 Are natural persons with income derived within

the territorial jurisdiction of a taxing authority.

 Classified as citizens and aliens.
 A Filipino citizen is he who is/has:
◦ Citizens of the Philippines at the time of the adoption
of the 1987 Constitution
◦ Born (by birth) with father and/or mother as Filipino
citizens
◦ Born before January 17, 1973 of Filipino mother who
elects Philippine citizenship upon reaching the age of
majority.
◦ Acquired Philippine citizenship after birth in
accordance with the Philippine laws
 Resident Citizen – a Filipino citizen who
stayed permanently in the Philippines or
stayed outside the Philippines for less than
183 days during the taxable year.
 Nonresident Citizen – a Filipino citizen who
stayed outside the Philippines for 183 days or
more during the taxable year and has
established proof to the BIR Commissioner of
his definite intention to reside outside the
Philippines on a permanent basis as an
immigrant or employee.
During 2018, Mr. Dongdi Perio, a Filipino citizen, worked
and earned P200,000 in Saudi Arabia. Before the end of
year 2018, he returned to the Philippines and earned
P80,000 salary from his employment here.
How much would be his gross taxable income for year
2018 as basis for Philippine income tax computation
under each of the following independent assumptions?
Assumption 1: Mr. Perio went abroad on January 2018
and returned to the Philippines on March 2018.
Assumption 2: Mr. Perio was in Saudi Arabia since June
2017 and returned to the Philippines on March 2018.
Assumption 3: Mr. Perio went to Saudi Arabia on March
1, 2018 and returned to the Philippines on December 5,
2018.
 Resident aliens – persons who are not citizens of
the Philippines but are residing within the
Philippines including foreign individuals who have
stayed in the Philippines for more than one year
from date of arrival.
 Nonresident aliens – foreign individuals whose
residences are not within the Philippines.
◦ Those engaged in trade or business in the Philippines –
those who have stayed within the Philippines for more
than 180 days
◦ Those not engaged in trade or business in the
Philippines – those who have stayed within the
Philippines for only 180 days or less and have no
business income derived within the Philippines.
 Are those alien individuals or Filipino citizens
who are taxed with fifteen percent (15%) tax
rate based on their gross compensation
income when the following conditions are met:
◦ They are employed occupying managerial or technical
positions with regional or area headquarters of
multi-national corporations, petroleum service
contractors and subcontractors, or offshore banking
units.
◦ If the taxpayer is a Filipino citizen, he has the option
to be taxed at 15% final tax or at normal tax rate.
Mr. E, a Filipino holding a managerial position
in a Regional Operating Headquarters of
Multinational Company receives a monthly
salary and cost of living allowance in the
amount of P70,000 and P7,000 respectively.
If Mr. E opted to be taxed at 15% final tax. How
much is the amount of tax for the year?
These are individuals:
1. Whose activities are principally for subsistence
or livelihood that do not realize gross sales or
receipts exceeding P100,000 in any 12-month
period.
2. Not deriving compensation as employee
3. Not licensed professionals, consultants, artists,
sales agents, brokers and others similarly
situated, including all others whose income
have been subjected to withholding tax.
MIE are subject to income taxes but exempt from
business taxes
 Normal Tax
 Passive Income Tax
 Capital Gains Tax
Individual taxpayer’s taxable income subject to
normal tax is income derived from
compensation, business and profession. It may
also include capital gains and passive income
not subjected to final taxes.
The pertinent items of gross income, less the
deductions, if any, authorized for such types of
income by the NIRC or other special laws.
Compensation income xx
Less: Health/hospital insurance paid xx
Net taxable income xx
Business income xx
Less: Business expenses allowed xx
Net business income xx
Add: capital gains not subject to FT xx
Passive income outside Phil xx xx
Total taxable income xx
 The income tax due of an individual taxpayer is
based on his/her net taxable income.
 The tax due on the respective income earned by
husband/wife should be computed separately.
 At the end of the year, the husband and wife will
accomplish a single income tax return wherein
their respective taxes are to be combined.
 BIR Form 1700 if purely compensation income,
1701 if combination of business and compensation
income.
Assume the following income of Mr. Scott and Mrs.
Ann Saboy
Mr. Saboy Mrs. Saboy
Compensation income P300,000 P180,000
Withholding taxes 34,000 24,500
Rent income of P120,000 is derived from the
couple’s conjugal property.

How much is the income tax?

 Are income earned from allowing other to use
one’s right, or game of chance or investment,
which the taxpayer merely waits the income
to come in.
 The law subjects passive income to final tax.
 These taxes are imposed on sales or
exchanges of properties not used in business.
 NRA Engaged in Business – he shall be taxed
in the same manner as a Nonresident Citizen,
except for the following income derived
within:
a. Dividends subject to 20% on gross amount
b. Cinematographic film owner at 25% on gross
income.
 NRA not Engaged in Business – shall be taxed
at 25% based on gross income within the
Philippines except for special aliens.
Shawar Mah, an Indian national engaged in
money-lending business in the Philippines,
reports the following business income and
expenses during the year:
Philippines India
Business income 900,000 600,000
Business expense 400,000 500,000
Dividend income 100,000 80,000
Mr. George Bush, a nonresident alien not doing
business in the Philippines, earned the following
income during the year:
Philippines USA
Net income from business $100,000
Prizes P100,000 30,000
Royalty income 200,000 60,000

How much is the Philippine income tax?

 An individual who is not engaged in business or
practice of profession whose gross income does not
exceed P250,000.
 Minimum wage earners
 If his pure compensation income derived from the
Philippines and the pertinent income tax has been
correctly withheld.
 Individual whose sole income has been subjected to
final withholding tax.
 Alien employees of regional or are headquarters of
multinational corporations with respect to income
received from such corporations
 Aliens employed by offshore banking units with
respect to income received by them from such units.
 Statement of Net Worth and Operations – if gross
sales or receipt does not exceed P50,000 in any
one quarter.
 Balance Sheet and Profit and Loss Statement – if
gross sales/receipts exceed P50,000 but does
not exceed P150,000 in any one quarter.
 If the gross sales/receipts exceeded P150,000 in
any one quarter:
◦ Balance sheet and profit and loss statement certified by
independent CPA.
◦ Comparative profit and loss statements
◦ Schedule of income producing properties and
corresponding income therefrom.