1. An income tax is one levied on the income from property or an occupation.

It is a direct tax upon the thing called

income.
Income means all wealth which flows into the taxpayer other than a mere return of capital.
Income is a gain derived from:
a) The use or employment of labor or capital, or both labor and capital; and/or
b) From the sale or other disposition of assets or property (both ordinary and capital 0.2
2. Purpose of Income Tax
The imposition of the income tax is intended:
1. To raise revenue to defray the expenses of the government; and
2. To mitigate the evils arising from the inequalities of wealth by a progressive scheme of taxation which
places the burden on those best able to pay.
3. Characteristics of Philippine Income Tax
Philippine income tax has the following characteristics:
1. A national tax - It is imposed and collected by the National Government throughout the country.
2. A general tax - It is levied without a specific or predetermined purpose. Thus, the revenue from income tax
may be appropriated for general public purposes
3. An excise tax - It is imposed on the right or privilege of a person to receive or earn income.
4. A direct tax - It is payable by the person upon whom it is directly imposed by law. It cannot be shifted or
passed on to others.
5. In general, a progressive tax for individual taxpayers - It is based upon one's ability to pay. The higher the
taxable net income of the individual, the higher the marginal tax rate.
6. The income tax system is a comprehensive system. - It adopts the citizen principle, the residence principle,
and the source principle.
7. Semi-global or semi-schedular system - Some types of taxable income are compounded or grouped together
without distinction, and after deducting expenses and other allowable deductions therefrom, are then subjected
to the same set of tax rate(s). This is known as the global tax system (or net income tax system). However,
there are some types of taxable income like passive income and certain capital gains which are classified into
different categories, and are accorded different tax treatments. Each category of income has its own schedule of
tax rates. This is known as the schedular tax system (or gross income tax system).
4. Requisites of Taxability of Income
1. There must be a gain or profit whether in cash or its equivalent;
2. The gain must be realized or received; and
3. The gain must not be excluded by law or international treaty from taxation.
5. How to Determine Income Within and Income Without
Income Test Source of Income
a) Interest Income
b) Income from services
c) Rent
d) Royalty
e) Gain on sale of real property

6. General Categories of Individual Taxpayers

Definition
1. Under Sec. 1, Art IV of the 1987 Constitution, the following are citizens of the
Philippines:
(1) Those who are citizens at the time of the adoption of the 1987
Constitution; or
(2) Those whose fathers and mothers are citizens; or
(3) Those born before January 17, 1973 of Filipino mothers, and who elect
Philippine citizenship upon reaching majority age; or
(4) Those who are naturalized in accordance with law.
AND
Whose residence is within the Philippines
2. a. Citizen who establishes the fact of his physical presence abroad with a
definite intention to reside therein;
b. Citizen who leaves for abroad either as an immigrant, or for employment on
a permanent basis;
c. Citizen who derives income from abroad which requires him to be physically
present abroad most of the time (≥ 183 days) during the year (Sec. 22(E))

3. 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 (Sec. 22(F))
 4. Not a citizen but whose residence is within the Philippines.
- His purpose in coming to the Philippines requires an extended stay in the
country, and makes his home temporarily in the Philippines (ex.
expatriates or those employed in the Philippines).
- Not a mere transient or sojourner as determined by his intention
regarding the nature and length of stay.
5. Not a citizen, not a resident of the Philippines

a)
- If stay in the Philippines is for > 180 days during the year

b) - If stay in the Philippines is for ≤ 180 days during the year (Sec. 25(A)(1))
6. 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) Alien individual employed by offshore gaming licensees or their service
providers
d) Qualified individuals availing of the Income Tax Holiday under special laws or
under Section 294 of the Tax Code
e) Qualified individuals availing of the 5% gross income tax (GIT)
incentive under special laws or under Section 294 of the Tax Code
f) Individual registered as a BMBE

7. Worker, whether in the public or private sector, who is paid not more than the
statutory minimum wage (Sec. 22 (HH)).
a.