“The hardest thing in the world to understand is the income tax.

"
-Albert Einstein-
(Creba vs. Secretary Romulo, G.R. No. 160756, March 9, 2010)

INCOME TAX,

Defined:

Income tax has been defined as a tax on all yearly profits arising from property, professions, trades
or offices, or a tax on a person’s income, emoluments, profits and the like.
Income tax is a direct tax on actual or presumed income (gross or net) of a taxpayer received,
accrued, or realized during the taxable year, which the law does not expressly exempt from taxation. 1

Yearly profits, how determined:

Sec. 43, NIRC –

The taxable income shall be computed upon the basis of the taxpayer’s annual
accounting period (fiscal year or calendar year, as the case may be) xxx.

Taxable Year
Sec. 22 (P) The term ‘taxable year’ means the calendar year, or the fiscal year ending during such calendar
year, upon the basis of which the net income is computed under Title II of the NIRC.

1. Fiscal Year - means an accounting period of twelve (12) months ending on the last day of any
month other than December. (Sec. 22 Q, NIRC)
2. Calendar Year – means an accounting period of twelve (12) months beginning in January and
ends in December

Accounting Method for Tax Purposes

- An Accounting Method is a “set of rules for determining when and how to report
income and deductions

Methods of Accounting for Recognition of Income (CIR vs. Lancaster Phils. G.R. No. 183408, 7.12.2017)
1. Cash basis method
2. Accrual Method
3. Installment Method
4. Percentage of Completion Method
5. Other Accounting Methods
6. Crop Method of Accounting

Accrual Method
- Amounts of Income accrue where the right to receive them becomes fixed, where
there is created an enforceable liability. Liabilities are incurred when fixed and
determinable in nature without regard to indeterminacy merely of time of payment.
The accrual of income and expenses is permitted when the ‘all events test’ has been
met.

1
Mamalateo, Reviewer on Taxation (2019), p. 94
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City University of Pasay, College of Law TAXATION

ALL-EVENTS TEST, Requisites:

1. Fixing of a right to income or liability to pay;

2. The availability of the reasonable accurate of such income of liability

The test does not demand that the amount of such income or liability be known
absolutely, only that a taxpayer has at his disposal the information necessary to
compute the amount with reasonable accuracy. The “all-events test” is satisfied
where computation remains uncertain; if its basis is unchangeable, the test is satisfied
where a computation may be unknown, but is not as much as unknowable, within the
taxable year. The amount of liability does not have to be determined exactly; it must
be determined with “reasonable accuracy” implies something less than an exact or
completely accurate amount. The propriety of an accrual must be judged by the fact
that a taxpayer knew, or could be reasonably expected to have known, at the closing
of its books for the taxable year. Accrual method of accounting presents largely a
question of fact; such that the taxpayer bears the burden of proof of establishing the
of an item of income or deduction.

CASH METHOD
- Income is to be construed as income for tax purposes only upon actual receipt of the
cash payment. It is also referred to as the “cash receipts and disbursements method”
because both the receipt and disbursements are considered. Thus, income is
recognized only upon actual receipt of the cash payment but no deductions are
allowed from the cash income unless actually disbursed through an actual payment
in cash.
(On Accounting Methods, see; CIR vs. Isabela Cultural Corporation, G.R. No. 172231, February 12, 2007)

INCOME TAX LAW

The primary law with respect to income taxation in the Philippines is the National Internal
Revenue Code of 1997 which has already undergone several amendments the latest being Republic Act
No. 10963 or the TRAIN Law (Tax Reform for Acceleration and INclusion Act).

Revenue Regulations promulgated by the DOF Secretary upon recommendation of the CIR, and
BIR Rulings and other administrative issuance signed by the CIR are also given great weight in the
interpretation of tax laws as they are promulgated to enforce the provisions of the Code. (Gulf Air Co., Phil
Branch., (GF) vs. CIR, G.R. No. 182045, September 19, 2002)

INCOME TAX SYSTEMS:

There are three (3) basic types of income tax systems:

1. Global Tax System

2. Schedular Tax System
3. Semi-schedular or semi-global Tax System
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City University of Pasay, College of Law TAXATION

1. Global Tax System

A global tax system of taxation is one where the taxpayer is required to lump up ALL items of
income earned, regardless whether it is classified as compensation income, business or
professional income, passive income, capital gain or other income, during a taxable period,
then the total allowable deduction (for individuals would include personal and additional
exemption; for corporation would include total allowable deductions) and pay under a single
set of income tax rules on these different items of income. All items of gross income,
deductions and personal and additional exemptions, if any, were declared in one income tax
return, and one set of tax rates were applied on the net taxable income. This system was
prevailing until 1981.2

2. Schedular Tax System

A scheduler system of taxation provides for a different tax treatment of different types of
income so that a separate tax return is required to be filed for each type of income and the
tax is computed on a per return or per schedule basis.

Under this system, there are different types of incomes that are subject to different sets of
graduated or flat income tax rates. The applicable tax rate(s) will depend on the classification
of the taxable income and the basis could be gross income (without deduction) or net income
(i.e. gross income less allowable deductions). Separate income tax return or capital gains tax
return, whichever is applicable, is filed by the recipient of passive income subject to final
withholding tax because the withholding agent is primarily responsible for the filing of the
withholding tax return and the payment of final tax to the BIR on such income. This system
was adopted in January 1, 1982 under B.P. Blg. 135 and was enforced until December 31,
1985.3

3. Semi-Schedular or Semi-Global Tax System

The method of taxation under the present NIRC belongs to a system which is partly schedular
and partly global.

Under this system, all compensation income, business or professional income, capital gain,
passive income, and other income not subject to final tax are added together to arrive at the
gross income, and after deducting the sum of allowable deductions from business and
professional income, capital gain and passive income, and other income not subject to final
tax, in the case of corporation, as well as personal and additional exemptions, in the case of
individual taxpayer, the taxable income is subjected to one set of graduated tax rates or
normal corporate income tax, as the case may be.

Note, however, that personal and allowable deductions under the former Sec. 35 of the NIRC
has been repealed by the TRAIN law.

2
See Mamalateo, Philippine Income Tax Law (2009), p. 3
3
Ibid, p. 4
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City University of Pasay, College of Law TAXATION

Under the present tax system, which was adopted in January 1, 2008 with the enactment of
R.A. 8424, the following are observed:

“Global” tax system is applied for all types of income not subject to final withholding tax.
This means that allowable deductions under Sections 34, 37 and 38 of the NIRC are deducted
from the taxable gross income. The resulting figure is the net “taxable income” (Sec. 31,
NIRC). 4

“Schedular” tax system is applied to purely compensation income where no deduction is

allowed and subject to withholding, passive income, capital gains, and other income subject
to final income tax at preferential tax rates.

Note: Under the TRAIN Law, Pres. Duterte vetoed the provision granting preferential tax
treatment to AEMOP (RHQs, ROHQs, OBUs, PSC) who are already enjoying the same prior to
January 1, 2018. Thus, BIR issued RR 8-2018 subjecting the AEMOP to the regular income tax
rate, hence, the preferential income rate for these special aliens is no longer applicable,
without prejudice to the application of preferential tax rates under existing international tax
treaties.

INCOME TAXPAYERS

TAXPAYER, defined

Sec. 22 (N) The term ‘taxpayer’ means any person subject to tax on income.

In cases of tax refund, it could refer to what is called as the ‘Statutory Taxpayer.’

He is, therefore, the person legally liable to file a return and pay the tax as provided for in Section
130 (A). As such, he is the person entitled to claim a refund or the so-called statutory taxpayer. Pursuant
to Sec. 204 C, the person entitled to claim a tax refund is the statutory taxpayer or the person liable for or
subject to tax. (Diageo Phils., Inc. vs. CIR, G.R. No. 183552, November 12, 2012)

CLASSIFICATION OF INCOME TAXPAYERS

1. Individual
a. Citizens
i. Resident Citizens (RC)
ii. Non-Resident Citizens (NRC)
iii. OCW and Seaman

b. Aliens
i. Resident Alien (RA)
ii. Non-Resident Alien Engaged in Trade or Business (NRAETB)
iii. Non-Resident Alien Not Engaged in Trade or Business (NRAETB)
iv. AEMOP

4
Mamalateo, Reviewer on Taxation, p. 344
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City University of Pasay, College of Law TAXATION

2. Corporate
a. Domestic Corporations
b. Foreign Corporations
i. Resident Foreign Corporation (RFC)
ii. Non-Resident Foreign Corporation (NRFC)
3. Estates and Trusts

INDIVIDUAL INCOME TAXPAYERS

A. Sec. 24, as amended by TRAIN Law

1. Resident Citizen (Sec. 23A, 24, 22E)
2. Non-Resident Citizen (Sec. 23B, 24)
3. OCW and Seamen (Sec. 23C, 24)
4. Resident Alien (Sec. 22F, 23D, 24)

a. Purely Compensation Income Earner (PCEI)

b. Self-employed Income Earner
i. Purely Self-Employment
ii. Practice of Profession
c. Mixed Income Earner (Compensation and Self-employment/Practice of Profession)

B. Sec. 25
5. Non-resident Alien Engaged in Trade or Business
6. Non-resident Alien Not-Engaged in Trade or Business
7. Aliens Employed in Multinational Companies, Off-shore Banking Units and Petroleum Service
Contractors (AEMOP)

C. Members of General Professional Partnership

TAX TREATMENT OF INDIVIDUAL INCOME TAXPAYERS

Q: What is the relevance of the classification of individual taxpayers?

A: The only income taxpayer of the seven (7) individuals who is liable to pay within and without is
the resident citizen. The other six (6) individual taxpayers are liable only for income derived from
within the Philippines. (See Section 23, NIRC)

A. Resident Citizen (Sec. 23 A and Sec. 24)

Tax Treatment:

Sec. 23 (A) – A citizen of the Philippines residing therein is taxable on all income derived from sources
within and without the Philippines.

Two (2) Types of Resident Citizen

a. Filipino residing in the Philippines
b. Filipino living abroad but without the intention to reside therein permanently.
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City University of Pasay, College of Law TAXATION

Under the TRAIN law, a Resident Citizen is further classified into:

1. Purely Compensation Income Earner (PCEI)
a. Minimum Wage Earner (Sec. 22 HH)
- Exempt from payment of Income tax

b. Non-minimum Wage Earner

- Taxed according to his taxable income and tax bracket or the graduated
rates.

Sec. 22 GG. – The term “statutory minimum wage” shall refer to the rate fixed by the Regional
Tripartite Wages and Productivity Board, as defined by the Bureau of Labor and Employment
Statistics of the DOLE

Sec. 22 HH –The term “minimum wage earner” shall refer to a worker in the private sector paid
the statutory minimum wage, or an employee in the public sector with compensation income of
not more than the statutory minimum wage in the non-agricultural sector where he or she is
assigned.

2. Self-employed Income Earner/Professional

a. Purely Self-Employment
- A self-employed individual is a sole proprietor or an independent
contractor who reports income earned from self-employment.5

b. Professional
- A professional is a person formally certified by a professional body
belonging to a specific profession (like a lawyer or a doctor). It also refers
to a person who engages in some art or sport for money as a means of
livelihood, rather than as a hobby (like professional boxer or a
professional artist. An insurance agent, management and technical
consultant, and recipients of professional and talent fees are also
considered professionals. (R.R. 8-2018)6

- Under Sec. 24 A (2) (b), these taxpayers have a choice to avail either:
 the graduated rates (NIT), or
 an 8% tax on gross sales/receipts and other non-operating income in excess
of PhP250,000.00 in lieu of the graduated income tax rates and the
percentage tax under Section 116 of the NIRC.

Rules on availing the 8% Tax Rate on GS or GR:

 The first P250,000 is not subject to tax, since what is taxed is anything in excess of P250,000.

5
Ingles, Tax Made Less Taxing; The TRAIN Supplement, p. 6
6
Ibid.
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City University of Pasay, College of Law TAXATION

 If you choose the 8% tax rate, then you won’t be liable for the 3% percentage tax under Section
116 because the 8% tax rate is in lieu of said 3% percentage tax.
 The taxpayer must signify his or her intention to use the 8% tax rate in the 1 st quarter of the
percentage/income tax return. If not, he or she is deemed considered to have chosen the
graduated rates.
 The optional 8% flat rate is not available to the following:
1. Purely Compensation Income Earner (subject to NIT based on graduated
rates)
2. A VAT-registered taxpayer, regardless of the amount of gross
sales/receipts and other non-operating income.
3. Non-VAT taxpayers whose gross sales/receipts and other non-operating
income exceeded the PhP3,000,000 VAT Threshold.
4. Taxpayers subject to Other Percentage Taxes (except those under Section
116, NIRC).
5. Partners of a general professional partnership since their distributive
share from the GPP is already net of costs and expenses; and
6. Individuals enjoying income tax exemption (like those registered as
Barangay Micro Business Enterprises. (RMC 50-2018)

 What happens if your gross sales/receipts and other non-operating income exceed the P3,000,000
VAT threshold?
o You are automatically subject to the graduated rates and can no longer use the 8% income
tax rate
o You will also be subject to other business taxes, if any.

 Take note of the different tax base for computing the graduated rates and the 8% income tax rate.
o Graduated rates; taxable income (Sec. 31, NIRC)
o 8% income tax rate: gross sales/receipts and other non-operating income to be reduced
by P250,000
 Gross receipts include all kinds of deposits. However, returnable deposits or
deposits held in trust and record as liability are excluded. (RMC 50-2018)

3. Mixed Income Earner (Compensation and Self-employment/Practice of Profession)

How taxed: [Sec. 24 A (2) (c), TRAIN]

1. All income on Compensation – graduated rates (NIT); P250,000 reduction applies
2. All income on Business/Profession – depends on the VAT threshold as discussed above:
i. If it exceeds the VAT threshold (Sec. 109 BB) – graduated rates apply
ii. If it does not exceed VAT threshold – taxpayer has a choice to use either:
a. The graduated rates (NIT), or
b. 8% income tax based on gross sales/receipts and other non-operating
income in lieu of the graduated rates (NIT) and percentage tax under
Section 116.
 The P250,000 reduction is no longer available because this
has already been applied in computing the income tax on
compensation (RMC 50-2018)
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City University of Pasay, College of Law TAXATION

 The total income tax liability of the mixed income earner is the sum of the liability for
compensation income and liability for the income from business or practice of profession.

B. Non-Resident Citizen (Sec. 22 E and Sec. 24):

Tax Treatment:

Sec. 23 B. A nonresident citizen is taxable only on income derived from sources within the Philippines.

Four Types of Non-Resident Citizens:

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 those whose employment
thereat requires him to be physically present abroad most of the time7 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.

Q: If you are a Filipino citizen and you are abroad, are you now a NRC?
A: No.

Q: What is the determining factor?

A: If he establishes to the satisfaction of the Commissioner of Internal Revenue the fact of his
physical presence abroad with the definite intention to reside therein.

Q: If you are a Filipino abroad, is it possible that you are still a RC for purposes of taxation?
A: Yes. If you do not have the intention to stay therein permanently.
NRC may be considered RC or NRC depending upon his departure and arrival. In this regard, NRC
shall submit proof to the BIR to show his intention of leaving the Philippines to reside permanently
abroad or to return to and reside in the Philippines for this purpose. 8

Under Section 2 of RR 01-79 dated January 8, 1979, the following Filipino who citizens who leaves
the country during the taxable year are considered as Non-Resident Citizens:

1. Immigrant – one who leaves the Philippines to reside abroad as an immigrant for which a
foreign visa has been secured.
2. Permanent Employee – one who leaves the Philippines to reside abroad for employment on
a more or less permanent basis.

7
The phrase “most of the time” shall mean that the said citizen shall have stayed abroad at least 183 days in a
taxable year. His presence abroad, however, need not be continuous.
8
Dimaampao, Basic Approach to Income Taxation, p. 25
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City University of Pasay, College of Law TAXATION

3. Contract Worker – one who leaves the Philippines on account of a contract of employment
which is renewed from time to time within or during the taxable year. To be considered
physically present abroad most of the time during the taxable year, a contract worker must
have been outside the Philippines for not less than 183 days during such taxable year. 9

R.R. 5-2001 provides that non-resident citizens who are exempt from tax with respect to income
derived from sources outside the Philippines shall no longer be required to file the information returns
from sources outside the Philippines beginning 2001. 10

However, citizens who work outside of the Philippines for at least 183 days in a taxable year due
to a contract of employment with a Philippine employer (such as employees seconded to a foreign
country) are not considered employees abroad. They do not fall within Section 22 (E) (3) because
their employment remains with the Philippine employer. (BIR Ruling No. 116-12) 11

Balikbayan trip to Manila – The trip to Manila of a non-resident citizen under the Balikabayan
program did not interrupt his residence aboard. The phrase “uninterrupted period” should not be
interpreted literally as to negate the continuity of residence abroad. If the reason for physical presence
abroad is established such as employment on a more or less regular tenure, such physical presence abroad
for the taxable year is not deemed interrupted by reason of visits or travels to the Philippines, no matter
how often made as to negate the citizen’s status as a non-resident citizen.

Pilots, stewardess and other crew members. – Pilots, stewardess and other crew members plying
international routes who are holders of immigrant visas or working visas and have left the Philippines
qualify as non-resident citizens. The fact that their salaries are paid locally does not remove them from
this category. (BIR Ruling No. 033-2000, September 5, 2000.) 12

C. OCW and SEAMEN (Sec. 23 C and Sec 24)

Tax Treatment:

Sec. 23 C – An individual citizen of the Philippines who is working and deriving income from abroad as an
overseas contract worker is taxable on income from sources within the Philippines. Provided, that a
seaman who is a citizen of the Philippines and who receives compensation for services rendered abroad as
a member of the complement of a vessel engaged exclusively in international trade shall be treated as an
overseas contract worker.

Overseas Contract Worker

The wage or income or income of an OCW which is earned from outside of the Philippines is
exempt from income tax.

An OCW is a Filipino citizen who:

9
Mamalateo, Reviewer on Taxation pp. 112-113
10
Ingles, Tax Made Less Taxing: A Reviewer with Codals and Cases, p. 45
11
Ingles, ibid., p. 46
12
Mamalateo, Philippine Income Tax, p. 26
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City University of Pasay, College of Law TAXATION

 Holds a job outside the Philippines

 Is physically present in that foreign country where the job is;
 Is registered with the POEA
 Has a valid overseas employment certificate;
 Their salaries and wages are paid by an employer abroad and is not borne by any entity
or person in the Philippines. (R.R. 1-2011).13

 This group was formerly considered either as RCs or NRCs. However, under the new law, they
have been considered neither of the two. Due to the nature of the occupation of these individuals,
they create a situation where they derive income from abroad but stay outside the Philippines
most of the time during the calendar year, hence, there is a need to separate these individuals
from the RCs and NRCs.

 The term “Overseas Contract Worker” was used instead of “Overseas Filipino Worker” since it is
the intention of the law to cover only those individuals with a working contract abroad. Hence,
“TNTs” are not considered under this group. One might ask that since the so-called TNTs are not
considered under this group, are their income outside exempt? No. They are usually classified as
RCs.14

Seaman

The Filipino seaman is deemed to be an OCW for purposes of taxation if he receives compensation for
services rendered abroad as a member of the complement of a vessel engaged exclusively in international
trades. (Sec. 23 C). Consequently, if he is not a member of the complement, or even if he is, but the vessel
is not engaged exclusively in international trade, said seaman is not deemed an OCW. What then is his
classification? He is deemed as RC, or a NRC, depending on where he stays most of the time during the
taxable year. If he stays in the Philippines longer than outside, he is a RC, otherwise, he is a NRC. 15

D. RESIDENT ALIEN (Sec. 23 D and Sec. 24)

Tax Treatment:

SEC. 23 D – An alien individual, whether a resident or not of the Philippines, is taxable only on income
derived from sources within the Philippines.

Q: Who is a resident alien?

A: Sec. 22 F – The term ‘resident alien’ means an individual whose residence is within the
Philippines and who is not a citizen thereof.
A RA is subject to net income tax, as well as the tax on passive income or income subject to final
tax under Sec. 24, in the same manner as that of a RC and NRC.
The intention to reside in the Philippines is not necessary as long as the said alien is not a
sojourner, traveler nor a tourist. (RR 2)16

13
Ingles, supra
14
Sababan, Taxation Law Review, p. 22
15
Ibid, pp. 22-23
16
supra, p. 23
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City University of Pasay, College of Law TAXATION

The BIR has ruled that there is intention on the part of an alien to stay in the Philippines
indefinitely when the alien:
 Had a Special Resident Retiree’s Visa;
 Acquired real property and is actually present most of the time in the Philippines and
 Registered as a taxpayer with the BIR (BIR Ruling No. 252-11)17

E. Non-Resident Alien (Sec. 22G and Sec. 25)

SEC. 22 G – The term “non-resident alien” means an individual whose residence is not within the
Philippines and who is not a citizen thereof.

Tax Treatment:

SEC. 23 D – An alien individual, whether a resident or not of the Philippines, is taxable only on income
derived from sources within the Philippines.

One who comes to the Philippines for a definite purpose which in its nature may be promptly
accomplished is a transient or non-resident. (R.R. 2-1940) 18

Two (2) Classifications of NRA:

1. Non-resident Alien Engaged in Trade or Business (NRAETB)

2. Non-resident Alien Not Engaged in Trade or Business (NRANETB)

Non-resident Alien Engaged in Trade or Business (NRAETB)

SEC. 25 A. In General – A nonresident alien individual engaged in trade or business in the Philippines shall
be subject to an income tax in the same manner as an individual citizen and a resident alien individual, on
taxable income received from all sources within the Philippines. A nonresident alien individual who shall
come to the Philippines and stay therein for an aggregate period of more than one hundred eighty (180)
days during any calendar year shall be deemed a ‘nonresident alien doing business in the Philippines,’
Section 22 (G) of this Code notwithstanding.

 A nonresident alien engaged in trade or business in the Philippines is a foreigner not

residing but engaged in trade or business therein.
 By ‘engaged in trade or business’ includes the exercise of a profession (RR 2-98).
 Under Section 25 G, a nonresident alien who is neither a businessman nor a professional
may be considered as engaged in trade or business in the Philippines if said alien stays in
the Philippines for an aggregate period of more than one hundred (180) days during one
calendar year.
 Therefore, a nonresident alien engaged in trade or business in the Philippines is an alien,
not residing, but:
1. Engaged in trade or business here;
2. Engaged in the exercise of a profession

17
Ingles, Tax Made Less Taxing, p. 44
18
Ingles, ibid, p. 46
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City University of Pasay, College of Law TAXATION

3. Comes and stays here for an aggregate period of one hundred eighty (180) days
during one calendar year. 19

Suppose that a nonresident alien without trade or business in the Philippines stays in the country
for 100 days in 2019 and for another 100 days in 2020, is he considered a nonresident alien
engaged in trade or business in the Philippines? No. The aggregate period of one hundred eighty
(180) days provided in the law must be within the same calendar year for an alien to be considered
engaged in trade or business, otherwise, said alien is still considered as not engaged in trade or
business.

Non-resident Alien Not Engaged in Trade or Business in the Philippines

SEC. 25 B Nonresident Alien Individual Not Engaged in Trade or Business Within the Philippines – There
shall be levied, collected and paid for each taxable year upon the entire income received from all sources
within the Philippines by every nonresident alien individual not engaged in trade or business within the
Philippines as interest, cash and/or property dividends, rents, salaries, wages, premiums, annuities,
compensation, remuneration, emoluments, or other fixed or determinable annual or periodic or causal
gains, profits and income, and capital gains, a tax equal to twenty-five (25%) of such income. Capital gains
realized by a nonresident alien individual not engaged in trade or business in the Philippines from the sale
of shares of stocks in any domestic corporation and real property shall be subject to the income tax
prescribed under Subsection (C) and (D) of Section 24.

Q: Can there be an instance when a NRANETB may be regarded as doing business in the Philippines,
hence subject to income tax like that of a citizen?
A: Yes. A NRA individual who shall come to the Philippines and stay therein for an aggregate period
of more than one hundred eighty (180) days during any calendar year shall be deemed a ‘NRA
doing business in the Philippines,’ Section 22 (G) notwithstanding.

 Loss of residence by alien

o An alien who has acquired residence in the Philippines retains his status until he
abandons the same and actually departs from the Philippines
o A mere intention to change his residence does not change his status from resident alien
to non-resident alien. An alien who has acquired a residence is taxable as a resident for
the remainder of his stay in the Philippines (Sec. 6, R.R. 2-1940)20

SPECIAL ALIENS / AEMOP (Aliens Employed in Multinational Companies, Offshore Banking Units and
Petroleum Service Contractors)

Prior to the enactment of RA 10963 (TRAIN Law) the AEMOP are entitled to the 15% preferential
income tax rate on their gross compensation income from sources within the Philippines. The same tax
treatment applies to certain Filipinos employed in this RHQ/RAHQ/ROHQ of MC, OBUs and PSC at their
option. However, the President vetoed the preferential tax treatment provision under the TRAIN Law for
both aliens and Filipinos. Thus, under the TRAIN law, these taxpayers are now subject to regular income
tax rates under Section 24 (A) (2) (a) of the NIRC.21

19
Sababan, Taxation Law Review, p. 23.
20
Ingles, Tax Made Less Taxing, p. 47
21
Sec. 6, R.A. 10963; Sec. 4 (C) RR No. 8-2018; BIR Tax Advisory dated January 31, 2018