Increasing the Income Tax Exemption Ceiling for Individual Taxpayers

Senate ©firce of thic octrel. TWENTIETH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES First Regular Session MAY 19 P5:51 SENATE RECEIVED B 2137 S. No. - Introduced by Senator MARK A. VILLAR AN ACT INCREASING THE INCOME TAX EXEMPTION CEILING FOR INDIVIDUAL TAXPAYERS TO THREE HUNDRED SIXTY THOUSAND PESOS (P360,000) ANNUALLY, AMENDING FOR THE PURPOSE SECTION 24 (A)(2)(a) AND (b) OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED EXPLANATORY NOTE Article VI, Section 28 of the Constitution provides that taxation shall be uniform and equitable, and that Congress shall evolve a progressive system of taxation. The Bangko Sentral ng Pilipinas forecasts that inflation will reach 3.6% in 2026 - higher than the previous round and above the 3.0% year-end target. The Philippine Statistics Authority (PSA) reported that inflation for the bottom 30% income households rose sharply from 0.1% in April 2025 to 8.5% in April 2026, reflecting the country's growing economic strain. This surge is largely driven by the ongoing crisis, which has caused significant increases in the prices of fuel, food, utilities, and transportation, ultimately eroding the purchasing power of the public. Despite the escalating cost of essential goods and services, wages have largely remained stagnant. At the same time, existing tax obligations continue to reduce take- home pay, placing an increasingly unsustainable burden on citizens— particularly low- and middle-income earners. In light of these circumstances, it is imperative for the government to adopt measures that will alleviate the financial strain experienced by the public. Thus, this bill seeks to amend the National Internal Revenue Code of 1997, as amended, by increasing the personal income tax exemption ceiling from P250,000 to P360,000 annually.

Now is an opportune time to pass this measure, as it will deliver meaningful and much-needed relief to millions of Filipino households within the lower middle- income sector, helping to mitigate the decline in the purchasing power. In doing so, the bill also extends support to working taxpayers to ensure that the system remains fair, equitable, and responsive to existing economic conditions. It also demonstrates the country's commitment to maintaining a progressive tax system that continues to adapt to the prevailing conditions in the Philippines. The backbone of our economy has always been the Filipino workforce; passing this bill is a crucial step toward giving them the fiscal stability and quality of life they deserve, especially during these trying times. In view of the foregoing, the passage of this bill is earnestly sought. MARK A. VILLAR

Sellate Office of tie & TWENTIETH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES First Regular Session MAY 19 P5:51 SENATE 2137 RECEIVED B S. No. - Introduced by Senator MARK A. VILLAR AN ACT INCREASING THE INCOME TAX EXEMPTION CEILING FOR INDIVIDUAL TAXPAYERS TO THREE HUNDRED SIXTY THOUSAND PESOS (P360,000) ANNUALLY, AMENDING FOR THE PURPOSE SECTION 24 (A)(2)(a) AND (b) OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Section 24 of the National Internal Revenue Code of 1997, as

2 amended, is hereby further amended to read as follows: "Sec. 24 Income Tax Rates.- "(A) Rates of Income Tax on Individual Citizen and Individual Resident Alien of the Philippines.- (1) xxx (2) Rates of Tax on Taxable Income of Individuals. - The tax shall be computed in accordance with and at the rates established in the following schedule: [(a) Tax Schedule Effective January 1, 2018 until December 31, 2022: Not over P250,000 0% Over P250,000 but not over P400,000 20% of the excess over P250,000

Over P400,000 but not over P800,000 P30,000 + 25% of the excess over P400,000 Over P800,000 but not over P2,000,000.. P130,000 + 30% of the excess over P800,000 Over P2,000,000 but not over P8,000,000 P490,000 + 32% of the excess over P2,000,000 Over P8,000,000 P2,410,000 | 35% of the excess over P8,000,000 (b) Tax Schedule Effective January 1, 2023 and onwards: 0% Not over P250,000... Over P250,000 but not over P400,000. 15% of the excess over P250,000 Over P400,000 but not over P800,000 P22,500 + 20% of the excess over P400,000 Over P800,000 but not over P2,000,000 P102,500 + 25% of the excess over P800,000 Over P2,000,000 but not over P8,000,000 P402,500 + 30% of the excess over P2,000,000 Over P8,000,000 P2,202,500 + 35% of the excess over P8,000,000) ..0% NOT OVER P360,000.. OVER P360,000 BUT NOT OVER P586,000 15% OF THE EXCESS OVER P586,000 OVER P586,000 BUT NOT OVER P1,172,000. P35,500 +20% OF THE EXCESS OVER P586,000 OVER P1,172,000 BUT NOT OVER P2,880,000. P157,500 + 25% OF THE EXCESS OVER P1,172,000

OVER P2,880,000 BUT NOT OVER P11,520,000.. . P604,500 + 30% OF THE EXCESS OVER P2,880,000 OVER P11,520,000.. ......P3,311,500 + 35% OF THE EXCESS OVER P11,520,000 XXX (b) Rate of Tax on Income of Purely Self-employed Individuals and/or Professionals Whose Gross Sales or Gross Receipts and Other Non- operating Income Does Not Exceed the Value-added Tax(VAT) Threshold as Provided in Section 109(BB). - Self-employed individuals and/or professionals shall have the option to avail of an eight percent (8%) tax on gross sales or gross receipts and other non-operating income in excess of [Twol THREE hundred [fifty) SIXTY thousand pesos [(P250,000)] (P360,000), in lieu of the graduated income tax rates under Subsection (A)(2)(a) of this Section and the percentage tax under Section 116 of this Code.

Sec. 2. Implementing Rules and Regulations. - Within sixty (60) days from the

effectivity of this Act, the Secretary of Finance shall, upon the recommendation of the Commissioner of Internal Revenue, promulgate the necessary rules and regulations to implement the provisions of this Act.

Sec. 3. Separability Clause - Any portion or provisions of this Act that may be

declared unconstitutional or invalid shall not have the effect of nullifying other portions or provisions hereof as long as such remaining portions or provisions can still subsist and be given effect in their entirety.

Sec. 4. Repealing Clause - All laws, presidential decrees, executive orders,

memoranda, circulars, rules and regulations, and other issuances or parts thereof, which are inconsistent with this Act, are hereby repealed, amended, or modified accordingly.

Sec. 5. Effectivity Clause - This Act shall take effect fifteen (15) days after its

30 publication in the Official Gazette or in at least two (2) newspapers of general 31 circulation. Approved,