Situs of Income

The situs of the income refers to the place of taxation of the income or the
country which has jurisdiction to impose the tax on such income.

For income tax purposes, income may be taxed in one or more or all of the
following places or countries:
1. The place where the taxpayer is a citizen.
2. The place where the taxpayer is a resident.
3. The place where the income is earned or derived.

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 Situs of Income (cont.)

As an example, if a German residing in the United States received a

dividend from a Philippine corporation, such dividend may be taxed in
Germany (where he is a citizen, #1), or in the United States (where he is
resident, #2), or in the Philippines (where the income was earned or
derived, #3).

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 Double Taxation
To constitute double taxation, two or more taxes must be imposed:
1. on the same property or income.
2. by the same government.
3. during the same taxing period.
4. for the same purpose

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 Double Taxation (cont.)

When a company registered a profit, tax is imposed on the profit in the form
of income tax.
When the profit of the entity is distributed to its shareholders in the form of
dividends, its shareholders pay taxes on the dividends received.

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 Income Tax in the Philippines
• Income tax is either :
– gross income or net, realized during the taxable
year.
• Imposed on the net income of:
– citizens,
– resident aliens,
– domestic corporations
– non-resident aliens and
– foreign corporations engaged in trade or
business within the Philippines
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 Income Tax in the Philippines
The income tax system in the Philippines may be
categorized under two general categories:

1. GROSS INCOME A final tax is imposed on

TAXATION the gross amount of
specified types of income
(Example: interest income,
royalty, prizes, dividends,
and capital gains.
2. NET INCOME Certain deductions are
TAXATION allowed and subtracted
from the aggregate of
incomes not subject to final
tax.
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 Income Tax in the Philippines
(cont.)

• It is also imposed on the gross income of non-resident

aliens and foreign corporations not doing business in the
Philippines.

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 Types of Taxable Income

1. Ordinary Income

a) Compensation income Earned or arises out of an

employer-employee relationship.

b) Professional income Derived from professional

services like medical and legal
services.

c) Business income Obtained from profits in

engaging in trade or business.

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 Types of Taxable Income (cont.)

2. Passive Income Earned without any action on the

part of the taxpayer who merely
waits for the income to be
received or realized. (e.g.
Interest income)

3. Capital gains Gains from selling capital assets