Only resident citizens and domestic corporations are taxed on income derived from
abroad. Worldwide taxable!
• The tax is imposed upon taxable compensation or employment income, business
income, and income derived from the practice of professions derived by citizens and
resident aliens.
• Married individuals shall compute separately their individual income tax based on their
respective total taxable income.
o If any income cannot be definitely attributed to, or identified as income
exclusively earned or realized by either of the spouses, the same shall be divided
equally between them for the purpose of determining their respective taxable
income.
• Minimum wage earners are exempt from the payment of income tax on their taxable
income. Holiday pay, overtime pay, night shift differential pay, and hazard pay received
by them are likewise exempt from income tax.
• A non-resident alien individual engaged in trade or business in the Philippines is subject
to the income tax in the same manner as an individual citizen and a resident alien on
taxable income received from sources within the Philippines.
• For non-resident aliens not so engaged, the tax is
o 25% of the entire or gross income received from sources within the Philippines
and
o 15% of the gross income received as compensation, salaries, and other
emoluments by reason of his employment by:
multinational corporations;
Philippines; or
Philippines. (Sec 25 (A-E))
Conditions to be exempt from capital gains tax of 6% on the sale, exchange, or
disposition of a principal residence (RR 13-99)
1. The proceeds from the sale, exchange, or disposition of his principal residence must
be fully utilized in acquiring or construing a new principal residence within 18
months. There must be proof.
2. This can only be availed of ONLY ONCE every 10 years
3. The historical cost of his old principal residence shall be carried over to the cost basis
of his new residence
4. If there is no full utilization, he shall be liable for the deficiency capital gains tax of
the utilized portion
5. If the principal residence is disposed in exchange for a condo, and if it is used as his
new residence, then he is exempt
6. The 6% capital gains tax otherwise due must be deposited in escrow with an
authorized agent bank, and can only be released when sufficient proof is shown that
the proceeds have been fully utilized within 18 months.
• What is the principal residence anyway? (RR 14-2000)
o It is the dwelling house, where the husband or wife or unmarried individual
resides; actual occupancy is not interrupted or abandoned by temporary absence
due to travel, studies, or work abroad