Individual Taxpayers are
natural persons with income
derived from within the territorial jurisdiction of a taxing authority. These individual taxpayers are classified as:
1.
Resident
citizens of the Philippines
a.
Under Sec. I, Art.
III of the Philippine Constitution , Filipino
citizen is he who is/has
i.
Born (by birth) with
father and/or mother as Filipino Citizens;
ii.
Born before January
17, 1973 of Filipino mother who elects Philippine citizenship upon reaching the
age of majority; or
Natural-born citizens of the Philippines who:
Ø Become
citizens of a foreign country shall retain their Philippine citizenship upon
taking their oath of allegiance to the Philippine Republic
Ø Have
lost their Philippine citizenship by reason of naturalization as citizens of a
foreign country are hereby deemed to have re-acquired Philippine citizenship
upon taking the said oath
Derivative citizenship
Ø The
unmarried child (illegitimate or illegitimate or adopted), below 18 years of age, of those who re-acquire Philippine
citizenship, shall be deemed citizens of the Philippines
iii.
Acquired Philippine
citizenship after birth (naturalized)
in accordance with Philippine Laws.
b.
An Alien is a foreign-born person who is
not qualified to acquire Philippine citizenship by birth or after birth.
2.
Non-resident
citizens of the Philippines. He is a
citizen who
a.
Establishes to the
satisfaction of the Commissioner of Internal Revenue the fact of his physical presence abroad with a definite
intention to reside therein; or
b.
Leaves the
Philippines during the taxable year
to reside abroad
i.
As an immigrant; or
ii.
For employment on a
permanent basis; or
iii.
For work and derives
income from abroad and whose employment thereat requires him to be physically
abroad most of the time during the taxable year.
c.
Was previously a
non-resident citizen and who arrives in the Philippines at any time during the
taxable year to reside permanently in the Philippines.
§ He
shall be considered a nonresident
citizen for the taxable year in which he arrives in the Philippines
with respect to income derived from sources abroad until the date of his arrival in the Philippines.
d.
A citizen of the
Philippines who shall have stayed outside
the Philippines for one hundred eighty-three days (183) or more by the end of the year.
3.
Resident
aliens
a.
Not a citizen of the
Philippines, but residence is within the Philippines.
b.
Actually present in
the Philippines and who are not mere transients or sojourners.
c.
An alien who lives
in the Philippines with no definite intention as to his stay is a resident
Ø One
who comes to the Philippines for a definite purpose which in its nature may be promptly accomplished is a transient (non-resident).
Ø One
who comes to the Philippines for the purpose that requires extended stay for its accomplishment, so he makes his home
temporarily in the Philippines, is a resident, regardless of his intention to
return to his residence abroad.
4.
Non-resident
aliens engaged in business in the Philippines
a.
Aliens who stayed in
the Philippines for an aggregate period of more
than 180 days during the taxable year;
b.
Aliens who have
business income in the Philippines.
Trade or Business includes:
Ø Performance
of the functions of a public office
Ø Performance
of personal services in the Philippines (does not include performance of
services by the taxpayer as an employee).
5.
Non-resident
aliens not engaged in business in the Philippines, but with income from the
Philippines
a.
Aliens who stayed in
the Philippines for only 180 days or
less,
b.
Aliens who have no
business income derived in the Philippines
6.
SPECIAL
ALIENS/ PREFERENTIAL TAX TREATMENT. Income derived
by ALIEN individuals EMPLOYED by
A.
Regional
or Area Headquarters and Regional Operating Headquarters of Multinational
Companies.
(RR 11-2010; RMC 41-09 as
amended)
·
FINAL
Withholding Tax of 15%
·
FROM
Gross income derived by alien
individual Occupying Managerial OR Technical Positions
in RHQ or ROHQ and Representative offices established in the Philippines by
multinational companies as:
- Salaries
- Wages
- Annuities
- Compensation
- Remuneration
- Other
emoluments such as honoraria and allowances, except income subject to fringe benefit tax
·
The same tax
treatment shall apply to Filipinos
employed by RHQ or ROHQ of multinational companies regardless of whether or not
there is an alien executive occupying the same position. Provided that such Filipino shall have the option to be taxed at either 15% of gross income or the
regular rate on their taxable income in accordance with the tax code.
ELIGIBILITY (MUST meet ALL the following
requirements):
1.
Position
and Function Test
ü Must
occupy managerial or technical position and must be exercising such functions
pertaining to said position.
2.
Compensation
Threshold Test
- The
employee must have received or is due to received under a contract of
employment, a gross taxable compensation income of at least P975,000 (whether or not this is actually
received). Provided that,
- A change in the
compensation income , as a consequence
of which, the employee subsequently receiving less than the compensation
threshold for the calendar year
when the change becomes effective, result in the employee being subject to the
regular income tax rate.
- For purposes of
computing the compensation threshold,
gross compensation shall not include:
- Retirement
and/or separation benefits (whether taxable or not)
- De
minimis benefits
Provided
that such benefits shall be considered in the determining the income tax due at
the time of the employee’s retirement or separation.
3.
Exclusivity
Test
- The
Filipino Managerial/Technical employee must be exclusively working for the RHQ or ROHQ as a regular employee and not just a
consultant or contractual personnel.
- EXCLUSIVITY
means just having one
employer at a time.
“Multinational
Company”
- A
foreign firm or entity engaged in international trade with its affiliates or
subsidiaries or branch offices in the Asia Pacific Region and other foreign
markets
“Managerial
Position (RMC 41-09 as amended)”
- One who is vested with powers or
prerogatives to lay down and execute management policies and/or employees.
“Technical
Position (RMC 41-09 as amended)”
Ø Limited
only to positions that are:
Ø Highly
technical in nature, OR
Ø Where
there are no Filipinos who are competent, able and willing to perform the
services for which the aliens are desired.
B.
Offshore
Banking Units
An offshore banking unit (OBU) is a branch of a
multi-national bank located in a financial center away from its home country.
OBUs cannot accept deposits from the people of that country, only from other
banks and OBUs.
C.
Petroleum
contractors and subcontractors
An
Alien individual who is a permanent resident of a foreign country but who is
employed and assigned in the Philippines by a foreign service contractor or by
a foreign service subcontractor engaged in petroleum operations in the
Philippines shall be liable to a tax of fifteen percent (15%) of the salaries,
wages, annuities, compensation, remuneration and other emoluments, such as
honoraria and allowances, received from such contractor or subcontractor:
Provided, however, that the same tax treatment shall apply to a Filipino
employed and occupying the same position as an alien employed by petroleum
service contractor and subcontractor.
7.
SENIOR
CITIZENS
·
Generally, qualified Senior Citizens
deriving returnable income during the taxable year, whether from
compensation or otherwise, are required to file their income tax returns
and pay the tax as they file the return.
·
However, if the returnable income of a
Senior Citizen is in the nature of compensation income but he qualifies as a
minimum wage earner under RA No. 9504, he shall be exempt from income
tax on the said compensation income subject to the rules provided under
Revenue Regulations No. 10‐2008 applicable to minimum wage earners.
·
Likewise, if the aggregate amount of gross
income earned by the Senior Citizen during the taxable year does not exceed
the amount of his personal exemptions (basic and additional), he shall
be exempt from income tax and shall not be required to file income
tax return.
