What did you learn?

Citizenship is a relationship between an individual owes allegiance and in turn is entitled to its
protection. Here in the Philippines there are people who are classified as Philippine citizens according to
the 1987 Philippine constitution, Article IV, Section 1. It was stated who are consider a citizen in the
Philippines: those who are citizens during the adoption of this constitution, whose mothers or fathers
are citizens of the Philippines, those who are born before January 17, 1973 and whose mother is a
citizen of the Philippines and who elect Philippine citizenship upon reaching the age of majority, and
those who are naturalized in accordance with law these are foreigner who converted as citizen of the
Philippine.

There are four classifications of individuals; resident citizens, these are Filipino’s who live in the
Philippines permanently; non-resident citizen, these are Filipino’s who works and derives income from
abroad and whose employment requires them to be physically present abroad “most of the time”
means you work abroad at least 183 days during the taxable year. When you are in abroad within 183
days as an employee or immigrant you are consider as non-resident citizen. Resident alien, these are
foreigners who choose to live in the Philippines permanently. And non-resident alien, are foreigners
who visit or live in the Philippines for business purposes is called non-resident alien engage in trade and
business but those foreigners who doesn’t engaged any business in the Philippines is called as non-
resident alien not engaged.

The tax basis on the four classifications of individuals: resident citizen, tax is based on their net
income, non-resident citizen, resident alien, and non-resident alien that engage business and trade their
tax basis on their net income their income within the Philippines. Non-resident alien not engage tax
basis on gross income within the Philippines to get their tax that is automatically x 25%.

Chapter 2: Taxation of Individuals

Objectives:

- Identify the individual income taxpayers

- Define the individual taxpayers and the related terms used.
- Illustrate the different classification of individual taxpayers
- State the sources of income of individual taxpayers
- Recognize the categories of income and state the final tax rates to be used by each type of
individual taxpayer
- List the sources of passive income and state the final tax rates to be used by each type of
individual taxpayer
- Discuss the treatment of passive income in the computation of a taxable income from
compensation or business/professional income
- Define the allowable deductions from gross income
 - Define and compute taxable income and tax due for each type of individual taxpayer depending
on income category
- Be familiar with individual taxpayers exempt from income tax.

Classification of Individual Income Taxpayers

 Citizen
 Residents citizen
 Non-resident citizen
 Resident alien
 Non-resident alien
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