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Citizenship and Residency Inside RP Outside RP

1. Resident citizens and domestic corporations are taxed on worldwide income, whether derived from sources within or outside the Philippines. 2. Non-resident citizens, resident aliens, non-resident aliens, overseas contract workers, and foreign corporations are taxed only on income derived from sources within the Philippines.

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Rhea Royce Cabuhat
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104 views

Citizenship and Residency Inside RP Outside RP

1. Resident citizens and domestic corporations are taxed on worldwide income, whether derived from sources within or outside the Philippines. 2. Non-resident citizens, resident aliens, non-resident aliens, overseas contract workers, and foreign corporations are taxed only on income derived from sources within the Philippines.

Uploaded by

Rhea Royce Cabuhat
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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A.

In General Taxable Income complement of a vessel engaged exclusively in


• The essential difference between capital and international trade shall be treated as an
income is that capital is a fund; and income is a overseas contract worker;
flow. Capital is wealth, while income is the (D) An alien individual, whether a resident or
service of wealth. not of the Philippines, is taxable only on
• Property is a tree, income is the fruit. Labor is income derived from sources
a tree, income is the fruit. Capital is a tree, within the Philippines;
income the fruit. (E) A domestic corporation is taxable on all
• Income means profits or gains. (Madrigal v income derived from sources within and
Rafferty) without the Philippines; and
• Income may be defined as the amount of (F) A foreign corporation, whether engaged or
money coming to a person or corporation not in trade or business in the Philippines, is
within a specified time, whether as payment for taxable only on income
services, interest or profit from investment. derived from sources within the Philippines.
o A mere advance in the value of
property of a person or a corporation in Who are taxable on income derived from all
no sense constitutes the ‘income’ sources, whether within or outside the
specified in the law. Such advance Philippines? Taxed worldwide!
constitutes and can be treated merely 1. Resident citizens.
as an increase in capital. (Fisher v 2. Domestic corporations.
Trinidad) • The other kinds of taxpayers are subject to tax
• Cash dividends is taxed as income because it only on income derived from
has been realized/received, while stock Philippine sources.
dividends is not taxed as income because it is
merely inchoate as it is a mere anticipation of TAXABLE TAXABLE
income (it becomes income once you sell it). INCOME INCOME
o One is an actual receipt of profits; the CITIZENSHIP AND RESIDENCY INSIDE OUTSIDE
other is a receipt of a representation of RP RP
the increased value of the assets of a RESIDENT CITIZEN YES YES
NON-RESIDENT CITIZEN YES NO
corporation. (Fisher v Trinidad)
OVERSEAS CONTRACT WORKER YES NO
• When dealing with money or property, the
questions you should ask are: RESIDENT ALIEN YES NO
o Is this capital or is this income? NON-RESIDENT ALIEN YES NO
o Has it been realized/received or is it DOMESTIC CORP YES YES
merely inchoate? FOREIGN CORP YES NO

B. General Principles C. Income Tax on Individuals


SEC. 23. General Principles of Income Taxation Definitions
in the Philippines. - Except when otherwise Resident citizens and resident aliens
provided in this Code: Section 22 (F) The term "resident alien" means
(A) A citizen of the Philippines residing therein an individual whose residence is within the
is taxable on all income derived from sources Philippines and who is
within and without the not a citizen thereof.
Philippines;
(B) A nonresident citizen is taxable only on • Resident alien is an individual:
income derived from sources within the 1. Whose residence is within the Philippines
Philippines; o Must be actually present in the
(C) An individual citizen of the Philippines who Philippines for more than 12 months
is working and deriving income from abroad as from his arrival
an overseas contract 2. Who is not a citizen
worker is taxable only on income derived from • Mere physical or body presence is enough.
sources within the Philippines: Provided, That Not intention to make the country one’s abode.
a seaman who is a (Garrison v CA)
citizen of the Philippines and who receives • An alien actually present in the Philippines
compensation for services rendered abroad as who is not a mere transient or sojourner is a
a member of the resident of the Philippines for purposes of the
income tax. Whether he is a transient or not is
determined by his intentions with regard to the
length and nature of his stay.
o A mere floating intention indefinite as
to time, to return to another country is
not sufficient to constitute him a
transient.
o If he lives in the Philippines and has
no definite intention as to his stay, he is
a resident. One who comes to the
Philippines for a definite purpose which
in its nature may be promptly
accomplished is a transient.

But if his purpose is of such a nature that an


extended stay may be necessary for its
accomplishment, and to that end the alien makes his
home temporarily in the Philippines, he becomes a
resident, though it may be his intention at all times
to return to his domicile abroad when the purpose
for which he came has been consummated or
abandoned. (RR 2)

Non-resident citizens
Sec 22 (E). The term "nonresident citizen"
means:
(1) 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.
(2) 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.
(3) 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.
(4) A citizen who has been previously
considered as nonresident 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
nonresident 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.
(5) 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 for purpose of this Section.

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