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Taxpayer Classifications in Income Tax

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7 views3 pages

Taxpayer Classifications in Income Tax

Uploaded by

sjayceelyn
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© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Lecture 07 (01) : Classification of Individual Income Taxpayers

Each classification of individual taxpayer, tax differently, or magkakaiba ang pagpapataw ng buwis sa iba’t
ibang classification ng taxpayers.

IN taxation ang taxpayers ay nahahati sa dalawa generally, individual taxpayers or natural being and
artificial beings.

Taxpayer Tax Base Tax Rate Taxable Source


Resident Citizen Net Income Graduated w/in and w/out the Ph
Non-Resident Citizen Net Income Graduated Within only
Resident Alien Net Income Graduated Within only
Non-resident Alien - Net Income Graduated Within only
ETB
Non-resident Alien - Gross Income Final Tax (25%) Within only
NETB
Special Employees

Citizen

- Citizens of the PH at the time of adoption of the Feb 2, 1987 constitution.


- Those whose fathers or mothers are citizens of the PH
- Those born before Jan. 17, 1973 of Filipino mothers, who elect Phil citizen.
- Those who are naturalized in accordance with law.

Non- Resident Citizen

- A citizen of the Ph who establishes to the satisfaction of the commissioner the fact of his/her
physical presence a broad with a definite intention to resides therein.
- A citizen of the PH who leaves the PH during the taxable year to reside abroad, either as an
immigrant or for employment on a permanent basis.
- A citizen of the PH who works and derives income from abroad and whose employment thereat
requires him/her to be physically present abroad most of the time during the taxable year.
- A citizen who has been previously considered as non-resident citizen and who arrives in the PH
at any time during the taxable year to reside permanently in the PH shall likewise be treated as
non-resident citizen for the taxable year in w/c he/she arrives in the Ph with respect to his/her
income derived from sources abroad until the date of his/her arrival in the PH.
- The taxpayer shall submit proof to the commissioner to show his/her intention of leaving the PH
to reside permanently abroad or to return to and reside in the PH, as the case may be.
- BASED ON PURPOSE
- TAXABLE YEAR IS CALENDAR YEAR
- ARTIFICIAL LANG NAKAKAGAMIT FISCAL YEAR.

Lecture 02: Alien (Classification of Individual Taxpayers)

Resident Alien

- An individual whose residence is within the PH and who is not a citizen thereof.
- He/she is one who is actually present in the PH and who is not mere transient or sojourner.
- He/she is one who lives in the PH with no definite intention as to his/her stay. (assumption is
dito sya magstay).
- He/she is one who comes to the PH for the purpose that requires extended stay for its
accomplishment, so he/she makes his/her home temporarily in the PH.

Non-Resident Alien

- An individual whose residence is not within the Ph and who is not a citizen thereof.
- He/she is one who comes to the PH for a definite purpose which in its nature may be promptly
accomplished.
- He/She is one who is mere transient or sojourner. (pumunta sa ph par amagbakasyon lang
dumaan lang ganon.)

Non- Resident Alien engaged on trade or business (HINDI PINOY)

- Alien who have business income in the PH


- Aliens who stayed in the PH for an aggregate period of more than 180 days, during the taxable
year.

NRA-NETB

- Stay 180 days or less.


- The 180 dyas assumption applicable only in this part. Engaged in trade or business.

Special Employees

a. Regional or area headquarters, (RHQs) and regional operation headquarters of multinational


entities in the PH that are engaged in international trade with affiliates and subsidiary branch
offices in the Asia-Pacific region.
b. Offshore banking units.
c. Petroleum contractors and sub-contractors.

(IBA PA YUNG TAX MO PAG GANTO KA)

Lecture 03: Individuals Exempt from Income TAX

1. Non-resident Citizen
2. Overseas Contract Workers, including Overseas Seamans (only income outside the PH only inside
Ph)
3. Barangay Micro Business Enterprise (BMBE)
4. Personal Equity and Retirement Account (PERA)
5. Philippine nationals and alien individuals employed by foreign governments, embassies,
diplomatic missions and international organizations situated in the Philippines.
6. Minimum Wage Earners – on their statutory minimum wage rates, holiday pay, overtime pay,
night shift differential pay, and hazard pay, if any are also exempted.
7. Senior Citizen. – VAT sila exempted – KUNG SILA MINIMUM WAGE LANG EXEMPTED
8. Kung sakali ang kinikita is 250,000 or less, those can be tax zero or walang tax kasi d nameet
threshold para magkaron ng tax.

BMBE – any enterprise engaged in the production, processing or manufacturing of products or


commodities, including agro-processing, trading and services, whose assets including those arising from
loans but exclusive of the land on w/c the particular business entity’s office, plant and equipment are
situated, should not be more than 3,000,000.

Sari-sari stores Bakeries Handicraft Shops

PERA – an individual’s voluntary retirement account established from his/her PERA contributions and/ or
his/her employer contributions, for the purpose of being invested solely in an eligible PERA investment
product (e.g unit investment trust fund, mutual fund, annuity contract, pension plan, share of stocks
traded in a local stock exchange, exchange traded bonds, government securities) duly approved by the
concerned regulatory authority (i.e BSP, SEC, Office of the Insurance Commision)

COLA – Cost of Living Allowance

Common questions

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Non-resident aliens are classified into those engaged in trade or business and those not engaged in trade or business (NRA-NETB). NRAs engaged in trade/business are taxed on their net income at graduated rates, whereas NRA-NETBs pay a final tax of 25% on their gross income derived from within the Philippines .

Philippine nationals employed by foreign governments, embassies, or international organizations situated in the Philippines are exempt from income tax on their income derived from these entities, recognizing diplomatic immunity and international agreements as the basis for their tax exemption .

Resident citizens are taxed on their net income from both within and outside the Philippines using a graduated tax rate, while non-resident citizens are only taxed on their net income derived from within the Philippines, also using a graduated tax rate .

Resident aliens are taxed on their net income derived from within the Philippines using a graduated tax rate. Unlike non-resident aliens, resident aliens live in the Philippines and are not considered transient, meaning they are treated similarly to resident citizens but do not pay taxes on income earned outside the Philippines .

Barangay micro business enterprises (BMBEs) are exempt from income tax provided their total assets do not exceed 3 million pesos, excluding the land where their operations are based. This classification encourages the growth of small businesses by reducing their tax liabilities, allowing them to reinvest in their operations .

Overseas contract workers, including seamen, are exempt from paying income tax on income earned outside the Philippines, differing from other exempt individuals like minimum wage earners who are exempt based on income thresholds or job type within the Philippines .

Senior citizens in the Philippines are exempt from value-added tax (VAT) and income tax if they earn only the minimum wage. These exemptions help reduce their tax burden, allowing them to retain more of their income and benefits .

A non-resident citizen who returns to the Philippines to reside permanently during the taxable year continues to be treated as a non-resident citizen for that year regarding income derived from sources abroad. They must provide proof of their intention to reside permanently in the Philippines to maintain their non-resident status for foreign-sourced income .

Special employees such as those employed by regional or area headquarters of multinational entities, offshore banking units, and petroleum contractors in the Philippines have specific tax conditions. These special conditions may include exemptions or specific tax rates depending on their nature of employment and income source, restricting taxation largely to income sourced within the Philippines .

A Personal Equity and Retirement Account (PERA) is a voluntary retirement savings account where contributions are invested in approved financial products. Contributions and earnings from this account are tax-exempt, providing a tax-deferred growth opportunity for individuals, encouraging long-term savings and investment .

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