INCOME TAXES FOR INDIVIDUALS
Topic Outline
a) Classification of Individual Income e) Basic Proforma Income Tax Computation
Taxpayers f) Passive Income, Capital Gains and Fringe
b) Sources of Income Benefits
c) Graduated Tax Rate
d) Individual Income Taxpayers
Classification of Individual Income Taxpayers
1. Resident Citizen
2. Non-resident citizen
3. Resident Alien
4. Non-resident alien engaged in trade or business
5. Non-resident alien not engaged in trade or business
Citizen
Under Article III Sec. 1 of the Philippine Constitution, Filipino citizens are:
A. Those who are citizens of the Philippines at the time of the adoption of the Feb. 2, 1987
Constitution
B. Those whose fathers or mothers are citizens of the Philippines
C. Those born before Jan. 17, 1973, the date of the adoption of the 1973 Constitution, of
Filipino mothers, who elect Philippine citizenship upon reaching the age of majority; and
D. Those who are naturalized in accordance with law
Kinds of Citizen:
1. Resident Citizen – is a Filipino Citizen who stayed permanently in the Philippines
for within 183 days or more during a taxable year.
2. Non-resident Citizen – is one who stayed permanently outside the Philippines
for 183 days or more, either as an immigrant or employee.
Alien
Is foreign-born person who is not qualified to acquire Philippine citizenship by birth or after
birth.
1. Resident Aliens – are persons who are not Filipino citizens but are residing and have
stayed in the Philippines for more than 1 year.
2. Non-resident Aliens – are foreign individuals whose residence are not within the
Philippines. They can either be engaged in a trade/business within the Philippines (NRAETB) or
not (NRANETB).
A. Non-resident Alien Engaged in Business - Alien actually engaged in business in
the Philippines
Presumed engaged in business in the Philippines for more than 180 days - aggregate
B. Non-resident Alien not Engaged in Trade or Business – is subject to 25% income
tax based on gross income from all sources within the Philippines.
, Illustration 1:
Pedro, an OFW, returned in the Philippines for good in May 2020. He shall be classified for 2020 taxable
year as follow:
January to April 2020 – Non-resident Citizen From May 2020 onwards – Resident Citizen
Illustration 2:
Ana, a resident citizen, left the Philippines on July 1, 2020 to reside permanently in US together with her
family. She shall be classified for 2020 taxable year as follows:
January to June 2020 – Resident Citizen
From July 2020 onwards- Non-resident Citizen
Illustration 3:
Determine the correct classification of the tax payer from the independent cases provided below:
Case 1: Allan is a natural born Filipino citizen. His family migrated in US 15 years ago. For personal
reasons, he decided to return and reside permanently in the Philippines on March 1, 2020.
Answer: From January to February 2020 – Non-resident Citizen
From March 1, 2020 onwards – Resident Citizen
Case 2:
Joe is an American information technology expert. He was signed by Noypi Telecom from January to
March of 2020 to improve its internet services. Due to anticipated entry of competitors from the
countries, Noypi decided to extend indefinitely the services of Joe.
Answer: He is a resident alien.
Case 3:
Greg Popovich, head coach of the San Antonio Spurs in the NBA is in the Philippines for a month-long
NBA promotional tour. He also expressed his intention to regularly visit the Philippines.
Answer: He is classified as NRA-NETB.
Case 4:
Using the same data in Case 3, assume that he invested in share of sticks of various domestic
corporations during his recent stay in the Philippines.
Answer: He is classified as NRA-NETB.
Case 5:
Mika “The Iceman” Immonen, a Finnish cue artist and former world’s billiard champion is a resident of
Finland. He won the world 9-ball championship in 2005 in the Philippines. He is also the owner of one of
the disco pubs in Malate since then.
Answer: NRA-ETB
Topic Outline
a) Classification of Individual Income e) Basic Proforma Income Tax Computation
Taxpayers f) Passive Income, Capital Gains and Fringe
b) Sources of Income Benefits
c) Graduated Tax Rate
d) Individual Income Taxpayers
Classification of Individual Income Taxpayers
1. Resident Citizen
2. Non-resident citizen
3. Resident Alien
4. Non-resident alien engaged in trade or business
5. Non-resident alien not engaged in trade or business
Citizen
Under Article III Sec. 1 of the Philippine Constitution, Filipino citizens are:
A. Those who are citizens of the Philippines at the time of the adoption of the Feb. 2, 1987
Constitution
B. Those whose fathers or mothers are citizens of the Philippines
C. Those born before Jan. 17, 1973, the date of the adoption of the 1973 Constitution, of
Filipino mothers, who elect Philippine citizenship upon reaching the age of majority; and
D. Those who are naturalized in accordance with law
Kinds of Citizen:
1. Resident Citizen – is a Filipino Citizen who stayed permanently in the Philippines
for within 183 days or more during a taxable year.
2. Non-resident Citizen – is one who stayed permanently outside the Philippines
for 183 days or more, either as an immigrant or employee.
Alien
Is foreign-born person who is not qualified to acquire Philippine citizenship by birth or after
birth.
1. Resident Aliens – are persons who are not Filipino citizens but are residing and have
stayed in the Philippines for more than 1 year.
2. Non-resident Aliens – are foreign individuals whose residence are not within the
Philippines. They can either be engaged in a trade/business within the Philippines (NRAETB) or
not (NRANETB).
A. Non-resident Alien Engaged in Business - Alien actually engaged in business in
the Philippines
Presumed engaged in business in the Philippines for more than 180 days - aggregate
B. Non-resident Alien not Engaged in Trade or Business – is subject to 25% income
tax based on gross income from all sources within the Philippines.
, Illustration 1:
Pedro, an OFW, returned in the Philippines for good in May 2020. He shall be classified for 2020 taxable
year as follow:
January to April 2020 – Non-resident Citizen From May 2020 onwards – Resident Citizen
Illustration 2:
Ana, a resident citizen, left the Philippines on July 1, 2020 to reside permanently in US together with her
family. She shall be classified for 2020 taxable year as follows:
January to June 2020 – Resident Citizen
From July 2020 onwards- Non-resident Citizen
Illustration 3:
Determine the correct classification of the tax payer from the independent cases provided below:
Case 1: Allan is a natural born Filipino citizen. His family migrated in US 15 years ago. For personal
reasons, he decided to return and reside permanently in the Philippines on March 1, 2020.
Answer: From January to February 2020 – Non-resident Citizen
From March 1, 2020 onwards – Resident Citizen
Case 2:
Joe is an American information technology expert. He was signed by Noypi Telecom from January to
March of 2020 to improve its internet services. Due to anticipated entry of competitors from the
countries, Noypi decided to extend indefinitely the services of Joe.
Answer: He is a resident alien.
Case 3:
Greg Popovich, head coach of the San Antonio Spurs in the NBA is in the Philippines for a month-long
NBA promotional tour. He also expressed his intention to regularly visit the Philippines.
Answer: He is classified as NRA-NETB.
Case 4:
Using the same data in Case 3, assume that he invested in share of sticks of various domestic
corporations during his recent stay in the Philippines.
Answer: He is classified as NRA-NETB.
Case 5:
Mika “The Iceman” Immonen, a Finnish cue artist and former world’s billiard champion is a resident of
Finland. He won the world 9-ball championship in 2005 in the Philippines. He is also the owner of one of
the disco pubs in Malate since then.
Answer: NRA-ETB
