Where income is earned:

1. Interest income on lending/loans - Residence of debtor

2. Rent income - Location of property rented

3. Service income - Place of where service is earned

4. Sale of real property - Location of property sold

5. Sale of tangible personal property - Place of sale/delivery

6. Sale of goods manufactured by

taxpayer
a. Manufactured & sold in same - income is earned in the same state
State
b. Manufactured & sold in different - Income is partly earned within the PH
state & partly outside

(TI/2) * (Value of P within/Value of P within

and outside)
(TI/2) *Gross sales within/Gross sales within
and outside)

7. Sale of intangible property

a. Sale of securities - Place of registration of issuer
b. Royalties, franchise fee, and - Place where privileged granted is
similar used
c. Dividend income
i. Domestic corporations - Earned in the PH

ii. Resident Foreign Corp. - Use pre-dominance test; 3 years prior

0-49.99% - outside
50-100% - % will be the proportion
earned in the PH

iii. Non-Resident For. Corp. - Earned outside the PH

Accounting methods:

When income is taxable:

1. Rent income - Rent received in advance is taxable in
the year received

2. Leasehold improvements
- Improvements made by lessee a. Outright or lumpsum
- Full FMV of improvement is
recognized as income at the
 time of completion.
b. Spread out method
i. Compute BV of improvement
= Cost * (Useful life - remaining lease
term)/ Useful life
ii. BV/ Remaining lease term

3. Sale of property in installments

a. Accrual method - Entire gross income is recognized in
year of sale

b. Installment basis
i. Dealers in Personal P.
ii. Dealers in Real P. - Initial payment must not exceed 25%
of SP
- Initial payment = downpayment +
payments in year of sale
iii. Not a dealer - Price must exceed P1,000 and must
Initial payment must not exceed 25%
of SP
-