TAX ON INCOME

CHAPTER I - DEFINITIONS

Section 22. Definitions

Person' means an individual, a trust, estate or corporation.

Corporation' shall include partnerships, no matter how created or organized, joint-stock

companies, joint accounts (cuentas en participacion), association, or insurance companies,
but does not include general professional partnerships and a joint venture or consortium
formed for the purpose of undertaking construction projects or engaging in petroleum, coal,
geothermal and other energy operations pursuant to an operating consortium agreement
under a service contract with the Government. 'General professional partnerships' are
partnerships formed by persons for the sole purpose of exercising their common profession,
no part of the income of which is derived from engaging in any trade or business.

Domestic,' when applied to a corporation, means created or organized in the Philippines or

under its laws.

Foreign,' when applied to a corporation, means a corporation which is not domestic.

The term 'non-resident 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.
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 whose
employment thereat requires him to be physically present abroad most of the time during
the taxable year.
4) A citizen who has been previously considered as non-resident 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 non-resident 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.
5) The taxpayer shall submit proof to the Commissioner to show his intention of leaving the
Philippines to reside permanently abroad or to return to and reside in the Philippines as the
case may be for purpose of this Section.

Resident alien' means an individual whose residence is within the Philippines and who is
not a citizen thereof.

Non-resident alien' means an individual whose residence is not within the Philippines and
who is not a citizen thereof.

Resident foreign corporation' applies to a foreign corporation engaged in trade or

business within the Philippines.

Non-resident foreign corporation' applies to a foreign corporation not engaged in trade

or business within the Philippines.

Fiduciary' means a guardian, trustee, executor, administrator, receiver, conservator or any

person acting in any fiduciary capacity for any person.
 Withholding agent' means any person required to deduct and withhold any tax under the
provisions of Section 57.

Shares of stock' shall include shares of stock of a corporation, warrants and/or options to
purchase shares of stock, as well as units of participation in a partnership (except general
professional partnerships), joint stock companies, joint accounts, joint ventures taxable as
corporations, associations and recreation or amusement clubs (such as golf, polo or similar
clubs), and mutual fund certificates.

Shareholder' shall include holders of a share/s of stock, warrant/s and/or option/s to

purchase shares of stock of a corporation, as well as a holder of a unit of participation in a
partnership (except general professional partnerships) in a joint stock company, a joint
account, a taxable joint venture, a member of an association, recreation or amusement club
(such as golf, polo or similar clubs) and a holder of a mutual fund certificate, a member in an
association, joint-stock company, or insurance company.

Taxpayer' means any person subject to tax imposed by this Title.

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 this Title. 'Taxable year'
includes, in the case of a return made for a fractional part of a year under the provisions of
this Title or under rules and regulations prescribed by the Secretary of Finance, upon
recommendation of the commissioner, the period for which such return is made.

Fiscal year' means an accounting period of twelve (12) months ending on the last day of
any month other than December.

Ordinary income' includes any gain from the sale or exchange of property which is not a
capital asset or property described in Section 39(A)(1). Any gain from the sale or exchange
of property which is treated or considered, under other provisions of this Title, as 'ordinary
income' shall be treated as gain from the sale or exchange of property which is not a capital
asset as defined in Section 39(A)(1). The term 'ordinary loss' includes any loss from the sale
or exchange of property which is not a capital asset. Any loss from the sale or exchange of
property which is treated or considered, under other provisions of this Title, as 'ordinary loss'
shall be treated as loss from the sale or exchange of property which is not a capital asset.

B. General Principles of Income Taxation (pg 55 PM Rev)

Section 23, National Internal Revenue Code

Sec. 23. General Principles of Income Taxation in the Philippines. - Except when otherwise provided in this Code:
a) A citizen of the Philippines residing therein is taxable on all income derived from sources within and without the
Philippines;
b) A nonresident citizen is taxable only on income derived from sources within the Philippines;
c) An individual citizen of the Philippines who is working and deriving income from abroad as an overseascontract
worker is taxable only 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;
d) An alien individual, whether a resident or not of the Philippines, is taxable only on income derived from
sources within the Philippines;
e) A domestic corporation is taxable on all income derived from sources within and without the Philippines; and
f) A foreign corporation, whether engaged or not in trade or business in the Philippines, is taxable only on income
derived from sources within the Philippines.

C. Scope of Income Taxation