ALIENS

As a rule, under Section 23 (D) of the National Internal Revenue

Code, An alien individual, whether a resident or not of the
Philippines, is taxable only on income derived from sources within
the Philippines.
Aliens are classified as either a Resident Alien, or Non-resident
Alien.

1) The term "resident alien" means an individual whose residence is

within the Philippines and who is not a citizen thereof. (Sec 22
(F), NIRC)

2) The term "nonresident alien" means an individual whose residence

is not within the Philippines and who is not a citizen thereof. (Sec
22 (G), NIRC)

If the assignee arrives in the Philippines prior to his/her

assignment, his/her actual days spent in the Philippines (that is,
physical presence in the Philippines) will determine his/her
residency/non-residency status, notwithstanding the start date of
his/her Philippine assignment.

Resident Alien

Resident Aliens who are not citizens but are residing in the
Philippines who are residing or have stayed in the Philippines for
more than one year.
Aliens on assignment in the Philippines for a period of two years or
more are generally considered as residents at the start of their
assignment in the Philippines and remain as such until departure
from the Philippines at the end of the assignment.1

Taxation of Resident Aliens

A Resident Alien is subject to Philippine tax on his/her income

derived from sources within the Philippines and such income is taxed
in the same manner as the income of a Philippine citizen.

Sample Tax Table

1
Income Tax. (n.d.). Retrieved March 24, 2017, from
https://home.kpmg.com/xx/en/home/insights/2011/12/philippines-income-tax.html
Non - Resident Alien

Non-resident Aliens are foreign individuals whose residence is not

within the Philippines. It is further classified as:

a) Those engaged in trade or business within the Philippines

- These are the Non- Resident Aliens who have stayed in the
Philippines for more than 180 days during the taxable year
b) Those not engaged in trade or business within the Philippines
- These are Non- Resident Aliens whose stay does not exceed
180 days during the taxable year.

Taxation of Non-resident Alien Individuals

A non-resident alien is taxed on income derived from

sources within the Philippines.

Those engaged in trade or business within the Philippines

A nonresident alien individual engaged in trade or business in the

Philippines shall be subject to income tax in the same manner as a
citizen and a resident alien, on taxable income received from all
sources within the Philippines except on the following items of
income which shall be subject to final tax (on the gross amount):

a. Cash and/or property dividends from a domestic corporation,

joint stock company, insurance or mutual fund company or
regional operating headquarter of a multinational company, or
share in the distributable set income of a partnership (except
a general professional partnership), joint account, joint
venture taxable as a corporation or association of which he is
a member or co-venturer - 20%

b. Interests - 20%.

However, interest income from long-term deposit or investment

in the form of savings, common or individual trust funds,
deposit substitutes, investment management accounts and other
investments evidenced by certificates in such form prescribed
by the Bangko Sentral ng Pilipinas shall be exempt, provided
that should the holder of the certificate pre-terminate the
deposit or investment before the 5th year, a final tax shall
be imposed on the entire income and shall be deducted and
withheld by the depository bank from the proceeds of the long-
term deposit or investment certificate based on the remaining
maturity thereof: 4 years to less than 5 years - 5%; 3 years
 to less than 4 years - 12%; and less than three (3) years -
20%.

c. Royalties - 20%.

However, royalties on books as well as other literary works,

and royalties on musical compositions shall be subject to a
final tax of 10%.

d. Prizes and Other Winnings — 20%.

However, prizes amounting to P10,000 or less shall be subject

to the schedular tax rates.

e. Capital gains from sale of shares of stock not traded in the

stock exchange - Not over P100,000 - 5%, and, on any amount in
excess of P100,000 - 10%.

f. Capital Gains from Sale of Real Property located in the

Philippines and classified as a capital asset - 6% based on
the gross selling price or current fair market value as
determined by the Philippine tax authority, whichever is
higher.

Those engaged in trade or business within the Philippines

A non-resident alien not engaged in trade or business within the

Philippines shall be subject to 25% tax on the gross amount of
incomes derived from the Philippines except the following incomes
which shall be subject to final tax:

a. Capital gains from sale of shares of stock not traded in the

stock exchange - Not over P100,000 - 5%, and, on any amount in
excess of P100,000 - 10%.

b. Capital Gains from Sale of Real Property located in the

Philippines and classified as a capital asset - 6% based on
the gross selling price or current fair market value as
determined by the Philippine tax authority, whichever is
higher.

Taxation of Certain Alien Employees

Certain alien employees are subject to 15% tax on their gross
compensation income, as follows:

1. For alien individuals employed by regional or area

headquarters and regional operating headquarters established
in the Philippines by multinational companies, their salaries,
wages, annuities, compensation, remuneration and other
emoluments, such as honoraria and allowances, from such
regional or area headquarters and regional operating
headquarters shall be taxed at 15% of such gross income.

2. For alien individuals employed by offshore banking units

established in the Philippines, their salaries, wages,
annuities, compensation, remuneration and other emoluments,
such as honoraria and allowances, from such offshore banking
units, shall be taxed at 15% of such gross income.

3. For alien individuals employed by a foreign service contractor

or by a foreign service subcontractor engaged in petroleum
operations in the Philippines, their salaries, wages,
annuities, compensation, remuneration and other emoluments,
such as honoraria and allowances, received from such
contractor or subcontractor shall be taxed at 15% of such
gross income.

Any other income earned from all sources within the Philippines by
the alien employees referred to above shall be subject to the
pertinent income tax, as the case may be, imposed under the Phil Tax
Code.