TRAIN-ing the Athlete: A Quick Guide on Taxing the Athlete under TRAIN

by: Mickey Ingles

Tax season is upon us. And as if tax isn’t taxing enough, we now have the Tax Reform for Acceleration and Inclusion Act (TRAIN) to deal with. It’s as if we were all like, “oh, I understand you now, tax law,” and then TRAIN comes along and says, “that’s what you think, loser face. There’s a new bad boy in town that you gotta deal with.” (Wow, TRAIN can be mean.)

So, without even a semblance of a segue, I’m just going to ask the question: how does TRAIN affect the earnings of your typical Filipino athlete?

TRAIN basically groups individuals into three categories for income tax purposes:

  1. Those who earn purely compensation income;
  2. Self-employed individuals earning income purely from self-employment or practice of profession; and
  3. Mixed-income earners, or those who earn both compensation income and from self-employment or practice of profession.

An athlete can fall into any of these three categories, so let’s explore each.

First Group

 Those who earn purely compensation income are individuals whose source of income is purely derived from an employer-employee relationship. An example of a purely compensation earner is an athlete who is employed by his team, is paid a hefty salary by the team, and doesn’t earn from other sources (like endorsements).

In that case, whatever compensation he or she gets from the team will be subject to the tax table below:

Range of Taxable Income

Tax Due = a + (b x c)

Over Not Over Basic Amount (a) Additional Rate (b) Of Excess Over (c)
250,000
250,000 400,000 15% 250,000
400,000 800,000 22,500 20% 400,000
800,000 2,000,000 102,500 25% 800,000
2,000,000 8,000,000 402,500 30% 2,000,000
8,000,000   2,202,500 35%

8,000,000

Since he or she is an employee, then the team has to withhold a certain percentage of his or her salary every pay day. At the end of the year though, his or her taxable income will be subject to the table above.

As you can see, if your taxable income for the year doesn’t exceed P250,000, you’re exempt from paying income taxes.

Second Group

 If the athlete isn’t employed by a team (or doesn’t have a day job where he or she is employed by someone), then he or she falls into the second group. The second group includes professionals like entertainers and athletes who receive promotional and talent fees. So, an athlete who earns solely from appearance fees or endorsements will fall under this group.

In this case, you’ll have to look at the athlete’s gross sales or receipts during the year. If his or her gross sales or receipts exceed P3,000,000, then he or she will have to use the tax table above.

But if it doesn’t exceed P3,000,000, then the athlete is given a choice to either:

  • Use the tax table above; or
  • Get taxed 8% of the gross sales or receipts in excess of P250,000.

If the athlete chooses the 8%, then the athlete won’t have to pay percentage tax as well. (Yeay!) In this case though, the athlete has to signify his or her intention to use the 8% rate in his or her 1st Quarter Percentage and/or Income Tax Return.

Income payors, like the companies who get the athletes for endorsements or appearances, must withhold either 5% of an athlete’s professional fees if his or her gross receipts do not exceed P3,000,000. If it does exceed P3,000,000, then the income payor must withhold 10%.

Third Group

Your usual professional basketball/volleyball/football player will fall under the third group because he or she not only gets salary from the team but also receives professional and talent fees from endorsements. In this case, he or she is considered a mixed income earner, and will be taxed in a, um, mixed manner as well.

First, their salaries will be taxed under the tax table above.

Second, their income from professional fees will be taxed depending on that P3,000,000 threshold. If his or her gross receipts or sales exceed P3,000,000, then these professional fees will also be subject to the tax table. If it doesn’t exceed P3,000,000, then the athlete has the choice of using the tax table or going for the 8% tax rate.

Note that in the third group, the 8% tax rate applies to the entire amount of gross receipts or sales—not merely to the excess of P250,000 which is how the second group is taxed.

If you want to know more (because this taxation rabbit hole goes really deep!), then check out TRAIN and Revenue Regulations 8-2018 and 11-2018, or simply ask your friendly lawyer or accountant.

(That seriously made my head hurt and left me with no witty way to end the post. In fairness though, I did use a picture of the Hogwarts Express as the featured image, because you know… train.)

Mickey Ingles is the editor-in-chief of Batas Sportiva. He is the author of Tax Made Less Taxing.

 

 

 

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