INCOME TAXPAYERS

CLASSIFICATION OF TAXPAYERS

1. INDIVIDUALS
a) Citizens of the Philippines:
b) Aliens or foreigners

2. ESTATES AND TRUSTS

3. CORPORATIONS
a) Domestic corporations
b) Foreign corporations
1. Resident foreign corporations
2. Non-resident foreign corporations

4. GENERAL PROFESSIONAL PARTNERSHIPS

DEFINITION OF TERMS

1. Citizen. Under the constitution, the following shall be considered citizens of the Philippines:

 those who are citizens of the Philippines at the time of the adoption of the February 2,
1987 Constitution.;
 those whose fathers or mothers are citizens of the Phil;
 those born before January 17, 1973, the date of the adoption of the 1973 Consitution , of
Filipino mothers, who elects Philippine citizenship upon reaching the age of majority; and
 those who are naturalized in accordance with law.

2. Resident citizen (RC)– is a Filipino citizen who permanently resides in the Phil.

3. Non-resident citizen means ( NRC):

 a citizen of the Philippines who establishes to the satisfaction of the Commissioner the
fact of his physical presence abroad with a definite to reside therein.

 a citizen of the Philippines who leaves the Philippines during the taxable year to reside
abroad,
1. as an immigrant
2. for employment on a permanent basis
3. for work and derives income from abroad and whose employment thereat
requires him to be physically present abroad most of the time during the
taxable year.

 A citizen of the Philippine who shall have stayed outside the Philippines for 183 days or
more by the end of the year (aggregate).

 a citizen who has been previously considered as non-resident citizen and who arrives in
the Phil. at any time during the taxable year to reside permanently in the Phil. He shall be
considered a non-resident citizen for the taxable year in which he arrives in the Phil. with
respect to his income derived from sources abroad until the date of his arrival in the
Philippines.
  the taxpayer shall submit proof to the Commissioner to show hi intention of leaving the
Philippines to reside permanently abroad or return to and reside in the Philippines, as the
case may be.

4. Resident alien (RA) –

 an individual whose residence is within the Phil. and who is not a citizen thereof. He is
one who is actually present in the Philippines and who is not a mere transient or
sojourner. But residence does not mean physical presence.
 An alien who comes to the Philippines for a definite purpose which in its very nature
would
require an extended stay, and to that end, makes his home temporarily in the Phil. is a
resident
alien.

5. Non-resident alien (NRA)– an individual whose residence is not within the Philippines and who is
not a
citizen thereof.

 An alien is considered resident or non-resident depending on his intention with regard to the
length and nature of his stay. Thus:
a) an alien who comes to the Phil. for a definite purpose which in its very nature may be
promptly
accomplished is a transient or non-resident alien.

b) An alien who lives in the Phil. with no definite intention as to his stay is a resident. A
mere
floating intention indefinite as to time of return to his country is not sufficient to constitute
him as a
transient
c) An alien who has acquired residence in the Phil. retains his status as such until he
abandons the same and actually departs from the Phil. The mere intention to change his
residence does not change his status as such as a resident alien to that of non-resident
alien. Thus, an alien who has acquired residence is taxable as a resident for the
remainder of his stay in the Phil.

6. Non-resident alien engaged in trade or business (NRA-ETB)– means that the alien is carrying on
a business in the Philippines. It involves some continuity of action. The term trade, business or
profession shall not include performance of services as an employee but it includes the
performance of the functions of a public office. A non resident alien who shall come to the Phil.
and stay therein for an aggregate period of more than 180 days (so the period need not be
continuous) during the calendar year shall be deemed doing business in the Philippines. The
only criterion is the length of stay.

7. Non-resident not engaged in trade or business in the Philippines (NRA-NETB)–A non-resident

alien to comes to the Philippines and stay therein for 180 days or less during the taxable year
shall be considered not doing business in the Phil.

8. Overseas Contract Workers (OCW)/Overseas Filipino Workers (OFW) are classified as non-
resident citizens.
9. Foreign currency deposit system (FCDS) shall refer to the conduct of banking transactions
whereby any person, whether natural or juridical, may deposit foreign currencies forming part of
the Philippine international reserves, in accordance with the provisions of R.A. No. 6426 entitled
“An Act Instituting a Foreign Currency Deposit System in the Philippines and For Other
Purposes.’

10. Foreign Currency Deposit Unit (FCD) shall refer to the unit of a local bank or a local branch of a
foreign bank authorized by the Bangko Sentral ng Pilipinas (BSP) to engage in foreign currency-
denominated transactions, pursuant to the provisions of R.A. No. 6426, as amended. Local bank
shall refer to a thrift bank or a commercial bank organized under the laws of the Republic of the
Philippines. Local branch of a foreign bank shall refer to a branch of a foreign bank doing
business in the Philippines, pursuant to the provisions of R.A. 337, as amended.

11. Offshore banking system – refer to the conduct of banking transactions in foreign currencies
involving the receipt of funds principally from external and internal sources and the utilization of
such fund pursuant to Pres. Decree No. 1034 as implemented by Central Bank (now BSP)
Circular No. 1389, as amended.

12. Offshore banking unit (OBU) – a branch, subsidiary or affiliate of a foreign banking corporation
which is duly authorized by the BSP to transact offshore banking business in the Phil. in
accordance with the provisions of P.D.1034 as implemented by Central Bank (now BSP) Circular
No. 1389, as amended.

13. Deposits – shall mean funds in foreign currencies which are accepted and held by an Offshore
Banking Unit or Foreign Currency Deposit Unit in the regular course of business, with the
obligation to return an equivalent amount to the owner thereof, with or without interest.

14. Marginal income earners – (RR No. 11-2000) shall refer to individuals not otherwise deriving
compensation as an employee under an employer- employee relationship but who are self-
employed and deriving gross receipts not exceeding P 100,000 during any 12-month calendar
period.

15. Domestic Corporations – are those created or organized under and by virtue of Philippine laws.

16. Foreign corporations – those organized in accordance with laws of their respective countries.

17. Resident foreign corporations - those engage in trade or business within the Philippines.

18. Non-resident foreign corporations – those not engaged in trade or business within the Philippines.

19. General Professional Partnership – formed by persons for the sole purpose of exercising their
common profession, no part of the net income of which is derived from engaging in any trade or
business.

20. Estate – refers to all properties, rights and obligations of a person which are not extinguished by
his death and also those which have accrued thereto since the opening of the succession.

21. Trust – is an agreement created by will or an agreement under which title to property is passed to
another for conservation or investment with the income therefrom and ultimately the corpus or
principal to be distributed in accordance with the directives of the creator as expressed in the
governing instrument.
22. Creditable withholding tax – is a method of collecting the income tax in advance from the receipt
of income thru the payor, which is constituted by law as withholding agent of the government.
The taxes withheld or deducted by the payor and remitted to BIR are deductible from the tax due
of the recipient of the income. (e.g. withholding taxes on compensation, on rent income, etc,)

23. Final withholding tax – the amount of tax withheld by the payor, which is constituted as a full and
final payment of the income tax due from the payee or recipient of income. This pertains to final
taxes on passive income. The income subject to final tax are no longer included in the taxable
income subject to basic tax rate.