Income

Taxation
Taxation of
Individuals

Classification of Individual Income

Taxpayers

I.

Citizen

a. Resident
b. Non-Resident

II. Alien

a. Resident
b. Non-Resident

1. Engaged in Trade or Business in the Philippines

2. Not Engaged in Trade or Business in the
Philippines

Citizen

The following shall be considered

citizens of the Philippines:

i.

Those who are citizens of the Philippines

at the time of the adoption of the
February 2, 1987 Constitution;
ii. Those whose fathers or mothers are
citizens of the Philippines;
iii.Those born before January 17, 1973, the
date of the adoption of the 1973
Constitution, of Filipino mothers, who elect
Philippine citizenship upon reaching the
age of majority; and
iv. Those who are naturalized in accordance
with law.

Citizen

RESIDENT CITIZEN: permanently

resides in the Philippines

NON-RESIDENT CITIZEN: works and
derives income from abroad and
employment requires him to be
physically present abroad most of the
time during the taxable year.
Most of the time: presence abroad for at least
183 days during the taxable year

ALIEN

RESIDENT ALIEN: residence is within

the Philippines and who is NOT a citizen

NON-RESIDENT ALIEN

Non-resident alien engaged in trade

and business (NRA-ETB)

Continually carrying on a business in the

Philippines
Stayed in the Philippines for more than 180
days during the calendar year

Non-resident alien not doing business

in the Philippines (NRA-NETB)

Stayed in the Philippines for 180 days or

less during the calendar year

1. Anette, a citizen, stayed in Japan for more than 180 days.

2. Hilary, an alien, stayed in the Philippines for more than one
year.
3. Meryll, citizen, maintained her residence in Australia.
4. Sigourney, departed from the Philippines to work as a
physical therapist in the US.
5. Melanie, Filipino overseas contract worker, on vacation in
the Philippines for one month
6. Winona, non-resident citizen, after two years of working as
entertainer in Japan, returns during the year to reside in the
Philippines.
7. Cindy, Filipino singer, visited Canada for 3 days to sing for
her cousins wedding.
8. Angelina, non-resident alien, finding the beauty of the
Philippines, stayed therein for more than 180 days.
9. Jim, non-resident alien, stayed in the Philippines as manager
of a domestic airline from January to September.
10 Anthony, a British, left Manila for Europe for vacation. He
. has a re-entry permit.

Sources of Income
Individual

Source of Income
Within

Resident Citizen
Non-Resident
Citizen
Resident Alien
Non-Resident
Alien

Without

ALLOWABLE DEDUCTIONS

Are items or amounts, which the

law allows to be deducted from

gross income in order to arrive at
the taxable income.
Allowable Deductions from COMPENSATION
INCOME

a)Basic personal and/or additional exemptions;

b)Premium payments on health and/or
hospitalization insurance

PERSONAL EXEMPTION

Amounts allowed as deductions

from gross income of the individual

taxpayer.
Represent the personal, living or
family expenses of the taxpayer.
Kinds of Personal Exemptions:
a)Basic Personal Exemption;
b)Additional Exemption.

BASIC PERSONAL
EXEMPTION

Personal Exemption amounting to

FIFTY THOUSAND Pesos
(Php50,000) for each individual
taxpayer regardless of status.

ADDITIONAL EXEMPTION

An individual, whether single or

married, shall be allowed an

additional exemption of TWENTYFIVE THOUSAND Pesos (Php25,000)
for each dependent child.
Not exceeding FOUR (4) children.
The additional exemption for
dependents shall be claimed by
only one of the spouses in the case
of married individuals.

ADDITIONAL EXEMPTION
Requisites for Additional Exemption:
Legitimate, illegitimate or legally adopted
child
Chiefly dependent upon the taxpayer
Living with the taxpayer
Not more than twenty-one (21) years of age
Unmarried
Not gainfully employed

Rules on Change of
Status
1. If the employee
should have additional

dependents during the taxable year, he

may claim the corresponding additional
exemption in full for such year.
2.If the taxpayer dies during the taxable
year, his death shall not affect the amount
of exemptions. It is as if he died at the
end of the year.
3.If the spouse dies or any of the
dependents dies or if any such dependent
marries, becomes 21 years old, or gets
gainfully employed during the taxable
year, the taxpayer may still claim the
same exemption as if the change occurred
at the end of the year.

Individuals allowed personal

exemptions

1.Citizens
2.Resident alien
3.Non-resident Alien Engaged in
Trade and Business in the
Philippines (only basic)

PREMIUM PAYMENTS ON
HEALTH AND/OR
HOSPITALIZATION INSURANCE
Conditions that must be met:

The insurance shall be taken by the

individual taxpayer himself for his

family;
The amount being claimed shall not
exceed P2,400 a year or P200 a month
per family;
The family has gross income of
P250,000 or less for the taxable year.

PREMIUM PAYMENTS ON
HEALTH AND/OR
HOSPITALIZATION INSURANCE
Conditions that must be met:

The insurance shall be taken by the

individual taxpayer himself for his

family;
The amount being claimed shall not
exceed P2,400 a year or P200 a month
per family;
The family has gross income of
P250,000 or less for the taxable year.

PREMIUM PAYMENTS ON
HEALTH AND/OR
HOSPITALIZATION INSURANCE
Mae Ann, single mother, is a government
employee who earns a monthly gross
compensation income of P18,000. She took
a hospitalization insurance for her and her
2-year old son. She right away paid the
annual premium of P2,400. However, had
she opted to pay this premium monthly, an
additional P50 per month is charged.

Is she entitled to the deduction? If

so, how much?

SOLVE THIS:
Mr. Binice, the taxpayer, is married, with
6 qualified dependent children. The
following data are available:
Gross Compensation Income
P240,000
Premium payment on health insurance
P10,000

Compute the taxable income if Mr.

Binice is a resident citizen.