TAXATION OF INDIVIDUALS

INDIVIDUAL TAXPAYERS
 Are natural persons with income derived within the
territorial jurisdiction of a taxing authority.
CLASSIFICATION
1. Citizen
a. Resident – is a Filipino Citizen who stayed
permanently in the Philippines or stayed outside the
Philippines for less than 183 days during the taxable year.

b. Non resident –Filipino citizen who stayed outside the

Philippines for 183 days or more during the taxable year.
2. Alien
a. Resident – are persons who are not citizen of the Philippines but are
residing within the Philippines
b. Non-resident – are foreign individuals whose residences are not within
the Philippines
b.1 Engaged in trade or business in the Philippines – who stayed
within the Philippines for more than 180 days during the taxable year.
b.2 Not engaged in trade or business in the Philippines – who have
stayed within the Philippines for only 180 days or less.
SOURCES OF INCOME
 Resident citizens – are taxable on all income derived
from sources within and without the Philippines.
 Non resident citizens and alien individuals – are taxable
only on income derived from sources within the
Philippines.
SPECIAL TAXPAYERS
 Are those alien individuals or Filipino Citizens who are
taxed with a fifteen percent (15%) rate based on their
gross compensation income when the following
conditions are met:
1. They are employed occupying managerial and or
technical positions with regional or area headquarters of
multi national corporations.
2. If the special taxpayer is an alien, all of his gross
compensation income received is subject to 15% final tax.

3. If the taxable is a Filipino citizen, he has the option to be

taxed at 15% final tax.
CATEGORIES OF INCOME AND TAX
RATES
 Compensation Income
 Business Income

 Passive Income

 Capital gains from sale of stocks, not traded through

local stock exchange.
 Capital gains from sale of real property

 Fringe benefits
ALLOWABLE DEDUCTIONS
 Are items or amounts, which the law allows to be
deducted from gross income in order to arrive at the
taxable income.
 From compensation income
 Basicpersonal and/ or additional exemptions
 Premium payments on health and/or hospitalization insurance
 From business Income
 Basic personal and/or additional exemptions
 Premium payments on health and/or hospitalization insurance
 Itemized deductions
 Optional standard deductions.
 Optional standard deduction.
 Inplace of the itemized deductions, the individual taxpayer
may opt for the optional standard deduction (OSD) not to
exceed 40% of his gross sales or gross receipts, as the case
maybe.
PERSONAL EXEMPTIONS
 Are arbitrary amounts allowed as deductions from gross
income of the individual taxpayer from compensation,
business or practice of profession.
 Represent the personal, living or family expenses of the
taxpayer.
KINDS OF PERSONAL EXEMPTIONS
 Basic personal exemption
 Additional exemption
BASIC PERSONAL EXEMPTION
 Amounting to FIFTY THOUSAND PESOS
(Php50,000.00) for each individual taxpayer regardless
of status.
ADDITIONAL EXEMPTION
 An individual, whether single or married, shall be
allowed an additional exemption of TWENTY FIVE
THOUSAND PESOS (P25,000.00) for each dependent
child not exceeding four (4) children.
INDIVIDUAL TAXPAYERS ALLOWED
PERSONAL EXEMPTIONS
 Citizens
 Resident alien

 Non-resident alien

 Estate and trusts

PREMIUM PAYMENTS ON HEALTH
INSURANCE
 The following conditions must be met:
 The insurance shall be taken by the individual taxpayer
himself for his family
 The amount being claimed shall not exceed P2,400 a year
 The family has gross income of 250,000 or less for the
taxable year.
TAXABLE INCOME AND TAX DUE
 Net Compensation income.
 For resident citizen and resident alien earning purely compensation
income:
Gross compensation income xx
Less: Exemption:
Basic xx
Additional xx
Prem. Payments xx xx
Net compensation income xx
2. Gross compensation income. Derived by aliens
including Filipinos employed by regional and area
headquarters and regional operating headquarters of
multinational companies.
For non-resident alien employed by such firms:
Gross compensation income xx
Multiply by tax rate 15%
Tax due xx
3. Net Income
For citizen, resident alien and non-resident alien engaged in
trade or business in the Phil.
a. Earning purely business or professional income:
Gross business income xx
Less: Itemized (OSD) xx
Basic personal exemption xx
Additional exemption xx
Prem. Payments xx xx
Net Income xx
b. Earning both business/prof. and compensation income
Gross business income xx
Gross compensation income xx
xx
Less: Itemized (OSD) xx
Basic Personal exemption xx
Additional xx
Prem. Payments xx
xx
Net Income xx
BASIC GUIDELINES ON CHANGE OF
FILING STATUS
 If the taxpayer has an additional dependent during the taxable
year, he/she may claim the corresponding additional
exemption in full for such year
 If the taxpayer dies during the taxable year, his/her estate may
still claim the personal and additional exemption for
himself/herself and his/her dependent or dependents as if
he/she died at the close of such year.
 If the spouse or any of the dependents dies or if any of such
dependents marries, reaches 21 years old or becomes gainfully
employed during the taxable year, the taxpayer may still claim
the same exemption as if the spouse or any of the dependents
died, or as if such dependents had married, reached 21 years
old, or became gainfully employed at the close of such year.