i. Criteria in Imposing Income Tax

c. Criteria in imposing Philippine Income Tax

• Citizenship – A citizen taxpayer is subject to income tax: (a) on his worldwide income if he resides in the Philippines; or (b) only on his income from sources within the Philippines, if he qualifies as a non-resident citizen.
• Residence – A resident alien is liable to pay income tax on his income from sources within the Philippines but exempt from tax on his income from sources outside the Philippines.
• Source – A non-resident alien could be subject to Philippine income tax if he derives income from sources within the Philippines such as dividend, interest, rent or royalty.

d. General principles of income taxation

Except when otherwise provided in this Code: (NIRC, Sec. 23)¹

• A citizen of the Philippines residing therein is taxable on all income derived from sources within and without the Philippines;
• A non-resident citizen is taxable only on income derived from sources within the Philippines;
• An individual citizen of the Philippines who is working and deriving income from abroad as an overseas contract worker (OCW) is taxable only on income derived from sources within the Philippines: Provided, That a seaman who is a citizen of the Philippines and who receives compensation for services rendered abroad as a member of the complement of a vessel engaged exclusively in international trade shall be treated as an overseas contract worker;
• An alien individual, whether a resident or not of the Philippines, is taxable only on income derived from sources within the Philippines;
• A domestic corporation is taxable on all income derived from sources within and without the Philippines; and
• A foreign corporation, whether engaged or not in trade or business in the Philippines, is taxable only on income derived from sources within the Philippines.