Philippines Income Tax Brackets 2026: TRAIN Law Slabs & Net Pay

By Maria Elena Santos, CPALast updated: October 202614 min read

Statutory source alignment verified for October 2026 by Maria Elena Santos, CPA (Statutory Research)

Navigating personal income tax in the Philippines has undergone significant modernization following the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) Act (Republic Act No. 10963). Designed to reduce the income tax burden on low- and middle-income wage earners while simplifying compliance, the law introduced progressive bracket reductions that directly boost monthly take-home pay across private and public sectors.

Whether you are starting a new job in Bonifacio Global City (BGC), managing payroll for an enterprise in Makati, or working as an overseas Filipino worker (OFW) returning to domestic employment, understanding how the Bureau of Internal Revenue (BIR) calculates withholding taxes, statutory deductions, and bonus exemptions is critical for personal financial planning.

TRAIN Law Income Tax Snapshot (2026)

The first PHP 250,000 of annual taxable income is 100% tax-free. For workers earning above PHP 250,000, revised tax rates range from 15% to 35%. Statutory employee contributions (SSS, PhilHealth, Pag-IBIG) and 13th-month pay up to PHP 90,000 are completely exempt from personal income tax.

What Are the Philippines Income Tax Brackets Under the Updated TRAIN Law?

Under the updated TRAIN Law (Republic Act No. 10963), individual income tax rates are divided into six progressive slabs, where income up to PHP 250,000 pays 0% tax, while income above PHP 8,000,000 is taxed at a top marginal rate of 35%. The intermediate brackets were permanently reduced in the second phase of the TRAIN implementation, providing additional tax savings to middle-class salary earners.

The revised individual income tax schedule applicable for the current taxable assessment year is outlined below:

Annual Taxable Income Bracket (PHP)	Base Tax Amount	Marginal Tax Rate	Effective Threshold Excess
Up to PHP 250,000	PHP 0	0% (Tax-Exempt)	PHP 0
PHP 250,001 – PHP 400,000	PHP 0	15%	Over PHP 250,000
PHP 400,001 – PHP 800,000	PHP 22,500	20%	Over PHP 400,000
PHP 800,001 – PHP 2,000,000	PHP 102,500	25%	Over PHP 800,000
PHP 2,000,001 – PHP 8,000,000	PHP 402,500	30%	Over PHP 2,000,000
Over PHP 8,000,000	PHP 2,202,500	35%	Over PHP 8,000,000

To compute your exact withholding liability or compare net take-home salary, visit our dedicated Philippines Income Tax Calculator.

How Is Taxable Income Computed from Gross Compensation?

Taxable income in the Philippines is computed by subtracting statutory government contributions (SSS, PhilHealth, Pag-IBIG), non-taxable de minimis benefits, and exempt bonuses from total gross compensation. In the Philippines, personal and additional exemptions for dependents were repealed under the TRAIN Law in exchange for the broad PHP 250,000 zero-bracket.

The standard payroll calculation formula follows this sequential hierarchy:

Gross Compensation Income: Includes basic monthly salary, overtime pay, night shift differential, hazard pay, allowances, and statutory bonuses.
Less Non-Taxable / Exempt Deductions:
- Mandatory Employee SSS / GSIS contributions (subject to statutory monthly salary credit schedules).
- PhilHealth premium share (currently capped at prevailing annual premium schedules).
- Pag-IBIG Fund monthly mandatory contributions (standard employee share of PHP 200).
- 13th Month Pay and other productivity incentives up to the statutory PHP 90,000 limit.
- Qualifying De Minimis benefits (e.g., rice subsidy, medical cash allowance, uniform allowance within BIR threshold caps).
Equals Net Taxable Compensation Income: This net figure is applied against the annual or semi-monthly BIR withholding tax tables to compute the precise payroll deduction.

Is 13th Month Pay Taxable in the Philippines?

13th month pay is legally mandated under Presidential Decree No. 851 and is 100% tax-free up to a combined ceiling of PHP 90,000 per calendar year. This statutory ceiling covers not only the mandatory 13th-month salary but also includes Christmas bonuses, mid-year incentives, productivity bonuses, and other non-statutory benefits received during the calendar year.

If the cumulative total of your 13th-month salary and other bonuses does not exceed PHP 90,000, no withholding tax is deducted. However, if your company awards a Christmas bonus of PHP 60,000 on top of an existing PHP 50,000 13th-month pay (totaling PHP 110,000), the excess PHP 20,000 is deemed taxable compensation. That excess is consolidated with your basic salary in the December payroll and taxed at your top marginal bracket.

Step-by-Step Payroll Tax Calculation Example

To visualize how the BIR formula applies in practice, consider a private sector professional in Metro Manila earning a gross basic salary of PHP 50,000 per month (PHP 600,000 annually) plus a mandatory 13th-month pay of PHP 50,000.

Annual Tax Computation Breakdown:

Gross Basic Annual Pay: PHP 50,000 × 12 = PHP 600,000
13th Month Pay: PHP 50,000 (Fully exempt, as it is under the PHP 90,000 cap)
Estimated Annual SSS Employee Share: ~PHP 16,200 (based on max MSC)
Estimated Annual PhilHealth Employee Share: ~PHP 15,000 (5% total premium split 50/50)
Annual Pag-IBIG Mandatory Employee Share: PHP 200 × 12 = PHP 2,400
Total Statutory Deductions: PHP 16,200 + PHP 15,000 + PHP 2,400 = PHP 33,600
Net Chargeable Taxable Compensation: PHP 600,000 − PHP 33,600 = PHP 566,400

Applying TRAIN Law Brackets to PHP 566,400:

This income falls into the PHP 400,001 to PHP 800,000 bracket (Base tax: PHP 22,500 + 20% on excess over PHP 400,000):

• Base tax: PHP 22,500

• Excess: PHP 566,400 − PHP 400,000 = PHP 166,400

• Marginal tax on excess: PHP 166,400 × 20% = PHP 33,280

• Total Annual Income Tax Due: PHP 22,500 + PHP 33,280 = PHP 55,780

Average Monthly Withholding Tax: ~PHP 4,648.33 | Effective Tax Rate: 9.30% of gross earnings.

What Is Substituted Filing and Who Qualifies for BIR Form 2316?

Substituted filing is an administrative relief under Revenue Regulations No. 2-98 that exempts eligible employees from filing an individual Annual Income Tax Return (BIR Form 1700), as their employer's year-end annualized withholding tax serves as the final assessment. If you qualify, your employer provides you with BIR Form 2316, signed by both parties, which acts as your official tax return.

Mandatory Criteria for Substituted Filing:

The employee receives purely compensation income (no side business, freelancing, or rental trade).
The employee had only one employer in the Philippines during the entire calendar year.
The tax due on the employee's compensation was correctly withheld and remitted to the BIR by the employer.
The employee's spouse, if applicable, complies with the same individual filing rules.

When must you file BIR Form 1700 manually? If you switched employers mid-year (having two or more employers in one calendar year), you are disqualified from substituted filing. You must request Form 2316 from both previous and current employers, consolidate your income on BIR Form 1700 using the eBIRForms package or eFPS, and file by April 15 of the following year.

Income Tax Rules for Resident Aliens and Expatriates

Resident aliens and expatriates working in the Philippines on a 9(g) commercial work visa or Alien Employment Permit (AEP) are taxed exclusively on Philippine-sourced compensation at the standard graduated TRAIN Law rates (0% to 35%). Unlike Philippine citizens, who are subject to worldwide income taxation, alien individuals are taxed solely on income derived from sources within the territory of the Philippines.

Furthermore, the preferential 15% tax rate previously enjoyed by foreign employees of Regional Operating Headquarters (ROHQ), Regional Headquarters (RHQ), and Offshore Banking Units (OBUs) was vetoed and repealed under the TRAIN Law. All expatriates employed in these multinational entities are now integrated into the standard graduated tax schedule.

Frequently Asked Questions

What are the Philippines income tax brackets under the updated TRAIN Law?

Under the updated TRAIN Law (Republic Act No. 10963), annual taxable income up to PHP 250,000 is 100% tax-free (0%). Income between PHP 250,001 and PHP 400,000 is taxed at 15% on the excess over PHP 250,000. Income between PHP 400,001 and PHP 800,000 incurs PHP 22,500 plus 20% on the excess. Income between PHP 800,001 and PHP 2,000,000 pays PHP 102,500 plus 25%. Income between PHP 2,000,001 and PHP 8,000,000 pays PHP 402,500 plus 30%, and taxable income above PHP 8,000,000 is taxed at PHP 2,202,500 plus 35%.

Is 13th month pay taxable in the Philippines?

13th month pay and other productivity bonuses in the Philippines are tax-exempt up to a statutory ceiling of PHP 90,000 per calendar year under the Tax Reform for Acceleration and Inclusion (TRAIN) Act. Any cumulative bonuses and de minimis benefits exceeding the PHP 90,000 threshold are added to your gross compensation and taxed at regular graduated income tax rates.

Which employee contributions are deductible from gross taxable income in the Philippines?

Mandatory statutory employee contributions to the Social Security System (SSS) or Government Service Insurance System (GSIS), the Philippine Health Insurance Corporation (PhilHealth), and the Home Development Mutual Fund (Pag-IBIG Fund) are fully excluded and deducted from your gross compensation before computing taxable income.

Who must file BIR Form 1700 versus Form 1701?

Pure compensation earners with multiple employers in a single taxable year must file BIR Form 1700 by April 15. Salaried workers with a single employer qualify for substituted filing where Form 2316 serves as their final return. Self-employed individuals, professionals, and mixed-income earners must file BIR Form 1701 annually alongside quarterly Form 1701Q returns.

How does substituted filing work for Philippine employees?

Substituted filing applies to pure compensation earners who receive income from only one employer in the Philippines during the calendar year, provided their employer correctly withheld the exact final tax due. In this case, BIR Form 2316 (Certificate of Compensation Payment/Tax Withheld) signed by both employer and employee serves as the equivalent of an officially filed annual income tax return.

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