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3. RA Resident Alien
An individual whose residence is WITHIN the Philippines and WHO IS NOT a citizen thereof. He is one
who is actually present in the Philippines and who is not a mere transient not sojourner. But residence
does not mean mere physical presence. An alien is considered a resident or a non-resident alien
depending on his INTENTION with regard to the length and the nature of his stay.
Notes:
Alien, whether resident or on-resident, are employed by:
(1) Regional or area headquarters (RHQs) and regional operating headquarters (ROHQs) of multinational
entities in the Philippines that are engaged in international trade with affiliated and subsidiary branch
offices in the Asia-Pacific Region.
(2) Offshore baking units (OBUs)
(3) Petroleum contractors and sub-contractors.
Sources of Income
1. Resident Citizens are taxable on all income derived from sources within and without the Philippines.
2. Non-resident citizens and alien individuals (resident and non-resident) are taxable only on income derived from
sources within the Philippines. An OCW (Overseas Contract workers) is taxable only on his income from sources
within the Philippines.
SOURCES OF INCOME
Individual Within the Philippines Without the Philippines
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Categories of Income and Tax Rates
Income Category Tax Rates Category Tax rate range Examples
3. Determine expenses and certain other items that can be deducted in computing the taxpayers
taxable income.
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There are general criteria for DEDUCTIBLE BUSINESS EXPENSES based on tax laws.
4. Apply the appropriate tax rate to the taxpayers taxable income to find the TAX DUE.
Tax Due = Taxable income x Tax Rate
Notes:
a) The applicable tax rates depend on:
b) Type of taxpaying entity
c) Level of income
d) Marital status for individuals
e) Other aspects
5. Subtract any applicable tax credit/payments from the taxpayers tax due in finding the TAX
PAYABLE.
Tax payable = Tax Due Tax Credits/Payments
Notes:
Tax credits are direct offset to the tax itself.
6. Increase the tax by penalties and interests to obtain the TOTAL AMOUNT PAYABLE.
Tax amount payable = Tax Payable + Penalties and Interests.
Notes:
Tax credits are direct offset to the tax itself.
TAX STATUS
1. Single
2. Head of the Family
An individual who supports and maintains in one household one or more individuals, who are closely
connected with him by blood relationship, relationship by marriage, or by adoption, and whose right to
exercise family control and provide for these dependent individuals is based upon some moral or legal
obligation.
Means unmarried or legally separated man or woman with:
a) (one or both parents, or
b) One or more brothers or sisters whether of the whole blood or half blood, or
c) One or more legitimate or illegitimate, recognized natural or legally adopted children who eet
the following qualifications:
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regardless of age
3. Married
ALLOWABLE DEDUCTIONS
These are items or amounts, which the laws allows to be deducted from gross income in order to arrive at the taxable
income.
PERSONAL EXEMPTIONS
These are arbitrary amounts allowed as deductions from gross income or the individual taxpayer from
compensation or practice of profession.
It represents the personal, living or family expenses of the taxpayer.
DEPENDENT CHILDREN
(Maximum of four)
ADDITIONAL EXEMPTION
No This year Next year
.
Change of Status:
1. Born 25,000 25,000
2. Reaches 21 years old normal child 25,000
3. Reaches 21 years old abnormal child and incapable to support 25,000 25,000
himself
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4. Marries 25,000
5. Gainfully employed 25,000
6. Dies 25,000
TRIAL 1:
Compute the personal exemption of Mr. Weygan, a Filipino, legally separated, with the following dependents:
A. Children: A, 25 years old and jobless; B, 20 years old student but gainfully employed; C, 22 years old
mentally retarded.
B. 59 years old mother.
C. 13 years old illegitimate daughter
D. Supporting a 65 years old senior citizen.
TRIAL 2:
Using the same information in trial 1, assuming the income of Mr. Weygan consists of the following:
A. Compensation income, P 390,000 (including 13th month pay of P 30,000). Related withholding taxes is P
65,000.
B. Rental income, P 60,000
C. Interest income from bank deposit, P 2,000.
D. Dividend income from SMC shares, P 5,000.
TRIAL 3:
During the taxable year 2015, Mr. Dixon, a Filipino, married, reported the following dependents:
A. Children: A, 21 years old this taxable year; B, 20 years old; C, 18 years old; D, 16 years old; E, 15 years old.
B. 59 years old mother.
C. Supporting a 65 years old senior citizen.
His annual compensation income is P 480,000. He is married to Valerie who is also working in Makati City with
annual compensation income of P 350,000.
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