Sometime before the end of 2026, Congress is expected to vote on the most significant change to your paycheck taxes since the TRAIN Law took effect in 2018. It is called the ProGRESS bill — short for Promoting Growth, Revenue, and Equity toward Socio-Economic Sustainability — and its headline promise is simple: if you earn ₱350,000 a year or less, you pay no income tax at all, up from the current ₱250,000. This guide explains the whole package in plain language: what actually changes, who wins by how much, who pays for it, and what still has to happen before any of it is real.
What it means to you
The income-tax part of the package (House Bill 10345) changes one number and leaves the rest of the ladder alone. Today, the first ₱250,000 of your taxable income is exempt, and everything above it is taxed at 15%, then 20%, 25%, 30%, and 35% as income rises. Under the bill, the exempt floor rises to ₱350,000, and the same 15-to-35% ladder simply starts from there. No rate goes up; the band where 0% applies just gets wider.
Because of how the brackets connect, the benefit is remarkably even:
- Earning ₱350,000 or more (about ₱29,200 a month and up): you save exactly ₱15,000 a year — roughly ₱1,250 a month — whether you make ₱400,000 or ₱10 million. The manager and the entry-level analyst above the line save the same peso amount, because the whole change happens at the bottom of the ladder.
- Earning between ₱250,000 and ₱350,000: you save 15% of the amount over ₱250,000 — from a few pesos up to the full ₱15,000. Many workers in this range drop to zero tax.
- Earning below ₱250,000: nothing changes. You already pay no income tax.
In cold numbers, the Department of Finance expects the wider exemption to pull 6.35 million of the country’s 8.2 million compensation earners — 77% of everyone with an employer — entirely out of income tax, up from 5.1 million today. For a household budget, ₱1,250 a month is a month of electricity, half a month of groceries, or two school tuitions — the point of the bill is that you feel it.
If you are self-employed or a professional on the 8% option, the same ₱350,000 figure becomes your shield: the 8% tax applies only to gross sales above ₱350,000 instead of above ₱250,000. A freelancer billing ₱500,000 a year would see the 8% bill fall from ₱20,000 to ₱12,000.
And if you run a small corporation or partnership, a companion measure (House Bill 10346) removes a tax that bites hardest in bad years: the 2% minimum corporate income tax (MCIT) on gross income. Firms classified as micro or small — total assets of not more than ₱15 million — would pay only the regular 20% or 25% tax on actual profit from 2027. No more owing tax on a year when you barely broke even. The finance department counts about 78,000 small firms in that group.
How it affects you — including the part you pay for
Here is the honest catch: the government does not give away roughly ₱68.6 billion a year for free. The package is designed to be paid for by new and higher taxes on things the state wants to discourage anyway, and that shows up in your grocery receipt, not your payslip:
- Sweetened drinks: the excise on beverages with caloric or non-caloric sweeteners rises from ₱6 to ₱20 per liter, and drinks made with high-fructose corn syrup go to ₱40 per liter. A 1.5-liter bottle of soft drink carries about ₱21 more tax than it does today.
- Vapes, e-cigarettes, and tobacco: steeper excise hikes with automatic annual increases on heated tobacco and vapor products.
- Luxury: the excise rate on luxury goods rises from 20% to 25%, with new levies on private jets and vessels and higher taxes on cars priced above ₱8 million.
- Large multinationals: a 15% global minimum tax on big corporate groups, aligning the Philippines with the international Pillar Two framework.
- Plastics and road use: a new levy on single-use flexible plastics and updated motor-vehicle user’s charges.
Add it up and the offsets are projected to raise ₱518.71 billion between 2027 and 2030 — about ₱191.77 billion net after the income-tax relief is subtracted. A household with two ₱30,000-a-month earners saves about ₱30,000 a year in income tax; whether it comes out ahead depends on how many taxed sodas, vapes, and luxury items it buys. The package also dangles a tax amnesty covering unpaid income, estate, donor’s, and VAT liabilities with their penalties — a one-time chance to clear old BIR exposure.
See your own numbers. Run your income through our ProGRESS bill comparison calculator — it shows your tax today, your tax if the bill passes, and the saving, side by side, plus the 8% and small-business MCIT comparisons.
Why the change
The ₱250,000 threshold was written into the TRAIN Law in 2018 and was never indexed to inflation. In the eight years since, prices have climbed 42.4% cumulatively, according to the Philippine Statistics Authority — meaning the “tax-free” promise quietly shrank every year. PSA chief statistician Claire Dennis Mapa told the House tax committee in August 2026 that matching the 2018 purchasing power of ₱250,000 would take about ₱356,000 today; the DOF’s own baseline, starting from 2019, computes ₱338,538. ₱350,000 lands between the two estimates — a restoration of the original promise, not an expansion of it.
Why pair it with sin taxes? Because the constitution’s fiscal reality: income-tax relief must be offset somewhere. Charging it to sweetened drinks, tobacco, vaping, luxury goods, and multinational profit floors is both a health-and-equity argument and the arithmetic that makes the bill passable. The DOF has been holding nationwide consultations since September 2026 to tune exactly that balance.
What still has to happen (read this part twice)
Everything above describes a bill, not a law. As of early October 2026: the House Committee on Ways and Means approved HB 10345 and HB 10346 on August 10; the full House has yet to vote; and the Senate has no agreed version — senators have filed alternatives with exempt thresholds from ₱350,000 up to ₱600,000. The numbers, including the ₱350,000 figure and the flat ₱15,000 saving, can and may change in bicameral conference. The target is passage within 2026 and effectivity on January 1, 2027, with the BIR reissuing withholding tables so employees see the change in their payslips without filing anything. When the final law is signed, we will update this guide and the calculator to the enacted numbers.
Frequently Asked Questions
When does the ₱350,000 tax-free threshold take effect?
Only if and when the bill becomes law. The House committee approved HB 10345 in August 2026 with a target effectivity of January 1, 2027, but the measure still needs House plenary and Senate approval, and senators have filed competing versions with thresholds from ₱350,000 to ₱600,000. Until a law is signed, the current ₱250,000 threshold applies.
How much will I actually save?
If your annual taxable income is at least ₱350,000, your saving is exactly ₱15,000 a year — about ₱1,250 a month — because the 15% band starts at ₱350,000 instead of ₱250,000 and every higher bracket’s fixed tax drops by the same amount. If you earn between ₱250,000 and ₱350,000, you save 15% of the amount over ₱250,000; below ₱250,000 you already pay nothing and gain nothing.
Does the ProGRESS bill raise income tax rates?
No. The 15/20/25/30/35% ladder in force since 2023 stays exactly the same above the widened exempt band. What changes is where tax-free ends. However, the wider package does raise other taxes — sweetened beverages, vapes, tobacco, and luxury goods — to pay for the income-tax relief, so households may pay more at the till even as their paycheck withholding drops.
What does ProGRESS mean for small businesses?
Two things. Self-employed taxpayers on the 8% option compute it only on gross sales above ₱350,000 instead of ₱250,000. And corporations and partnerships classified as micro or small (total assets of not more than ₱15 million) would stop paying the 2% minimum corporate income tax from 2027, paying only the regular 20% or 25% tax on actual profit.
Why ₱350,000 and not a bigger number?
The TRAIN Law set ₱250,000 in 2018 and never indexed it. Cumulative inflation from 2018 to 2026 is 42.4%, so ₱250,000 buys much less than it did; the PSA computes that restoring its 2018 purchasing power would take about ₱356,000, while the DOF’s baseline puts it at ₱338,538. ₱350,000 lands between the two estimates and is what fits the budget after offsetting measures.
Sources: HB 10345 and HB 10346 as filed July 28, 2026 (texts archived at our research desk); House Committee on Ways and Means hearing of August 10, 2026 as reported by GMA News, BusinessWorld, and the Philippine News Agency; DOF ProGRESS consultation briefings (September–October 2026) as reported by the Daily Tribune, Bloomberg, and ABS-CBN News. Figures describe proposed legislation and may change before enactment — this article is information, not tax advice.