Fresh PH Law on Easing Into Taxes 🧾

Also, get to know Two Essential Tax Concepts 😉

They should teach taxation in high school, don't you think? Understanding how taxes work is crucial, yet many of us enter adulthood without a clue. Let me update you with a recent move that will significantly affect your life when you start working.

Recently, President Ferdinand Marcos Jr. signed the "Ease of Paying Taxes Act" into law. This game-changer simplifies tax procedures, allowing you to file tax returns electronically or manually through various channels, including the Bureau of Internal Revenue (BIR), authorized agent banks, or tax software providers. This move is part of an effort to modernize tax administration, making it more efficient and taxpayer-friendly.

Before we get into the perks of this new law, let's take a quick tour of the tax landscape in the Philippines. In this FiveBites article, we will focus on two things young people should know about: Personal Income Tax and Value Added Tax (VAT).

The Philippines has a progressive personal income tax system, meaning the more you earn, the higher the tax rate you pay, up to 35%. Thanks to the TRAIN Act, individuals earning less than PHP 8 million see a reduction in their tax rates, making it a bit easier on your wallet.

Here's a snapshot of how it works:

• Earnings up to PHP 250,000? You're in the clear with 0% tax.

• Make between PHP 250,001 and PHP 400,000? Your rate dropped from 20% to 15%.

• And it scales up from there, with the highest earners (over PHP 8 million) still at a 35% tax rate.

For detailed information and to stay informed about your (future) obligations (just in case), visit the Bureau of Internal Revenue's website at BIR Income Tax Return Forms.

Annual Filing Deadline
Take note that the deadline for filing the income tax return is April 15 each year, accounting for the income of the previous taxable year.

Even if you think you’re not paying taxes because you don’t have a job, think again. 

VAT, a 12% tax applied to most goods and services, affects everyone. It's charged by businesses generating over PHP 3 million in gross sales. However, there's a silver lining: the government exempts certain exporters and service providers from VAT to promote economic-contributing business activities. This includes sales to registered enterprises and services related to air transport, international shipping, and special international agreements.

Why Should You Care?

Understanding taxes is more than just a responsibility; it's about knowing where your money goes and how it benefits the community. 

With the new Ease of Paying Taxes Act, the government is not just looking to fill its coffers but to invest in infrastructure and services that improve everyone's quality of life. Plus, knowing the ins and outs of taxes can help you navigate financial decisions more wisely.

So, whether you're earning your first paycheck, running a start-up, or just trying to make sense of adulting, getting to grips with the tax system is a step towards financial literacy and empowerment. Let's embrace these changes and make informed choices for a brighter future.

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