CHAPTER 3 – INTRODUCTION TO

INCOME TAXATION

Charmaine Shanina B. Demin-Li

 TAXPAYERS ACCORDING TO FILING
STATUS

A single individual taxpayer is unmarried, widowed, divorced, or

married but legally separated, without any qualified dependent.

Head of the family refers to an unmarried or legally separated man

or woman with one or both parents, or with one or more brother or
sisters, or with one or more legitimate, recognized or legally adopted
children, living with and dependent upon him/her for their chief support,
where such brothers or sisters or children, are not more than 21 years
of age, unmarried, and not gainfully employed or not capable of
supporting themselves because of mental or physical defect.
 TAXPAYERS ACCORDING TO FILING
STATUS

For taxation purposes, benefactors of senior citizen are also

considered heads of the family. Senior citizen refers to a resident of the
Philippines who is at least 60 years old, including one who has retired
either from the private enterprise or government service, and has an
income of not more than Php 60,000.
Married individual refers to a person who is legally married including
one who is separated from his/her spouse neither by way of divorce
nor by way of legal separation, with or without qualified dependent
children.
 ALLOWABLE PERSONAL EXEMPTIONS

1. Basic personal exemption – an arbitrary amount based on the civil or filing

status of the taxpayers.
2. Additional personal exemption – an amount allowed based on the number of
qualified dependent children of a taxpayer.
  R.A. No. 8424 R.A. 9504
(Jan. 1, 1998 – July 5, 2008) (July 6, 2008 thereafter)
Basic    
Single ₱20,000 ₱50,000
Head of the family 25,000 50,000
Married 32,000 50,000
Additional    
For each qualified dependent 8,000 25,000
child not to exceed four
 WHO ARE ENTITLED TO BASIC
PERSONAL EXEMPTIONS?

1. Resident citizen with income within or outside the Philippines

2. Non-resident citizen with income within the Philippines
3. Resident alien if there is an income within the Philippines
4. Non-resident alien engaged in business or trade in the Philippines, provided
the following requisites have been complied with:
a) The country of a non-resident alien has its own income tax law
b) The income tax law of non-resident alien’s country allows personal
exemption to Filipinos engaged in business or trade in that foreign country,
but that Filipino is not a resident therein. This is the principle of reciprocity.
 ANALYSIS

Mr. Frederick is married and a non-resident alien engaged in

trade or business in the Philippines. His country allows
personal exemption of ₱20,000 for single; ₱30,000 for head of
the family and ₱40,000 for married.
Required: Determine the basic personal exemption.
 SEATWORK #1

Instruction: Classify the following taxpayers as resident citizen, non-resident citizen, resident alien, or
non-resident alien engaged in trade or business in the Philippines.
1. Mr. Mach Gregor, an Italian, left the Philippines on September 15 of the current taxable year for a
vacation trip in the US. Before he left, he had secured a re-entry document.
2. Ms. Antonie Thia, a citizen with residence in Cebu City, stayed in Singapore for 250 days during the
current taxable year.
3. Mr. Mach Chine, a non-resident alien, entered the territorial jurisdiction of the Philippines as a tourist
and stayed in Boracay for 280 days.
4. Ms. Angel Lica, a registered nurse, left the Philippines after passing the state examination to work in the
U.S.
5. Mr. Romeo Juliet, a citizen and a resident of Bohol, left the Philippines to attend the wedding of his
brother in Japan.
 SEATWORK #2

Ms. Cory Mao, divorced from her husband four years ago, has the following
dependents for the current taxable year:
1. A legitimate son, 19 years old, living with her and dependent upon her for chief
support from January to September of the current year. Beginning October up to
December of the current year, the dependent son is already living with and
dependent upon his uncle for chief support.
2. A recognized natural child, 16 years old, living with her, and dependent upon her
for 50% support, while the other 50% was provided by her estranged husband.

Required: Compute the basic and personal exemption of Ms. Cory Mao for the
current taxable year.