Illustration 4:

Use the following data for Cases A-E:

An individual taxpayer provided the following information for 2022:
Gross business income, Philippines P5,000,000
Gross business income, Canada 2,000,000
Gross business income, Singapore 1,000,000
Business expenses, Philippines 3,000,000
Business expenses, Canada 1,000,000
Business expenses, Singapore 500,000

Determine the taxable income assuming:

Case A: The taxpayer is a resident citizen

Case B: The taxpayer is a nonresident citizen

Case C: The taxpayer is a resident alien

Case D: The taxpayer is a nonresident alien engaged in trade or business

Case E: The taxpayer is a nonresident alien not engaged in trade or business (assume further that the data
pertaining to gross income is other than business income)

Case F: The income and expenses of a Filipino citizen in 2022 were provided as follows:
January to June: Philippines Canada
Gross income P5,000,000 P2,000,000
Allowable deductions 2,000,000 1,000,000

July to December: Philippines Canada

Gross income P2,000,000 P3,000,000
Allowable deductions 1,000,000 1,200,000

Assume the taxpayer is a resident who left the country in July of the current year to reside permanently in Canada,
how much is his taxable income?

Case G: Assume the same data in case F, except that the taxpayer is a nonresident citizen who returned
and reside permanently in the country in July of the current year. Compute his taxable income.
Illustration 4: SOLUTIONS
Use the following data for Cases A-E:
An individual taxpayer provided the following information for 2022:
Gross business income, Philippines P5,000,000
Gross business income, Canada 2,000,000
Gross business income, Singapore 1,000,000
Business expenses, Philippines 3,000,000
Business expenses, Canada 1,000,000
Business expenses, Singapore 500,000

Determine the taxable income assuming:

Case A: The taxpayer is a resident citizen

 Answer: P3,500,000
Gross business income, Philippines P5,000,000
Gross business income, Canada 2,000,000
Gross business income, Singapore 1,000,000
Business expenses, Philippines (3,000,000)
Business expenses, Canada (1,000,000)
Business expenses, Singapore (500,000)
Taxable income P3,500,000

A resident citizen is taxable on income within and without the Philippines.

Case B: The taxpayer is a nonresident citizen

 Answer: P2,000,000
Gross business income, Philippines P5,000,000
Business expenses, Philippines (3,000,000)
Taxable income P2,000,000

A nonresident citizen is taxable on income derived from within the Philippine sources only. Basis
is net income.

Case C: The taxpayer is a resident alien

 Answer: P2,000,000
Gross business income, Philippines P5,000,000
Business expenses, Philippines (3,000,000)
Taxable income P2,000,000

Same solution with Case B. A resident alien is taxable on income derived from within the
Philippine sources only. Basis is net income.

Case D: The taxpayer is a nonresident alien engaged in trade or business

 Answer: P2,000,000
Gross business income, Philippines P5,000,000
Business expenses, Philippines (3,000,000)
Taxable income P2,000,000

Same solution with Case B and C. A nonresident alien is taxable on income derived from within
the Philippine sources only. Basis is net income.
Case E: The taxpayer is a nonresident alien not engaged in trade or business (assume further that the data
pertaining to gross income is other than business income)
 Answer: P5,000,000

NRA-NETBs are taxable on their gross income.

Case F: The income and expenses of a Filipino citizen in 2022 were provided as follows:
January to June: Philippines Canada
Gross income P5,000,000 P2,000,000
Allowable deductions 2,000,000 1,000,000

July to December: Philippines Canada

Gross income P2,000,000 P3,000,000
Allowable deductions 1,000,000 1,200,000

Assume the taxpayer is a resident who left the country in July of the current year to reside permanently in Canada,
how much is his taxable income?
 Answer: P5,000,000
Gross business income, Philippines (Jan- Dec) P7,000,000
Gross business income, Canada (Jan- Jun) 2,000,000
Allowable deductions, Philippines (Jan- Dec) (3,000,000)
Allowable deductions, Canada (Jan- Jun) (1,000,000)
Taxable income P5,000,000

Case G: Assume the same data in case F, except that the taxpayer is a nonresident citizen who returned
and reside permanently in the country in July of the current year. Compute his taxable income.
 Answer: P5,800,000
Gross business income, Philippines (Jan- Dec) P7,000,000
Gross business income, Canada (Jul- Dec) 3,000,000
Allowable deductions, Philippines (Jan- Dec) (3,000,000)
Allowable deductions, Canada (Jul- Dec) (1,200,000)
Taxable income P5,800,000