CLASSIFICATIONS OF INDIVIDUAL TAXPAYERS

Individual Taxpayer- refers to a natural personpersonwho derives income from the practice of profession,
trade or business or receives compensation income as an employee.

Classifications of Individual Taxpayers According to Citizenship

1.) Citizens
The following individuals are citizens of the Philippines:
a. Those who are citizens of the Philippines at the time of the adoption of the 1987 Constitution;
b. Those whose fathers or mothers are citizens of the Philippines;
c. Those born before January 17, 1973 of Filipino mothers , who elect Philippine citizenship upon
reaching the age of majority;
d. Those who are naturalized in accordance with law.

Natural-born citizens are those who are citizens of the Philippines from birth without having to
perform any act to acquire or perfect their Philippine citizenship.

Citizens are further classified as:

a. Resident Citizen- a Filipino citizen who :

1. Resides in the Philippines permanently, or
2. Stays outside the Philippines for less than 183 days during a particular taxable year.

A resident citizen is taxable for income derived within and outside the Philippines based on taxable
(i.e. net) income

b. Non-resident Citizen
1. 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.
2. 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.
3. 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.

4. A citizen who has been previously considered as nonresident citizen and who arrives in
the Philippines at 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.

Immigrant refers to an individual who leaves the Philippines to reside abroad where foreign
visa has been secured.

A non-resident citizen is taxable for income derived within the Philippinesbased on taxable
(i.e., net) income

Note that a citizen of the Philippines who is working and deriving income from abroad as an
OVERSEAS CONTRACT WORKER is taxable only on income from sources within the Philippines.
Note further that a seaman who is a Filipino citizen and who receives compensation for services
rendered abroad as member of the complement of a vessel engaged exclusively in international
trade is treated as an overseas contract worker.

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. His presence abroad, however, need not be
continuous.
 2.) Aliens-for income tax purposes, are those taxpayers who are considered foreigners, or who have
not acquired Filipino citizenship under the Philippine Constitution.
a. Resident Alien - an individual whose residence is within the Philippines and who is not a citizen
thereof. Resident aliens include foreign individuals who have stayed in the Philippines for more
than one year from the date of arrival.A resident alien is taxable for income derived within the
Philippines based ontaxable (i.e., net) income.

b. Non-Resident Alien - an individual whose residence is NOT in the Philippines and who isnot a
citizen thereof.

i. Non-resident Alien engaged in trade and business refers to:

* An individual who is neither a citizen nor a resident of the Philippines but has a business,
particularly a sole proprietorship established and operating in the Philippines

*A nonresident alien individual who shall come to the Philippines and stay therein for an
aggregate period of more than one hundred eighty (180) days during any calendar year

ii. Non-resident Alien not engaged in trade and business refers to foreign individuals who have
stayed within the Philippines for only 180 days or less and have no business income derived within
the Philippines.
A non-resident alien NOT engaged in trade or business in the Philippines (NRANETB) - is taxable
forincome derived within the Philippines based on gross income

NOTES:

1. What makes an alien a resident or non-resident alien is his intention with regard to
the length and nature of his stay. Thus: One who comes to the Philippines for a definite purpose
which in itsvery nature may be promptly accomplished is not a resident citizen.One who comes to
the Philippines for a definite purpose which in itsvery nature would require an extended stay, and
to that end, makeshis home temporarily in the Philippines, becomes a resident. A foreigner who
shall live in the Philippines with no definite intention as to his stay is a resident. A foreigner who
has acquired residency in the Philippines shall only become a nonresident when he actually departs
with the intention of abandoning his residency in the Philippines.

c. Special aliens- are individuals who derive income under special employment contracts in offshore
banking units petroleum contractors or regional or area headquarters of multinational corporations
operating in the Philippines.

Tax Rate and Base - 15% of gross income received as salaries, wages, annuities, compensation,
remuneration and other emoluments, such as honoraria and allowances

Note: The same tax treatment shall apply to Filipinos employed and occupying the same positions as
those of aliens employed by these multinational companies, offshore banking units and petroleum
service contractors and subcontractors.

Note that the coverage of the special classification (and the corresponding tax rate) is limited to income
received as wages. Hence, any income earned from all other sources within the Philippines by the alien
employees shall be subject to the pertinent income.

Classifications of Individual Taxpayers According to Filing Status

A. Single- an individual taxpayer who is unmarried, widowed, divorced or married but legally
separated without any qualified dependent.
B. Head of the Family-head of family means an unmarried or legally separated man or woman with
one or both parents, or with one or more brothers or sisters, or with one or more legitimate,
recognized natural or legally adopted children living with and dependent upon him for their chief
support, where such brothers or sisters or children are not more than twenty-one (21) years of
 age, unmarried and not gainfully employed or where such children, brothers or sisters, regardless
of age are incapable of self-support because of mental or physical defect.
C. Married- an individual who is legally married, including one who is separated from his or her spouse
neither by divorce nor by legal separation, with or without qualified dependent children
Parents/Senior
Requisites Brother/Sister Child
Citizens
Living with the taxpayer
Chiefly dependent for support upon the taxpayer
Not gainfully employed
Not married
Not more than 21 years old or if mentally/physically
incapacitated, even older
Legitimate, illegitimate, legally adopted

Deductions [from Income Subject to Schedular/Graduated Tax Rates], In General

The allowable deductions from the gross income of an individual taxpayer are as follows:
1. Business Expenses and Expenses from Practice of Profession – deductible only from business gross
income and professional income, respectively but not from compensation income.

2. Special deduction for actual premium payments for health and/or hospitalization insurance taken by an
individual taxpayer provided that the following requisites are met:
a. The taxpayer’s family gross income does not exceed P250,000 in a taxable year.
b. The amount deductible should only be limited to P2,400 per family or P200 per month.
In the case of married taxpayers, only the spouse claiming the additional exemption for
dependents shall be entitled to this deduction. In case married couple does not have qualified
dependent children, the husband shall claim the deduction for premium on health and
hospitalization insurance premium.

2. Personal Exemptions – are arbitrary amounts allowed by law to be deducted from incometo cover
personal, living, or family expenses of the taxpayer. These deductions are allowedon the theory
that the minimum requirements of subsistence of a taxpayer should be freefrom tax.

RA 8424 RA 9504 2008

January 1, 1998- July 6, 2008- Transitory
July 5, 2008 onwards Amounts
Basic:
Single 20,000.00 50,000.00 35,000.00
Head of the family 25,000.00 50,000.00 37,500.00
Married 32,000.00 50,000.00 41,000.00
Additional for each child not to exceed four 8,000.00 25,000.00 16,500.00

RC NRC RA NRAEBT NRANEBT SI/A

Basic Yes Yes1 Yes1 Yes2 No No
Additional Yes1 Yes1 Yes3 No No No
Taxable Income:
Within Yes Yes Yes Yes Yes Yes
Outside Yes No No No No No
Tax Base NI4(5%-32%) NI4 (5%- NI4 (5%- NI4 (5%- GI5 (25%) GI5 (15%)
32%) 32%) 32%)

1
Provided taxpayer has income within the Philippines.
2
Provided Principle of reciprocity applies.
 a. The country of the non-resident alien has its own income tax law
b. The income tax law of the NRA’s country allows personal exemption to Filipinos engaged in
trade or business in that foreign country but that the Filipino is not a resident therein.
c. The NRA files an accurate income tax return in accordance with the date prescribed by the
Philippine law covering all incomes within the Philippines.

Note: if the problem is silent all of the above requirements have been complied with.
Limit of BPE Allowed to NRAETB: An amount equal to the exemptions allowed by the non-
resident alien’s country to Filipino citizens not residingtherein but deriving income therefrom,
but not to exceed the amount fixed byNIRC.[In other words, whichever is LOWER]
3
Provided dependents are living with the taxpayer.
4
NI-Net Income using the Schedular Rate ranging from 5% to 32%

Income Tax Table

Over Not Over Tax Rate
P10,000.00 5%
P10,000.00 P30,000.00 P500 + 10% of the excess over P10,000.00
P30,000.00 P70,000.00 P2,500.00 + 15% of the excess over P30,000.00
P70,000.00 P140,000.00 P8,500.00 + 20% of the excess over P70,000.00
P140,000.00 P250,000.00 P22,500.00 + 25% of the excess over P140,000.00
P250,000.00 P500,000.00 P50,000.00 + 30% of the excess over P250,000.00
P500,000.00 P125,000.00 + 32% of the excess over P500,000.00

5
GI-Gross Income

GUIDELINES ON GRANT OF PERSONAL EXEMPTIONS

1. In case both spouses are earning, each shall be allowed to claim Basic Personal Exemption of
50,000.00.
2. A married couple where only one is earning an income and the other is either not earning or a non-
resident citizen with income outside the Philippines shall be allowed a basic personal exemption of
50,000.00.
3. Married individuals shall be entitled to additional exemption for their qualified dependent children.
4. In case of legally separated spouses, only the spouse who has custody of the child or children may
claim the additional exemption.
5. The benefactor of a qualified senior citizen cannot claim additional exemption for the senior citizen.
6. Thu husband is the proper claimant of additional exemption for qualified dependent children.
However, the wife shall claim full additional exemption for children in the following cases:
a. The husband is unemployed;
b. The husband is an NRC deriving income from foreign sources;
c. The husband formally waives his right to claim the exemptions for children. The waiver should
be for all children. A waiver shall take effect until revoked by the husband. Any revocation shall
take effect only starting the succeeding calendar year.
7. In case only one spouse earns income subject to basic tax, the said spouse shall claim the
additional personal exemption.
8. The additional exemption for qualified dependent children shall be claimed by only one of the
spouses in case of married individuals.

GUIDELINES ON CHANGE OF FILING STATUS

1. If taxpayer should have additional dependent(s) during taxable year, taxpayer may claim
corresponding additional exemption in full for such year.
2. If taxpayer dies during taxable year, his estate may still claim Basic Personal Exemption and
Additional Exemptions for himself and his dependent(s) as if he died at the close of such year.
3. If during the taxable year
a. spouse dies or
b.any of the dependents dies or marries, turns 21 years old or becomesgainfully employed
 taxpayer may still claim same exemptions as if the spouse or any of thedependents died, or
married, turned 21 years old or became gainfully employed at the close of such year.

Summary of Rules with respect to Change in Status:

RA 8424 RA 9504

Change in Status Current Succeedin Current Succeedin

Year g Year Year g Year
Exemption Exemption Exemption Exemption
Married (no QDC) 32,000.00 32,000.00 50,000.00 50,000.00
Dies (no QDC) 32,000.00 - 50,000.00 -
Widowed with 1 qualified dependent child 40,000.00 28,000.00 75,000.00 75,000.00
Widowed with qualified dependent not his
32,000.00 25,000.00 50,000.00 50,000.00
child
Widowed without dependents 32,000.00 20,000.00 50,000.00 50,000.00
Legally separated with 1 qualified dependent
40,000.00 33,000.00 75,000.00 75,000.00
child
RA 8424 RA 9504
Current Succeedin Current
Change in Status Change in
Year g Year Year
Status
Exemption Exemption Exemption
Legally separated with qualified dependent
32,000.00 20,000.00 50,000.00 50,000.00
not his child
Legally separated without dependents 32,000.00 20,000.00 50,000.00 50,000.00
Not legally separated with 1 qualified
40,000.00 40,000.00 50,000.00 50,000.00
dependent

RA 8424 RA 9504

Current Succeedin Current Succeedin

DEPENDENT CHILDREN
Year g Year Year g Year
Exemptio Exemptio Exemptio Exemptio
n n n n
Born 8,0000 8,0000 25,000.00 25,000.00
Reaches 21 years old-normal 8,0000 - 25,000.00 -
Reaches 21 years old-abnormal child and
8,0000 8,0000 25,000.00 25,000.00
incapable to support himself
Marries 8,0000 - 25,000.00 -
Gainfully employed 8,0000 - 25,000.00 -
Dies 8,0000 - 25,000.00 -