Chapter 2- part 1

Question 1

are natural persons with income derived from within the territorial jurisdiction of taxing authority.

Answer 1

INDIVIDUAL TAXPAYERS

Question 2

1. Born with father and/or mother as Filipino citizens
2. Born before Jan. 17,1973 of Filipino mother who elects Philippine citizenship upon
   reaching the age of maturity
3. Acquired Philippine citizenship after birth (naturalized) in accordance with Philippine Laws

Answer 2

CITIZENS OF THE PHILIPPINES

Question 2

CLASSIFICATION OF INDIVIDUAL TAXPAYERS

Answer 2

1. Resident Citizens(RC)
2. Nonresident Citizens (NRC)
3. Resident Aliens (RA)
4. Nonresident Aliens (NRA)
   -Engaged in trade/business (NRA-ETB)
   -Non-resident alien not engaged in trade or business (NRA-NETB

Question 3

A Filipino citizen who permanently resides in the Philippines

Answer 3

RESIDENT CITIZEN

Question 4

A citizen of the Philippines who:
1. Establishes to the satisfaction of the Commissioner the fact of his physical presence abroad with a definite intention to reside therein.
2. Leaves the Philippines during the taxable year to reside abroad
3. Works and derive income from abroad and his employment requires him to be physically present abroad most of the time (at least 183 days) during the taxable year
4. Have been previously considered as non-resident citizen and who arrives in the Philippines at any time during taxable year to reside permanently

Answer 4

NON-RESIDENT CITIZEN

Question 5

Filipino citizens who are physically present in a foreign country as a consequence of their employment. Their salaries and wages are paid by an employer abroad.

Answer 5

OVERSEAS CONTRACT WORKER (OCW)/OVERSEAS FILIPINO WORKER (OFW)

Question 6

Individual whose residence is within the Philippines and who is not a citizen thereof.

Answer 6

RESIDENT ALIEN

Question 7

Individual whose residence is not within the Philippines and who is not a citizen thereof.

Answer 7

NON-RESIDENT ALIEN

Question 8

-Alien is carrying on a business in the Philippines

-Has stayed in the Philippines for more than 180 days

Answer 8

NON-RESIDENT ALIEN ENGAGE IN TRADE OR BUSINESS

Question 9

has stayed in the Philippines for 180 days or less

Answer 9

NON-RESIDENT ALIEN NOT ENGAGE IN TRADE OR BUSINESS

Question 10

IMPORTANCE OF CLASSIFICATION

Answer 10

They differ as to:
● Situs of income
● Manner of computing tax
● Treatment of certain passive incomes
● Allowable deductions
● References in the tax choice

Question 11

APPLICABLE TAXES AND TAX RATES

Answer 11

The applicable taxes for individuals depend on several factors such as but not limited to:
❖ Classification of taxpayer
❖ Source of income
❖ Type of income

Question 12

CLASSIFICATION OF TAXPAYER

Answer 12

Resident citizens

Non-resident aliens not engaged in trade and business (NRA-NETB)

Question 13

taxable on their income derived from sources within and without the Philippines while other taxpayers are taxable only on their income derived from the Philippine sources.

Answer 13

Resident citizens

Question 14

are taxable based on the gross income while others are taxable based on their net income

Answer 14

Non-resident aliens not engaged in trade and business (NRA-NETB)

Question 15

SOURCES OF INCOME

Answer 15

Resident citizens are taxable based on their worldwide income while others are taxable only on their income derived from sources within the Philippines.

Question 16

RESIDENT CITIZEN TAX BASE AND SOURCE OF TAXABALE INCOME

Answer 16

NET INCOME AND WITHIN AND WITHOUT THE COUNTRY

Question 16

NRA-NETB

Answer 16

GROSS INCOME AND WITHIN

Question 17

NRC, RA AND NRA-ETB TAX BASE AND SOURCE OF TAXABALE INCOME

Answer 17

NET INCOME AND WITHIN

Question 18

TYPES OF INCOME (APPLICABLE TAX)

Answer 18

Ordinary or regular income (GRADUATED RATE)

Passive income (FINAL WITHHOLDING TAX)

Question 19

– refers to income such as compensation income, business income, and income from
practice of profession

Answer 19

Ordinary or regular income (GRADUATED RATE)

Question 20

– subject to final withholding taxes are certain passive incomes from sources within the Philippines such as:
- Interest income
-Dividend Income
-Royalties
-Prizes
-Other winnings

Answer 20

Passive income (FINAL WITHHOLDING TAX)

Question 20

Capital gains subject to gains tax (CAPITAL GAIN TAX)

Answer 20

• Capital gains from sale of shares of stocks of a domestic corporation
• Capital gains from sale of real property in the Philippines