bac2

• Classification of Individuals


  • Resident Citizens
  • Non-resident Citizens
  • Resident Alien
  • Non-Resident Alien (NRA)
• Resident Citizens


  A citizen of the Philippines residing therein
• Who are citizens of the Philippines

  • Those who are citizens of the Philippines at the time of the adoption of this Constitution
  • Those whose fathers or mothers are citizens of the Philippines
  • Those born before January 17, 1973, of Filipino Mothers, who elect Philippine citizenship upon reaching the age of majority
  • Those who are naturalized in accordance with law
• Non-resident Citizens


  • A citizen of the Philippines whose physical presence abroad is with a definite intention to reside therein
  • A citizen of the Philippines who leaves the Philippines during the taxable year to reside abroad, either as an immigrant or for employment on a permanent basis
• Non-resident Citizens


  • Overseas Contract Worker or Overseas Filipino Workers (OFW) who were issued an overseas employment permit
  • A citizen of the Philippines who works and derives income from abroad and whose employment thereat requires him to be physically present abroad most of the time during the taxable year
• Resident Alien


  • An alien who lives in the Philippines with no definite intention as to his stay (floating intention)
  • One who comes to the Philippines for a definite purpose which in its nature would require an extended stay and to that end makes his home temporarily in the Philippines
  • An alien who has acquired residence in the Philippines and retains his status as such until he abandons the same and actually departs from the Philippines
• Non-Resident Alien (NRA)


  • An alien who comes to the Philippines for a definite purpose which in its nature may be promptly accomplished
  • NRA engaged in trade or business (NRAETB) in the Philippines
  • NRA not engaged in trade or business (NRANETB) in the Philippines
• An NRA who shall come to the Philippines and stay for an aggregate of more than 180 days shall be deemed a NRAETB
• Gross income


  Pertinent items of income referred to in Section 32(A) of the Tax Code, including all income from whatever source (unless exempt from tax by law)
• Items of Gross Income

  • Compensation for services in whatever form paid including fees, salaries and wages, commissions, and similar items
  • Gross income derived from the conduct of trade or business or the exercise of a profession
  • Gains from dealings in property
  • Interests
  • Rents
  • Royalties
  • Dividends
  • Annuities
  • Prizes and Winnings
  • Pensions
  • Partners' distributive share from the net income of general professional partnership
• Gross compensation income


  Any remuneration for rendering of personal services, generally obtained from an employer-employee relationship between payor and recipient
• Employer-employee relationship


  • The person to whom services are rendered has the right to control and direct the individual who performs the services, not only as to the result in accomplishing the work but also as to the details and means by which that result is accomplished
• Classification of Gross Compensation Income

  • Basic salary or wage
  • Honoraria
  • Fixed or variable allowances
  • Commissions
  • Fees
  • Tips and gratuities
  • Hazard or emergency pay
  • Retirement pay
  • Separation pay
  • Pensions
  • Vacation and sick leave
  • Thirteenth month pay and other benefits
  • Fringe benefits and de minimis
  • Overtime pay
  • Profit sharing
  • Awards for special services
  • Beneficial payments
  • Other forms of compensation
• Basic salary or wage

  Salary refers to earning received periodically for a regular work other than manual labor, such as a monthly salary of an employee. Wages are earnings received usually according to specified intervals of work, as by the hour, day, or week
• Honoraria


  Payments given in recognition for services performed for which established practice discourages charging a fixed fee
• Fixed or variable allowances


  Allowances received by a public officer or employee or officer or employee of a private entity, in addition to the regular compensation fixed for his position or office, that are compensation subject to withholding tax, except for amounts paid specifically as advances or reimbursements for traveling, representation and other bona fide ordinary and necessary expenses incurred or reasonably expected to be incurred by the employee in the performance of his duties
• Commissions


  A percentage of total sales or on certain quota of sales volume attained as part of incentive
• Fees


  Received by an employee for the services rendered to the employer including a director's fee of the company, fees paid to public officials, marriage fees, baptismal offerings, sums paid for conducting masses for the dead, and other contributions received by a clergyman, evangelist, or religious worker for services rendered
• Tips and gratuities


  Tips and gratuities paid directly to an employee (by a customer of the employer) which are not accounted for by the employee to the employer are considered taxable income, but not subject to withholding tax
• Hazard or emergency pay


  Additional payment received due to workers' exposure to danger or harm while working, normally added to the basic salary together with the overtime pay and night differential pay to arrive at gross salary
• Retirement pay


  A lump sum payment received by an employee who has served a company for a considerable period of time and has decided to withdraw from work into privacy, generally taxable except for SSS or GSIS retirement pays and retirement pay due to old age that meets certain requirements
• Separation pay


  Taxable if voluntarily availed of, not taxable if involuntary (e.g. due to death, sickness, disability, reorganization/merger, company at the brink of bankruptcy)
• Pensions


  A stated allowance paid regularly to a person on his retirement or to his dependents on his death, in consideration of past services, meritorious work, age, loss or injury, generally taxable unless the law states otherwise or the BIR approves the pension plan
• Vacation and sick leave


  Paid or availed of as salary of an employee who is on vacation or on sick leave notwithstanding his absence from work is taxable compensation income, except for the monetized value of 10 days or less of unused vacation leave credits paid to private employees and all vacation and sick leave credits paid to government officials and employees
• Thirteenth month pay and other benefits


  Not taxable if the amount is P90,000 or less, any amount exceeding P90,000 is taxable
• Fringe benefits and de minimis


  Fringe benefits are any good, service, or other benefit furnished or granted by an employer, in cash or in kind, in addition to basic salaries. De minimis benefits are privileges of relatively small value as given by the employer to his employees, and are not considered as compensation subject to income tax and withholding tax
• Overtime pay


  Premium payment received for working beyond regular hours of work, included in the computation of gross salary of employee
• Profit sharing


  The proportionate share in the profits of the business received by the employee in addition to his wages
• Awards for special services

  The amount received as an award for special services of employee, or suggestions to employer resulting in the prevention of theft or robbery
• Beneficial payments


  Where an employer pays the income tax owed by an employee, considered additional compensation income
• Compensation paid in kind


  Other forms of compensation received due to service rendered, such as an insurance premium paid by employer for the insurance coverage where the heirs of employee are the beneficiaries
• Shares of stock received as compensation


  The fair market value of the shares of stock at the time the service is rendered is the basis of the tax
• Stock option


  A privilege granted to some key employees of a corporation or other entities to avail of the said corporation's share of stock in the future at a certain price, which can be either equity-settlement or cash-settlement
• Cancellation of debt


  The cancellation and forgiveness of indebtedness may amount to a payment of income, gift or capital transaction, depending on the circumstances
• Insurance premium as compensation

  Premiums paid by the employer on life insurance coverage of the employee wherein the beneficiary is the employee's family constitute taxable income on the basis of the amount of premium paid
• Income tax paid as compensation


  For income tax paid by the employer in favor of the employee, the basis of tax is the amount of tax paid
• Convenience of the employer's rule

  Allowances in kind furnished to the employee for and as a necessary incident to the performance of his duties are not taxable
• Living quarters


  The rental value of living quarters furnished in addition to cash salary should be reported as income, except if the living quarters are furnished for the convenience of the employer
• Meals subsidized by employer


  The value of any board and lodging, furnished by an employer is ordinarily taxable to the employee, except when meals are furnished for the convenience of the employer
• Compensation income


  Remuneration or earnings paid to an employee for services rendered