIDED, THAT SHOULD THE COMMISSIONER FIND THAT THE GRANT OF REFUND IS NOT PROPER,
THE COMMISSIONER MUST STATE IN WRITING THE LEGAL AND FACTUAL BASIS FOR THE DENIAL.
PROVIDED, HOWEVER, THAT FAILURE ON THE PART OF ANY OFFICIAL, AGENT, OR EMPLOYEE OF
THE BIR TO ACT
ON THE APPLICATION WITHIN THE NINETY (90)-DAY PERIOD SHALL BE PUNISHABLE UNDER
SECTION 269 OF THIS CODE.

19. BEGINNING JANUARY 1, 2023, THE FILING AND PAYMENT OF VAT SHALL BE DONE WITHIN
TWENTY-FIVE (25) DAYS FOLLOWING THE CLOSE OF EACH TAXABLE QUARTER.

20. BEGINNING JANUARY 1, 2021, THE VAT WITHOLDING SYSTEM imposed upon the Government or
any of its political subdivisions, instrumentalities or agencies, including government-owned or
controlled corporations (GOCCs) shall SHIFT FROM FINAL TO A CREDITABLE SYSTEM.

21. PAYMENTS FOR PURCHASES OF GOODS AND SERVICES ARISING FROM PROJECTS FUNDED BY
OFFICIAL DEVELOPMENT ASSISTANCE (ODA) AS DEFINED UNDER REPUBLIC ACT NO. 8182,
OTHERWISE KNOWN AS THE “OFFICIAL DEVELOPMENT ASSISTANCE ACT OF 1996”, AS AMENDED,
SHALL NOT BE SUBJECT TO THE FINAL WITHHOLDING TAX SYSTEM.