House Passes Bill Lowering Personal Income Tax Rate to 25%

MANILA, Philippines-The first batch of tax reforms proposed by the administration of President Rodrigo Duterte has been approved by the House on its third and final reading on Wednesday, May 31.

House Bill Number 5636 aims to lower the maximum rate of personal income tax from the current 32% to 25% except for the “ultra rich”. Under the said bill, people earning P250,000 or below annually will not be required to pay income taxes. On the other hand, high income earners, who comprise 0.1% of taxpayers, will be obliged to pay a higher rate of 35% from current 32%.


Under the same measure, 13th month pay up to P100,000 and other bonuses will be tax-free.

The said bill got a thumbs up from 246 lawmakers who voted yes. Only 9 voted against it and one abstained. HB5636 was put to a third reading just minutes after it was approved on the second reading after Duterte certified it as urgent two days. This meant that the House no longer needed to follow the “3-day rule” between the 2nd and 3rd readings.

While the measure proposes to lower the income tax of many taxpayers, it also aims to increase taxes on refined petroleum products and automobiles except for jeeps, jeepney substitutes, buses, trucks, cargo vans and special purpose vehicles. The bill also aims to impose an additional P10 tax per liter of volume capacity on carbonated drinks and sugar-sweetened beverages.

HB 5636 will retain value-added tax exemption on cooperatives and lift exemption on sectors like power transmission, boy scouts and girl scouts, lease of residential units, domestic shipping importation, low-cost and socialized housing but conditioned upon the establishment of a housing voucher system, and exemptions in special laws, except those covering people with disability and senior citizens.

Prizes from the Philippine Charity Sweepstakes Office lotto will receive a 20% final tax.

After the 3rd reading, the bill will now be passed on to the Senate, where it will undergo three readings. It will then be transmitted to the Office of the President.

Earlier, Senators said they would not pass the Palace’s version of the tax reform package.

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