Philippines Income Tax Brackets 2026 (TRAIN Law) Explained

Millions of Filipino workers live under a completely different tax rulebook than everyone else in the country — not because of income level, but because of where the work actually happens. Overseas Filipino Workers pay zero Philippine income tax on what they earn abroad, a genuinely major exception hiding inside an otherwise standard progressive tax structure.

2026 TRAIN Law tax brackets

These figures come from the TRAIN (Tax Reform for Acceleration and Inclusion) Law, which raised the tax-free threshold considerably above the pre-reform system when it took effect.

Why the fixed base amounts make this easier than it looks

Every bracket above the first pairs a fixed base tax with a marginal rate applied only to income above that bracket's floor — someone earning exactly ₱800,000 owes exactly ₱102,500 before a single peso of the next bracket's marginal rate even applies.

Working through a real number

₱600,000 in taxable income lands in the ₱400,000–₱800,000 bracket: base tax of ₱22,500, plus 20% of the ₱200,000 sitting above that bracket's floor, equals ₱22,500 + ₱40,000 = ₱62,500 total tax — hand-checked, an effective rate of exactly 10.4% on the full ₱600,000, well below the 20% bracket rate that only applies to the top slice.

The OFW exemption, in full

Overseas Filipino Workers are classified as non-resident citizens under Section 23(C) of the National Internal Revenue Code, exempting them entirely from Philippine income tax on income earned abroad — provided they hold valid POEA/DMW-registered overseas employment documentation. Remittances sent home aren't taxed as income for the family receiving them either. This isn't a minor carve-out: OFW remittances have historically run roughly 8-9% of Philippine GDP, among the highest remittance-to-GDP ratios anywhere in the world. The exemption only covers foreign-sourced income specifically — a Philippine rental property or local bank account income still falls under the standard brackets above, regardless of OFW status.

Common mistakes

• Applying the top bracket rate to all income. Like every progressive system, only income within each band gets taxed at that band's rate — the fixed base amounts already bake in the lower brackets.
• Using pre-TRAIN figures. The tax-free threshold and brackets changed considerably under TRAIN — older online estimates may not reflect the current structure at all.
• Assuming OFW status is automatic just from working abroad. The exemption specifically requires valid POEA/DMW-registered overseas employment documentation, not just informal work outside the country.

Frequently Asked Questions