For taxable years beginning after December 31, 2018, the Tax Reform provides for the reduction of the individual and corporation income tax rates through a discount applicable to the total tax payable.
Individuals
For individuals, the net tax payable will be 95% of the regular income tax plus the gradual adjustment. Regarding the alternative base tax (“ABT”), the Tax Reform introduced amendments to the rates and brackets as follows:
| Net income subject to ABT | Rate |
|---|---|
| From $25,000 to $50,000 | 1% |
| From $50,001 to $75,000 | 3% |
| From $75,001 to $150,000 | 5% |
| From $150,001 to $250,000 | 10% |
| More than $250,000 | 24% |
Corporations
For corporations, the normal tax rate was reduced from 20% to 18.5%. The alternative minimum tax rates (“AMT”) were also amended. To determine the applicable AMT, the taxpayer will have to consider the volume of business for the year. If the volume of business is more than $3,000,000, the AMT will be the greater of 23% of the net alternative income or $500. If the volume of business is $3,000,000 or less, the AMT will be the greater of 18.5% of the net alternative income or $500.
For AMT purposes, only specified deductions will be allowed. If the taxpayer files the income tax return, along with audited financial statements or an agreed upon procedures report, or a compliance report, it will be allowed to deduct all the expenses as claimed for the regular income tax computation.
