1.

What are the national taxes

● National taxes refer to national internal revenue taxes imposed and collected by
the national government through the Bureau of Internal Revenue (BIR)
● Capital Gains Tax - Capital Gains Tax is a tax imposed on the gains presumed to
have been realized by the seller from the sale, exchange, or other disposition of
capital assets located in the Philippines, including pacto de retro sales and other
forms of conditional sale.
● Documentary Stamp Tax - Documentary Stamp Tax is a tax on documents,
instruments, loan agreements and papers evidencing the acceptance,
assignment, sale or transfer of an obligation, right or property incident thereto.
● Donor's Tax - Donor’s Tax is a tax on a donation or gift, and is imposed on the
gratuitous transfer of property between two or more persons who are living at the
time of the transfer. It shall apply whether the transfer is in trust or otherwise,
whether the gift is direct or indirect and whether the property is real or personal,
tangible or intangible.
● Estate Tax - Estate Tax is a tax on the right of the deceased person to transmit
his/her estate to his/her lawful heirs and beneficiaries at the time of death and on
certain transfers, which are made by law as equivalent to testamentary
disposition. It is not a tax on property. It is a tax imposed on the privilege of
transmitting property upon the death of the owner. The Estate Tax is based on
the laws in force at the time of death notwithstanding the postponement of the
actual possession or enjoyment of the estate by the beneficiary.
● Excise Tax - Excise Tax is a tax on the production, sale or consumption of a
commodity in a country.
● Income Tax - Income Tax is a tax on a person's income, emoluments, profits
arising from property, practice of profession, conduct of trade or business or on
the pertinent items of gross income specified in the Tax Code of 1997 (Tax
Code), as amended, less the deductions if any, authorized for such types of
income, by the Tax Code, as amended, or other special laws.
● Percentage Tax - Percentage tax is a business tax imposed on persons, entities,
or transactions specified under Sections 116 to 127 of the National Internal
Revenue Code of 1997 (also known as Tax Code), as amended, and as required
under special laws.
● Value-Added Tax - Value-Added Tax (VAT) is a form of sales tax. It is a tax on
consumption levied on the sale, barter, exchange or lease of goods or properties
and services in the Philippines and on importation of goods into the Philippines. It
is an indirect tax, which may be shifted or passed on to the buyer, transferee or
lessee of goods, properties or services.
● Withholding Tax - Withholding Taxes is a corporate tax obligation paid by
taxpayers engaged in trade or business activities in the Philippines. Employers
withhold from the salary of their employees every month and each amount
withheld serves as an advanced payment for the employer’s Income Taxes
during the business year.
2. Who are the income tax payer
 ● A taxpayer may be an individual or business entity that is obligated to pay taxes
to a federal, state, or local government. Taxes from both individuals and
businesses are a primary source of revenue for governments.
● The income taxpayers include the individuals and corporations.
3. What is income?
● Income means all wealth which flows into the taxpayer other than as a mere
return of capital.
● Taxable income means the pertinent items of gross income specified in the Tax
Code as amended, less the deductions, if any, authorized for such types of
income, by the Tax Code or other special laws.
● Gross income means all income derived from whatever source.
○ Gross income includes, but is not limited to the following:
■ Compensation for services, in whatever form paid, including but
not limited to fees, salaries, wages, commissions and similar items
■ Gross income derived from the conduct of trade or business or the
exercise of profession
■ Gains derived from dealings in property
■ Interest
■ Rents
■ Royalties
■ Dividends
■ Annuities
■ Prizes and winnings
■ Pensions
■ Partner's distributive share from the net income of the general
professional partnerships
4. Classifying income tax payers
● Individuals
○ Citizen (NOTE: A Filipino is either classified as resident or non-resident)
■ Resident Citizen (a Filipino citizen residing in the Ph; Pinoy na
nakatira sa Ph–whether employed or not)
● Unemployed Filipino residing in the Ph = even though
he/she is unemployed, if he is a Filipino residing in the Ph,
he is classified as a resident citizen
● A filipino who is privately employed in the Ph = in this case,
he is privately employed but still a FIlipino residing in the
Ph
■ Non-resident Citizens (a Filipino citizen not residing in the
Ph–OFW; if the Pinoy goes abroad as an immigrant or for
employment purpose)
● A hard working overseas FIlipino worker = the OFW works
and derives income abroad and his employment thereat
requires him to be physically present abroad most of the
time during the taxable year;
 ○ Alien (non-Filipino living in the Ph)
■ Resident Aliens (individual who is residing in the Ph but is not a
citizen thereof)(aliens who stayed in the Ph for more than 1 year
as of the end of the taxable year are considered resident aliens)
● An Indian (or other nationality aside from Ph) married a
Filipina and has been residing in the Ph for 2 years
■ Non-resident Aliens (an individual not residing in the Ph and who
is not a citizen thereof) (more than 180 days but not more than 1
year)
● Engaged in trade or business = an alien who stayed in the
Ph for an aggregate period (continuous) of more than 180
days during the year;
○ A Mexican businessman who has his domicile in
the Ph for 7months
● Not engaged in trade or business
○ Alien who comes to the Ph for a definite purpose
which in its nature may be promptly be
accomplished
■ A fat Mexican tourist
○ An alien who shall come to the Ph and stay therein
for an aggregate period of not more that 180 days
during the year
○ Taxable Estates and trusts
● Corporations
○ Domestic corporation - A domestic corporation is a company that
conducts business in its home state. The entity is treated as a domestic
corporation by the government of its home state, and is treated as a
foreign corporation by the governments of all other states in which it does
business.
○ Foreign corporations - A foreign corporation is a company that does
business in a state other than where the owners originally registered the
corporation. Depending on the company's activities, the foreign state's
laws might require the owners to register the business there as a foreign
corporation and pay state taxes.
■ Resident foreign corporation - A resident foreign corporation is a
foreign corporate entity that is being brought to the Philippines and
secured a license to do business in the Philippines with the
Securities and Exchange Commission in the Philippines. A
resident foreign corporation is one which establishes its physical
presence in the Philippines – e.g. through an office,a branch or a
sales office.
■ Non-resident foreign corporations - A non-resident foreign
corporation is one which does not have any presence in the
Philippines but derives income in the Philippines such as
 extending foreign loans earning interest income, investing in
shares of stocks of domestic corporations earning dividends, or
leasing out assets in the country for a fee – aircrafts,sea vessels,
cinematographic films.
● The General Classification Rule for Individuals (how do we classify the individual
income taxpayer)
○ Intention (regarding his nature of stay within and outside the Ph)
■ The taxpayer shall submit documentary proofs such as visa, work
contracts, and other documents indicating such intention to the
Commissioner of Internal Revenue (CIR) of the BIR
■ The intention of the taxpayer regarding the nature of his stay
within or outside the Ph shall determine his appropriate
classification
■ Alien = normally non-resident
● If he comes to the Ph with tourist visa, he would still be
classified as non-resident alien
○ A tourist visa is a document purporting short-term
stay. It shall not result in the reclassification of the
taxpayer's normal residency. An alien who comes
to the ph with a tourist visa will still be classified as
a non-resident alien
● If he comes to the Ph with an immisgration visa, he would
be reclassified as a resident alien upon his arrival
○ A immigration visa is a document purporting
long-term stay. It would result in the automatic
reclassification of the taxpayer’s residency. Pag
monsoon pa siya sa ibang bansa, non-resident
alien pa siya but once nagpunta na siya sa Ph and
meron siyang immigration visa, then he will be
reclassified as resident alien
■ Citizen = normally a resident
● If he would go abroad with a tourist visa, he would still be
considered a resident citizen. A citizen who would go
abroad with a tourist visa would still be considered as a
resident citizen
● If he would go abroad with a two-year working visa, he
would be reclassified as a non-resident citizen upon his
departure.
○ A working visa is a document purporting long-term
stay. It would result in the automatic reclassification
of the taxpayer’s residency. Pag nandito pa yung
citizen in the Ph, he is still considered as a resident
citizen but once he departs from the Ph with a
 working visa, he will be reclassified as a
non-resident citizen
○ Length of Stay
■ If the individual did not submit any documentation to prove his
intention regarding his stay in the Ph, this is what we will be
looking at
■ In the absence of intention, which means na walang sinumbit na
documents si taxpayer to the CIR of the BIR, we will follow the
length of stay
■ This is considered in default of documentary proof
■ Citizens staying abroad for a period of at least 180 days are
considered as non-resident.
● If you are a Filipino staying in another country for at least
183 days or more than 183 days, then the classification of
that citizen is a non-resident citizen
● EXAMPLE: Without any definite intention as to the nature
of his stay, a Filipino citizen left the Ph and stayed abroad
from March 15, 2019 to April 1, 2020 before returning to
the Ph
○ We check the length of time because the intention
is not being stated.
○ Count the days from March 15, 2019 to April 1,
2020
■ For 2019, count the number of days from
March 15, 2019 to December 31, 2019
■ Aliens who stayed in the Ph for more than 1 year as of the end of
the taxable year are considered as resident
● Para ma classify ang alien into a resident alien dapat
nandito siya sa Ph for more than 1 year as of the end of
the taxable year
■ Aliens who are staying in the Ph for not more than 1 year but more
than 180 days are deemed non-resident aliens engaged in trade
or business
● Para ma classify ang alien as non-resident alien engaged
in business, dapat nandito siya in the Ph for more than 180
days but not more than 1 year kasi if more than 1 year he
will be considered as a resident alien
■ Aliens who stayed in the Ph for not more than 180 days are
considered non-resident alien not engaged in trade of business
(comes to the Ph for a definite purpose )
● Para ma classify ang alien as non-resident alien not
engaged in trade or business, dapat nandito siya sa Ph for
not more that 180 day
 ● EXAMPLE: An American actor was contrasted by a Pg TV
company to do a project in the Ph. he arrived in the country
on Feb. 29, 2019 and returned to the US 3 weeks later
upon completion of the project
○ His stay is for a definite purpose which in its nature
will be accomplished immediately
○ Even though hindi natin malaman ang kanyang
intention or purpose of his stay in the Ph, we look at
his length of stay which is 3 weeks (less than 180
days)
● EXAMPLE: A Libyan national arrived in the country on
Nov. 4, 2019. The Libyan national stayed in the Ph since
then without any working visa or work permit
○ Check the length of stay from Nov. 4 2019 to Dec.
31, 2019
■ Nov.4 - Nov. 30 = 26 days
■ Dec. 1 - Dec. 31 = 31 days
■ 26 days + 31 days = 57 days (less than 180
days)
■ 2019 = his classification is a non-resident
alien not engaged in trade or business
○ If he stayed here in the Ph from Nov. 4, 2019 to
Dec. 31, 2020, his classification is no longer a
non-resident alien not engaged in trade or business
but rather a resident alien because he stayed in the
Ph for more than 1 year
■ 2020 = resident alien
5. What are the income taxes
●
6. Who are required to file income tax return
● Individuals
○ Resident citizens receiving income from sources within or outside the
Philippines
■ Employees deriving purely compensation income from two or
more employers, concurrently or successively at any time during
the taxable year
■ Employees deriving purely compensation income regardless of the
amount, whether from a single or several employers during the
calendar year, the income tax of which has not been withheld
correctly (i.e. tax due is not equal to the tax withheld) resulting to
collectible or refundable return
■ Self-employed individuals receiving income from the conduct of
trade or business and/or practice of profession
 ■ Individuals deriving mixed income, i.e., compensation income and
income from the conduct of trade or business and/or practice of
profession
■ Individuals deriving other non-business, non-professional related
income in addition to compensation income not otherwise subject
to a final tax
■ Individuals receiving purely compensation income from a single
employer, although the income of which has been correctly
withheld, but whose spouse is not entitled to substituted filing
○ Non-resident citizens receiving income from sources within the
Philippines
○ Aliens, whether resident or not, receiving income from sources within the
Philippines
● Non-Individuals
○ Corporations including partnerships, no matter how created or organized.
○ Domestic corporations receiving income from sources within and outside
the Philippines
○ Foreign corporations receiving income from sources within the Philippines
○ Estates and trusts engaged in trade or business
7. Who are exempt from filing the income tax return
● An individual earning purely compensation income whose taxable income does
not exceed P250,000.00
● An individual whose income tax has been withheld correctly by his employer,
provided that such individual has only one employer for the taxable year
● An individual whose sole income has been subjected to final withholding tax or
who is exempt from income tax pursuant to the Tax Code and other special laws.
● An individual who is a minimum wage earner
● Those who are qualified under “substituted filing”. However, substituted filing
applies only if all of the following requirements are present:
○ the employee received purely compensation income (regardless of
amount) during the taxable year;
○ the employee received the income from only one employer in the
Philippines during the taxable year;
○ the amount of tax due from the employee at the end of the year equals
the amount of tax withheld by the employer;
○ the employee’s spouse also complies with all 3 conditions stated above;
○ the employer files the annual information return (BIR Form No. 1604-CF);
and
○ the employer issues BIR Form No. 2316 (Oct 2002 ENCS version) to
each employee.