I.

TAXPAYERS
II. SITUS OF TAXATION
KINDS OF TAXPAYERS
TEXT

KINDS OF TAXPAYERS
▸ NATURAL / INDIVIDUAL

▸ CITIZENS

▸ RESIDENT (RC)

▸ NON-RESIDENT (NRC)

▸ ALIENS

▸ RESIDENT (RA)

▸ NON-RESIDENT (NRA)

▸ DOING BUSINESS (NRA-DB) - >180 DAYS

▸ NOT DOING BUSINESS (NRA-NDB)

▸ JURIDICAL/ CORPORATION

▸ DOMESTIC CORPORATION

▸ FOREIGN CORPORATION

▸ RESIDENT (RFC)

▸ NON-RESIDENT (NRFC)
TEXT

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.
(living abroad)

▸ 2) A citizen of the Philippines who leaves during the

taxable year to reside abroad, either as an immigrant or for
employment on a permanent basis. (leaving the Philippines)
TEXT

THE TERM “NONRESIDENT CITIZEN” MEANS:

▸ 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.
(employment abroad)

▸ 4) A citizen who has been previously considered as nonresident

citizen and who arrives in the Philippines 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. (comes home)
TEXT

WHO ARE TAXABLE ON INCOME DERIVED FROM ALL SOURCES, WHETHER

WITHIN OR WITHOUT THE PHILIPPINES?

▸ 1. RESIDENT CITIZENS

▸ 2. DOMESTIC CORPORATIONS

▸ Other kinds of taxpayers are subject to tax only on income

derived from sources WITHIN THE PHILIPPINES!
SITUS OF TAXATION
TEXT

SECTION 42 (A) GROSS INCOME FROM SOURCES WITHIN THE PHILIPPINES

▸ 1. Interest

▸ 2. Dividends

▸ 3. Services

▸ 4. Rentals and Royalties

▸ 5. Sale of Real Property

▸ 6. Sale of Personal Property

TEXT

1. INTERESTS
▸ includes interests on bonds,
notes and other interest
bearing obligations.

▸ situs of interests > DEBTOR

is in the Philippines
TEXT
2. DIVIDENDS
▸ a. from a DOMESTIC
CORPORATION; and
▸ b. from a foreign corporation,
unless less than 50% of the gross
income of the foreign corporation
was derived from the Philippines
for the three-year period ending
with the close of its taxable year
preceding the declaration of such
dividends.
For example, Naruto, Inc., a
Japanese corporation, derives
more than 50% of its gross
income in the Philippines from
the sale of action figures for
the past three years. If it
declares dividends to a non-
resident citizen, the dividend
income will be considered
sourced within the Philippines.
TEXT

3. SERVICES
▸ compensation for labor or
personal services performed in the
▸ Services for the design,
Philippines. fabrication, engineering and
manufacture of the materials
and equipment made and
completed in Japan, thus
rendered outside the taxing
jurisdiction of the Philippines,
are not subject to contractor's
tax.
◦ CIR v. Marubeni, GR 137377, Dec 18,
200
TEXT

4. RENTALS AND ROYALTIES

▸ Rentals> Property used is
LOCATED in the Philippines

▸ Royalties> the USER of Intellectual

Properties is in the Philippines
TEXT

For example, the USE by Jollibee Corporation of Sponge Bob

SquarePants Adventure Kit, which trademark is owned by
Nickelodeon, an American basic cable and satellite network, is
subject to tax. The royalty received by Nickelodeon from
Jollibee shall be subject to Philippine income tax, because the
source of the royalty income is from the Philippines.
TEXT

5. SALE OF REAL PROPERTY

▸ if the real property sold is located
within the Philippines, the gain is
considered income from within the
Philippines.
TEXT

6. SALE OF PERSONAL PROPERTY (SEC.42E)

▸ Gains, profits and income from the sale of personal property
produced (in whole or in part) by the taxpayer within and sold
without the Philippines, or produced (in whole or in part) by the
taxpayer without and sold within the Philippines, shall be treated
as DERIVED PARTLY FROM SOURCES WITHIN AND PARTLY FROM
SOURCES WITHOUT THE PHILIPPINES

▸ Gains, profits and income derived from purchase of personal

property within and sold without, or from purchase without and
sale within, are treated as DERIVED ENTIRELY FROM SOURCES
WITHIN THE COUNTRY IN WHICH IT IS SOLD.

▸ Situs of sale of stocks in a domestic corporation: treated as

DERIVED ENTIRELY from sources within the Philippines regardless
of where the said shares are sold.
TEXT

BOAC IS AN AIRLINE WITH NO LANDING RIGHTS BUT MAINTAINS AN

AGENCY FOR THE TICKET SALES IN THE PHILIPPINES . SUBJECT TO
INCOME TAX?

◦ Yes. As a rule, the source of the income is the

property, activity or service that produced the
income.  For the source of income to be considered as
coming from the Philippines, it is sufficient that the
income is derived from the activity within the
Philippines.
◦ The Sale of tickets in the Philippines by its general
sales agent is the activity that produced the income.  
The situs of the source of payments is in the
Philippines.   Thus, British Overseas Airways
Corporation, a resident foreign corporation is subject
to tax upon its total net income from all sources
within the Philippines.
◦  CIR v. BOAC, L-65773, April 30, 1987
TEXT

 Whether the goods in question did not acquire a taxable situs in the
Philippines because they merely passed Philippine territory in transit and that
they were not intended for local use but for exportation to a foreign country.

◦ No. The one subject to the payment of the sales tax is not the buyer who
intends to export what he buys, but the seller, because such sale is
domestic and therefore liable for the payment of sales tax in this country.
◦ The tax in dispute  is one on sales transaction and not a tax on property
sold.  The sale of the tractors was consummated in the Philippines, for title
was transferred to the foreign buyer at the pier in Manila; hence, the situs
of the sale is Philippines and it is taxable in this country.
▸ A. Soriano Y Cia v. CIR, G.R. No. L-5896, August 31, 1955
TEXT

REFERENCES

▸ Ingles, I.M.(2015). Tax Made Less Taxing: A Reviewer with

Codals and Cases, 28-32.

▸ National Internal Revenue Code of the Philippines (RA No.

8424 as amended)

▸ Lecture in Taxation 1 given by Atty. Antonio Bonilla,

Academic Year 2016-2017, 1st semester.