TRAIN Law (RA 10963)
Updated June 21, 2026
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Definition
Republic Act 10963, commonly called the TRAIN Law (Tax Reform for Acceleration and Inclusion), is Package 1 of the Comprehensive Tax Reform Program. It took effect on January 1, 2018, it exempts the first ₱250,000 of annual taxable income from personal income tax, and it sets a graduated schedule that reaches a top marginal rate of 35% on taxable income over ₱8,000,000 (effective January 1, 2023). TRAIN repealed the old basic personal exemption (₱50,000) and the additional exemption (₱25,000 per dependent), and it raised excise taxes on petroleum, automobiles, and sugar-sweetened beverages (NIRC §24(A), as amended by RA 10963).
The TRAIN Law is the single largest overhaul of the Philippine individual tax system since the 1997 NIRC. It is the first of the Duterte administration's Comprehensive Tax Reform Program (CTRP) packages and must be read as distinct from later laws: CREATE (RA 11534, 2021) cut corporate income tax to 25%/20%, and CMEPA (RA 12214, effective July 1, 2025) set a single 20% final tax on deposit interest in any currency and cut the stock transaction tax. Neither is part of RA 10963. TRAIN's core individual change is structural, not a deduction: it deleted the basic and additional personal exemptions entirely and replaced them with a 0% bracket on the first ₱250,000 of taxable income. The graduated schedule has six brackets running from 0% to 35%, with the second tranche of lower rates and the 35% top rate taking effect on January 1, 2023. To offset the revenue lost from lower income taxes, TRAIN raised excise taxes on diesel, gasoline, and automobiles, and it introduced a sweetened-beverage excise of ₱6.00 per liter (caloric or non-caloric sweeteners) and ₱12.00 per liter (high-fructose corn syrup).
Detailed explanation
What is the TRAIN Law (RA 10963)?
Republic Act 10963, the Tax Reform for Acceleration and Inclusion (TRAIN) Law, is the Philippines' landmark individual-tax reform. It was signed on December 19, 2017 and took effect on January 1, 2018 as Package 1 of the Comprehensive Tax Reform Program (CTRP). TRAIN exempts the first ₱250,000 of annual taxable income from personal income tax, sets a six-bracket graduated schedule topping out at 35% on taxable income over ₱8,000,000, and funds the resulting revenue loss with higher excise taxes on petroleum, automobiles, and sugar-sweetened beverages (RA 10963, Section 5; NIRC §24(A), as amended).
How did TRAIN change personal income tax?
TRAIN's defining individual change is structural. It repealed the basic personal exemption (₱50,000) and the additional exemption (₱25,000 per dependent) when Section 12 of RA 10963 repealed NIRC §35. In their place is a single 0% bracket on the first ₱250,000 of taxable income: a threshold, not a deduction. The graduated schedule effective January 1, 2023 is: 0% up to ₱250,000; 15% of the excess over ₱250,000 for ₱250,001 to ₱400,000; ₱22,500 + 20% of the excess over ₱400,000 for ₱400,001 to ₱800,000; ₱102,500 + 25% of the excess over ₱800,000 for ₱800,001 to ₱2,000,000; ₱402,500 + 30% of the excess over ₱2,000,000 for ₱2,000,001 to ₱8,000,000; and ₱2,202,500 + 35% of the excess over ₱8,000,000 for income above ₱8,000,000 (NIRC §24(A)(2)(a), as amended by RA 10963).
The 8% flat-tax option
For self-employed individuals and professionals, TRAIN introduced an 8% flat tax on gross sales/receipts and other non-operating income in excess of ₱250,000, available to non-VAT taxpayers whose gross sales do not exceed the ₱3,000,000 VAT threshold, in lieu of graduated rates and the percentage tax (NIRC §24(A)(2)(b), as amended).
Which excise taxes did TRAIN raise?
To offset lower income taxes, TRAIN raised consumption taxes. Petroleum excise rose in tranches: diesel from zero to ₱6.00 per liter and gasoline from ₱4.35 to ₱10.00 per liter at full phase-in. Automobile excise was restructured into price-based tiers of 4% to 50%. A new sweetened-beverage excise applies at ₱6.00 per liter for drinks using caloric or non-caloric sweeteners and ₱12.00 per liter for those using high-fructose corn syrup, with milk and coffee exempt. These pass through the supply chain to consumers (NIRC §§148 to 150, 150-B, as amended by RA 10963).
Which BIR forms apply under TRAIN?
The correct return depends on the income mix. A purely-compensation employee not eligible for substituted filing uses Form 1700. An individual earning purely from business or profession (under graduated rates with OSD, or under the 8% flat tax) uses Form 1701A. A mixed-income earner, or a self-employed taxpayer using itemized deductions under graduated rates, uses Form 1701. Annual returns are due April 15; individuals with business income also file quarterly on Form 1701Q (NIRC §51, as amended by RA 10963).
How does TRAIN relate to CREATE and CMEPA?
TRAIN is one law in a sequence and should not be conflated with later reforms. The CREATE Act (RA 11534, 2021) cut the corporate income tax rate from 30% to 25% (and to 20% for small domestic corporations with net income not over ₱5 million and assets not over ₱100 million). The Capital Markets Efficiency Promotion Act (CMEPA, RA 12214), effective July 1, 2025, set a single 20% final tax on deposit interest in any currency and cut the stock-transaction tax to 0.1%. Corporate-rate and capital-market provisions belong to CREATE and CMEPA respectively, not to RA 10963 (RA 11534, Section 6; RA 12214).
Worked example: an employee earning ₱600,000
Consider Juan dela Cruz, a Makati bank employee with ₱600,000 in annual taxable compensation and no dependents to claim (TRAIN abolished dependent exemptions). His ₱600,000 falls in the ₱400,001 to ₱800,000 bracket: ₱22,500 + 20% × (₱600,000 − ₱400,000) = ₱22,500 + ₱40,000 = ₱62,500, an effective rate of about 10.4%. Under the old pre-TRAIN schedule with the ₱50,000 personal exemption, his tax would have been materially higher. TRAIN's relief comes from the wider 0% bracket and lower marginal rates, not from exemptions (NIRC §24(A), as amended by RA 10963).
Compliance and administration
The BIR implemented TRAIN through Revenue Regulations No. 8-2018 (income tax) and related issuances, plus updated withholding tables. Employers must withhold under the graduated table with no exemptions; self-employed taxpayers must elect 8% or graduated rates on their first quarterly return; and excise taxpayers must apply the correct petroleum, automobile, and sweetened-beverage rates. Annual income tax returns (Form 1700/1701A/1701) and quarterly returns (Form 1701Q) must reflect the current brackets (BIR Revenue Regulations No. 8-2018).
Sources and References
- Republic Act No. 10963 (TRAIN Law) full text and veto message, Department of Finance / Official Gazette.
- PwC Worldwide Tax Summaries, Philippines: Individual taxes on personal income (2023 graduated table; 8% option; ₱3,000,000 VAT threshold).
- Grant Thornton Philippines: “All Aboard: Revisiting TRAIN's Impact on Individuals” and 2023 regulatory tax updates.
- BIR Revenue Regulations No. 8-2018 (income tax) and No. 11-2018 (withholding tax).
- Republic Act No. 11534 (CREATE) and Republic Act No. 12214 (CMEPA), for the corporate and capital-market provisions that are distinct from TRAIN.
Why it matters
Building on that structural shift, TRAIN directly changes how every Filipino taxpayer computes liability: there are no longer personal or dependent exemptions to claim, so the ₱250,000 zero-rate threshold is the only across-the-board relief. Understanding this is essential because a taxpayer who still subtracts a “₱50,000 personal exemption” or imagines a “₱250,000 standard deduction” for compensation income will compute the wrong tax. The law's dual effect (lower income tax but higher excise tax on fuel, cars, and sugary drinks) means households must weigh income-tax savings against higher consumer prices. For self-employed individuals, TRAIN also created the 8% flat-tax option (on gross sales/receipts over ₱250,000, for non-VAT taxpayers under the ₱3,000,000 threshold), making form and rate selection a real decision (NIRC §24(A)(2)(b), as amended by RA 10963).
How it works
How does the TRAIN graduated income tax schedule work?
TRAIN replaced the old seven-bracket schedule with a six-bracket graduated table. Effective January 1, 2023, the brackets for individual citizens and resident aliens are: 0% on the first ₱250,000; 15% of the excess over ₱250,000 for ₱250,001 to ₱400,000; ₱22,500 + 20% of the excess over ₱400,000 for ₱400,001 to ₱800,000; ₱102,500 + 25% of the excess over ₱800,000 for ₱800,001 to ₱2,000,000; ₱402,500 + 30% of the excess over ₱2,000,000 for ₱2,000,001 to ₱8,000,000; and ₱2,202,500 + 35% of the excess over ₱8,000,000 for income above ₱8,000,000. The first ₱250,000 is a 0% bracket, not a deduction (NIRC §24(A)(2)(a), as amended by RA 10963).
What happened to personal and additional exemptions?
TRAIN repealed them outright. The pre-2018 basic personal exemption of ₱50,000 and the additional exemption of ₱25,000 per qualified dependent child (maximum four) were deleted when Section 12 of RA 10963 repealed NIRC §35. There is no personal exemption and no compensation-income standard deduction under TRAIN; relief is delivered solely through the ₱250,000 zero-rate bracket. Self-employed individuals choosing graduated rates may still elect the 40% Optional Standard Deduction (OSD) against gross sales/receipts in lieu of itemized expenses (NIRC §34(L), as amended).
How do excise taxes apply under TRAIN?
Excise taxes are imposed at the point of manufacture or importation and pass through the supply chain to consumers. Petroleum excise rose in tranches, taking diesel from zero to ₱6.00 per liter and gasoline from ₱4.35 to ₱10.00 per liter at full phase-in. Automobile excise is tiered by net manufacturer/importer price, from 4% to 50%. Sugar-sweetened beverages carry ₱6.00 per liter using caloric or non-caloric sweeteners and ₱12.00 per liter using high-fructose corn syrup; milk and ground/instant coffee are exempt. Manufacturers and importers remit excise to the BIR (NIRC §§148 to 150, 150-B, as amended by RA 10963).
Which return do individuals file under TRAIN?
It depends on the income mix. A purely-compensation employee not qualified for substituted filing files BIR Form 1700. An individual earning purely from business or profession (under graduated rates with OSD, or under the 8% flat tax) files BIR Form 1701A. A mixed-income earner, or a self-employed individual using itemized deductions under graduated rates, files BIR Form 1701. All are due on or before April 15 of the following year; individuals with business income also file quarterly returns on BIR Form 1701Q (NIRC §51, as amended by RA 10963).
Examples
Salaried employee earning ₱600,000 annually under TRAIN
Juan dela Cruz, a bank employee in Makati, has ₱600,000 in annual taxable compensation and no other income. Under TRAIN there is no personal exemption to subtract. The ₱600,000 is run directly through the graduated table. ₱600,000 falls in the ₱400,001 to ₱800,000 bracket: ₱22,500 + 20% of the excess over ₱400,000. Tax = ₱22,500 + 20% × (₱600,000 − ₱400,000) = ₱22,500 + ₱40,000 = ₱62,500. His employer withholds about ₱5,208 per month and he is typically substituted-filed via Form 2316 (NIRC §24(A), as amended by RA 10963).
Self-employed professional earning ₱1,200,000: 8% vs graduated
Maria Santos, a freelance architect in Cebu, has ₱1,200,000 in gross receipts and ₱300,000 in documented expenses. Because she is non-VAT and below the ₱3,000,000 threshold, she can choose the 8% flat tax or graduated rates. 8% option: 8% × (₱1,200,000 − ₱250,000) = ₱76,000. Graduated option (itemized): taxable income ₱900,000 → ₱102,500 + 25% × (₱900,000 − ₱800,000) = ₱127,500, plus 3% percentage tax on ₱1,200,000 (₱36,000), or ₱163,500 in all. Here the 8% flat tax saves ₱87,500, so Maria elects 8% and files Form 1701A. She files quarterly on Form 1701Q (NIRC §24(A)(2)(b), as amended by RA 10963).
High earner crossing the 35% top bracket
Atty. Reyes, a partner at a Manila law firm, has ₱9,000,000 in annual taxable income. This is the only bracket where TRAIN's 35% top marginal rate applies, on income above ₱8,000,000. ₱9,000,000 falls in the over-₱8,000,000 bracket: ₱2,202,500 + 35% of the excess over ₱8,000,000. Tax = ₱2,202,500 + 35% × (₱9,000,000 − ₱8,000,000) = ₱2,202,500 + ₱350,000 = ₱2,552,500. The 35% rate (replacing the pre-TRAIN 32%) reaches only the slice above ₱8,000,000 (NIRC §24(A), as amended by RA 10963).
Jeepney operator and the fuel excise pass-through
A jeepney operator in Quezon City burns about 200 liters of diesel weekly. Diesel was excise-free before TRAIN and now carries excise at the fully phased-in ₱6.00 per liter. Weekly excise burden = 200 L × ₱6.00 = ₱1,200, or roughly ₱62,400 a year, before VAT on the excise. Operators generally pass this to passengers through higher fares, illustrating TRAIN's trade-off: lower income tax for individuals, higher consumption taxes on fuel (NIRC §148, as amended by RA 10963).
Sugar-sweetened beverage manufacturer
A bottler produces 10,000,000 liters of cola annually using caloric sweetener (not high-fructose corn syrup). Under TRAIN, sweetened beverages with caloric or non-caloric sweeteners are taxed at ₱6.00 per liter. Excise = 10,000,000 L × ₱6.00 = ₱60,000,000 per year. Had the product used high-fructose corn syrup, the rate would double to ₱12.00 per liter (₱120,000,000). The bottler remits excise to the BIR and typically passes it to retailers and consumers (NIRC §150-B, as amended by RA 10963).
Common misconceptions
- Myth: The TRAIN Law's top income tax rate is 32%.
- Fact: TRAIN's top marginal rate is 35% on taxable income over ₱8,000,000 (effective 2023). The 32% figure was the pre-TRAIN top rate; TRAIN raised the ceiling rate while lowering rates for low- and middle-income earners (NIRC §24(A), as amended by RA 10963).
- Myth: Under TRAIN you still claim a ₱50,000 personal exemption or a ₱250,000 standard deduction.
- Fact: TRAIN repealed personal and additional exemptions (RA 10963, Section 12). There is no compensation-income standard deduction. The first ₱250,000 of taxable income is simply taxed at 0%. It is a bracket threshold, not a deduction you subtract (NIRC §24(A), as amended).
- Myth: The TRAIN Law cut the corporate income tax rate to 25%.
- Fact: The corporate rate cut to 25% (20% for small corporations) came from the CREATE Act (RA 11534, 2021), not TRAIN. RA 10963 is focused on individual income tax and excise taxes. Conflating TRAIN with CREATE (or with CMEPA, RA 12214) produces incorrect rate citations (RA 11534, Section 6).
- Myth: Excise taxes under TRAIN apply only to imported goods.
- Fact: Excise applies to both locally manufactured and imported goods at the same rates. A Philippine-made vehicle or a locally bottled sweetened beverage bears the same excise as an imported equivalent (NIRC §§148 to 150, 150-B, as amended by RA 10963).
- Myth: The 8% flat tax replaces income tax for every self-employed person.
- Fact: The 8% option is available only to non-VAT taxpayers below the ₱3,000,000 threshold and must be elected; it applies to gross sales/receipts over ₱250,000. Mixed-income earners apply it only to the business portion, and many find graduated rates with deductions produce a lower tax (NIRC §24(A)(2)(b), as amended).
Questions people ask
When did the TRAIN Law take effect?
The TRAIN Law (RA 10963) took effect on January 1, 2018. The first tranche of lower income tax rates applied from 2018, and a second tranche, including the 35% top rate and the current graduated brackets, took effect on January 1, 2023. From 2018, employers withheld tax using the TRAIN withholding tables issued under RR 11-2018 (NIRC §24(A), as amended).
What is the top income tax rate under the TRAIN Law?
The top marginal personal income tax rate under TRAIN is 35%, applied to annual taxable income over ₱8,000,000 (effective January 1, 2023). This replaced the pre-TRAIN top rate of 32%. The 35% rate applies only to the portion of income above ₱8,000,000, not to the entire income (NIRC §24(A)(2)(a), as amended by RA 10963).
Did the TRAIN Law keep personal and additional exemptions?
No. TRAIN repealed both the ₱50,000 basic personal exemption and the ₱25,000-per-dependent additional exemption (RA 10963, Section 12, repealing NIRC §35). Relief now comes only from the 0% tax bracket on the first ₱250,000 of taxable income. That ₱250,000 is a zero-rate threshold, not a deduction or a standard deduction (NIRC §24(A), as amended).
How do I calculate my income tax under the TRAIN Law?
Compute taxable income (gross income less allowable business deductions for the self-employed; gross taxable compensation for employees), then apply the 2023 graduated table: 0% up to ₱250,000; 15% over ₱250,000 to ₱400,000; ₱22,500 + 20% over ₱400,000 to ₱800,000; ₱102,500 + 25% over ₱800,000 to ₱2,000,000; ₱402,500 + 30% over ₱2,000,000 to ₱8,000,000; and ₱2,202,500 + 35% over ₱8,000,000. File Form 1700, 1701A, or 1701 by April 15 (NIRC §24(A), as amended by RA 10963).
What excise taxes did the TRAIN Law raise or introduce?
TRAIN raised petroleum excise (diesel from zero to ₱6.00 per liter; gasoline from ₱4.35 to ₱10.00 per liter at full phase-in), restructured automobile excise into price-based tiers of 4% to 50%, and introduced a sweetened-beverage excise of ₱6.00 per liter (caloric or non-caloric sweeteners) and ₱12.00 per liter (high-fructose corn syrup), with milk and coffee exempt (NIRC §§148 to 150, 150-B, as amended by RA 10963).
Is TRAIN the same as CREATE or CMEPA?
No. They are separate laws. RA 10963 (TRAIN, 2018) reformed personal income tax and excise taxes. RA 11534 (CREATE, 2021) cut corporate income tax to 25% (20% for small corporations). RA 12214 (CMEPA, effective July 1, 2025) set a single 20% final tax on deposit interest in any currency and lowered the stock-transaction tax. Do not attribute corporate-rate or capital-market changes to TRAIN (RA 11534; RA 12214).
Can self-employed individuals use the 8% flat tax under TRAIN?
Yes. A self-employed individual or professional who is non-VAT registered and whose gross sales/receipts do not exceed the ₱3,000,000 VAT threshold may elect an 8% tax on gross sales/receipts and other non-operating income in excess of ₱250,000, in lieu of the graduated rates and the percentage tax. The election is made on the first quarterly return and the taxpayer files Form 1701A (NIRC §24(A)(2)(b), as amended by RA 10963).
In practice
- Employers must run TRAIN's graduated withholding tables, with no personal or dependent exemptions, so that the first ₱250,000 of annual taxable compensation is withheld at 0% and the 35% rate applies only above ₱8,000,000.
- Self-employed individuals and professionals must decide each year between the 8% flat tax (non-VAT, under ₱3,000,000) and graduated rates with itemized or 40% OSD deductions, then file the matching return (Form 1701A or 1701) by April 15 with quarterly Form 1701Q.
- Importers and manufacturers of petroleum, automobiles, and sweetened beverages must register with the BIR, apply the correct TRAIN excise rate (including the ₱6 vs ₱12 per liter SSB distinction), and remit excise on schedule.
- Tax practitioners must cite RA 10963 only for individual income tax and excise changes, and cite RA 11534 (CREATE) for corporate rates and RA 12214 (CMEPA) for the CMEPA changes to deposit interest, DST and the stock transaction tax, to avoid misattributing provisions.
- Consumers should expect TRAIN's trade-off in budgeting: lower personal income tax but higher prices on fuel, new vehicles, and sugary drinks driven by the excise pass-through.
Next steps
Learn more
Personal Income Tax Calculator (TRAIN Law)
Withholding Tax Calculator
Automobile Excise Tax Calculator
Estate Tax Calculator With Amnesty
VAT Calculator
BIR Form 1701 Annual Income Tax Return
BIR Form 2316 Certificate Of Compensation Payment/Tax Withheld
BIR Form 2550Q Quarterly VAT Return
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Sources & References (2)
Primary sources and the laws, regulations, and official issuances this page relies on. Links open the recorded source documents or references.
- LawPhil Project (Arellano Law Foundation). “RA 10963 (TRAIN): full enacted text.” lawphil.net. Republic Act No. 10963, Tax Reform for Acceleration and Inclusion Act. Source checked .
- Official Gazette of the Philippines. “Official Gazette: RA 10963 as enacted.” officialgazette.gov.ph. Official Gazette, Republic Act No. 10963. Source checked .