TAX 02: Individual Taxation

• Citizens of the Philippines

  • Those who are citizens of the Philippines at the time of the adoption of the Constitution (on February 2, 1987)
  • Those whose fathers or mothers are citizens of the Philippines (jus sanguinis)
  • 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
• Modes of acquiring Philippine citizenship

  • Filipino by birth (jus soli and jus sanguinis)
  • Filipino by naturalization
• Resident citizen (RC)


  A citizen of the Philippines residing therein
• Non-resident Citizen (NRC)


  • A citizen of the Philippines who establishes to the satisfaction of the Commissioner the fact of his physical presence abroad 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
  • 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
• Overseas Contract Workers (OCW)


  If an OFW has a contract, he is an OCW
• Seaman (Seafarers)- requisites:


  • Member of complement
  • Vessel is engaged in international shipping
• Aliens


  Individuals who are not Filipino citizens
• Resident alien (RA)


  • An individual whose residence is within the Philippines and who is not a citizen thereof
  • An alien who lives in the Philippines with no definite intention as to his stay
  • 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, although it may be his intention at all times to return to his domicile abroad
• Non-resident alien engaged in trade or business in the Philippines (NRAETB)


  • NRA who is engaged in trade or business in the Philippines
  • NRA who has practiced his profession in the Philippines
  • NRA who shall come to the Philippines and stay therein for an aggregate period of more than 180 days during any calendar year shall be deemed a "non-resident alien doing business in the Philippines"
• Non-resident alien not engaged in trade or business in the Philippines (NRANETB)


  • NRA who is not engaged in trade or business in the Philippines
  • NRA who has not practiced his profession in the Philippines
  • NRA who shall come to the Philippines and stay therein for an aggregate period of NOT more than 180 days during any calendar year
• Aliens Employed by an Offshore Gaming Licensee and Service Providers


  Alien individuals regardless of residence and who are employed and assigned in the Philippines, regardless of term and class of working or employment permit or visa by an offshore gaming licensee or its service provider shall pay a final withholding tax of 25% on their gross income provided that the minimum final withholding tax due for any taxable month from said persons shall not be lower than Php 12,500.00
• Classification of Taxpayers


  • Resident citizen
  • Non-resident citizen
  • Resident alien
  • Non-resident alien engaged in trade or business
  • Non-resident alien not engaged in trade or business
  • Estate and trust
• Compensation income earner


  Individuals whose source of income is purely derived from an employer-employee relationship
• Self-employed


  A sole proprietor or independent contractor who reports income earned from self-employment (contract of service, job order, professionals)
• Mixed


  Earning both from employment and from business (other sources aside from employment)
• Jus soli (right of soil)

  which is the legal principle that a person’s nationality at birth is determined by the place of birth (e.g. the territory of a given state)
• Jus sanguinis (right of blood)

  which is the legal principle that, at birth, an individual acquires the nationality of his/her natural parent/s. The Philippine adheres to this principle.
• OCW is not synonymous with OFW.
• Seaman (Seafarers) – requisites:


  Must be registered with POEA and valid Overseas

  Employment Certificate and valid Seafarers Identification Record Book (SIRB) or Seaman’s Book issued by Maritime Industry Authority (MARINA)
• A citizen who has been previously considered as non-resident citizen and who arrives in the Philippines at any time during the taxable year to reside permanently in the Philippines shall likewise be treated as a non-resident citizen for the taxable year in which he arrives in the Philippines with respect to his income derived from sources abroad until the date of his arrival in the Philippines
• Non-resident Citizen (NRC)

  The taxpayer shall submit proof to the Commissioner to show his intention of leaving the Philippines to reside permanently abroad or to return to and reside in the Philippines as the case may be.
• Group : Gross Sales

  • Micro : Less than 3M
  • Small : 3M to less than 20M
  • Medium : 20M to less than 1B
  • Large : 1B & above
• More than 183 days outside the country: NRC

  Less than 183 days outside the country: RC
• Nicanor is an NRC. From January to June 2022, he earned Php 1 Million from his business in the Philippines and another Php 1 Million from his employment abroad. On July 1, 2022, he returned to the Philippines to live permanently herein. Upon his return and until the end of the year, he earned Php 1 Million from his business and another Php 1 Million from sources outside the Philippines.

  What is the treatment of the income from sources derived from WITHIN/WITHOUT the Philippines for the period January to June?

  • TAXABLE
• Nicanor is an NRC. From January to June 2022, he earned Php 1 Million from his business in the Philippines and another Php 1 Million from his employment abroad. On July 1, 2022, he returned to the Philippines to live permanently herein. Upon his return and until the end of the year, he earned Php 1 Million from his business and another Php 1 Million from sources outside the Philippines.

  What is the treatment of the income from sources derived from WITHIN/WITHOUT the Philippines for the period July to December?

  • TAXABLE
• Resident alien


  An individual whose residence is within the Philippines and who is not a citizen thereof
• Resident Alien


  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, although it may be his intention at all times to return to his domicile abroad
• An alien who has acquired residence in the Philippines retains his status as such until he abandons the same and actually departs from the Philippines
• Resident Alien must not merely transients or sojourners.
• To become a resident alien

  Presence of at least 2 years is required
• RC: Taxable income Within & Without: Graduated or 8% option

  NRC: Taxable income Within: Graduated or 8% option

  RA: Taxable income Within: Graduated or 8% option

  NRAETB: Taxable income Within: Graduated or 8% option

  NRANETB: Gross Income Within: 25% Final tax

  Estate and Trust: Taxable income Within & Without: Graduated Tax
• Resident Alien


  RA 11055 (Philippine Identification System Act)has been defined as an individual who is not a citizen of the Philippines but has established residence in the Philippines for an aggregate period of more than 180 days
• Gross income shall include whether in cash or in kind basic salary, wages, annuities, compensation, remuneration and other emoluments such as honoraria and allowances received from such service providers or offshore gaming licensee (providers and licensees are required to submit contracts of racts of employment to the BIR). DOLE shall issue gaming employment license to the employee and shall be issued TIN.
• Aliens Employed by an Offshore Gaming Licensee

  Penalty in case of failure to obtain TIN on part of employer – Fine of Php 20,000 for every foreign national and revocation of primary and other licenses and/or perpetual or temporary ban employing or engaging foreign nationals for their operations.