Tax Chapter 2

Returnable Income

Compensation income from being an employee b) Income from trade, business, or practice or a profession c) Gain from sale of ordinary assets d) Net capital gain from sale of “other capital assets” and e) Other taxable income not subject to FT or CGT

Passive Income

Earned without any active action on the part of the taxpayer

Capital Gains

Arise from the sale of 2 types of capital assets, namely: a) Real property in the Philippines classified as capital asset; and b) Shares of domestic corporations (provided the seller or taxpayer is not a dealer in securities)

Resident Citizen

Those who are citizens at the time of the adoption of the 1987 Constitution; or b. Those whose fathers and mothers are citizens; or c. Those born before January 17, 1973 of Filipino mothers, and who elect Philippine citizenship upon reaching majority age; or d. Those who are naturalized in accordance with law. AND Whose residence is within the Philippines

Non-resident citizen

a. A citizen of the Philippines who establishes to the satisfaction of the Commissioner the fact of his physical presence abroad with a definite intention to reside therein. b. A citizen of the Philippines who leaves the Philippines during the taxable year to reside abroad, either as an immigrant or for employment on a permanent basis. c. A citizen of the Philippines who works and derives income from abroad and whose employment thereat requires him to be physically present abroad most of the time during the taxable year. d. A citizen who has been previously considered as nonresident citizen and who arrives in the Philippines any time during the taxable year to reside permanently in the Philippines shall likewise be treated as a nonresident citizen for the taxable year in which he arrives in the Philippines with respect to his income derived from sources abroad until the date of his arrival in the Philippines. e. The taxpayer shall submit proof to the Commissioner to show his intention of leaving the Philippines to reside permanently abroad or to return to and reside in the Philippines as the case may be. Per Revenue Regulation, a citizen of the Philippines who shall have stayed outside the Philippines for 183 days or more by the end of the year is a nonresident citizen for that year.

OCW

a. Citizen working or deriving income from abroad. Must be registered with the POEA; b. Seaman who is a citizen and works as a member of the complement of a vessel engaged exclusively in international trade

Resident Alien

Not a citizen but whose residence is within the Philippines.

Non-resident alien

Not citizen, not a resident of the Philippines

ETB

if stay in the Philippines is for more than 180 days during the year

NETB

if stay in the Philippines is for 180 days or less during the year

Non-resident Citizen

Per Revenue Regulation, a citizen of the Philippines who shall have stayed outside the Philippines for 183 days or more by the end of the year is a ________ for that year.

Special Individual taxpayers

a) Non-resident alien cinematographic film owner, lessor, or distributor b) Subcontractor, whether citizen, resident alien, or NRAETB, of service contractors engaged in petroleum operations c) Filipinos registered with the BOI availing of the Income Tax Holiday (“ITH) d) PEZA-registered individuals availing of ITH incentive e) PEZA-registered individuals availing of 5% gross income tax (GIT) incentive f) Individual registered as Barangay Micro Business Enterprise (BMBE)

MWEs

Worker, whether in the public or private sector, who is paid not more than the statutory wage

Tax Base

Net Capital Gain which is the excess of the amount realized on the sale (selling price) over the basis or adjusted basis of the shares.

Selling price

the total consideration of the sale consisting of the sum of money and/or the fair market value of property received, if any.

Adjusted basis

the basis of the shares sold plus expenses of sale/disposition

Withholding agent

The payor of the income who, in this case, is the BUYER.

Transaction subject

Sale, transfer, or other disposition of real property located in the Philippines, classified as CAPITAL ASSETS, including pacto de retro sales and other forms of conditional sales.

Rate and Base of Tax

Six percent (6%) of the gross selling price or current fair market value of the property, whichever is higher. The fair market value of the property is the higher of zonal value or assessor's value,

Final Tax

The tax to be withheld by the payor (buyer) is a final tax and the capital gain from the sale is not returnable.