THE CONCEPT OF INCOME

 Why is income subject to tax?

Income is regard as the best measure of taxpayers’ ability to pay tax. It is an

excellent object of taxation in the allocation of government costs.

 What is income for taxation purposes?

The tax concept of income is simply referred to as “gross income” under the NIRC.
A taxable item of income is referred to as an “item of gross income” or “inclusion
in gross income”.

Gross income simply means taxable income in layman’s term. Under the NIRC
however, the term “taxable income” refers to certain items of gross income less
deductions and personal exemptions allowable by law. Technically, gross income is
broader too pertain to any income that can be subjected to income tax.

Gross income is broadly defined as any inflow of wealth to the taxpayer from
whatever source, legal or illegal, that increases net worth. It includes income from
employment, trade, business or exercises of profession, income from properties, and
other sources such as dealings in properties and other regular or casual transactions.
ELEMENTS OF GROSS INCOME

1. It is a return on capital that increases net worth.

2. It is a realized benefit.
3. It is not exempted by law, contract or treaty.

RETURN ON CAPITAL

Capital means any wealth or property. Gross income is a return on wealth or

property that increases the taxpayer’s net worth.

Illustration
ABC purchase goods for P300 and sold them for P500. The P500 consideration
can be analyzed as follows:
Selling price (total consideration received) 500 Total return
Cost (value of inventory forgone) 300 Return of capital
Mark-up (gross income) ₱ 200 Return on capital

The return on capital that increases net worth is income subject to income tax.
Return of capital merely maintains net worth; hence, it is not taxable. An
improvement in net worth indicates ability to pay tax.
Capital items deemed with infinite value

There are capital items that have infinite value and

are incapable of pecuniary valuation. Anything
received as compensation for their loss is deemed a
return of capital.

Examples:
1. Life

2. Health

3. Human reputation
Life

The value of life is immeasurable by money. Under Sec. 32 of the NIRC, the
proceeds of life insurance policies paid to the heirs or beneficiaries upon
death of the insured, whether in a single sum or otherwise, are exempt from
income tax.

The proceeds of a life insurance contract collected by an employer as a

beneficiary from the life insurance of an officer or any person directly
interested with his trade are likewise exempt. These proceeds are viewed as
advances recovery of future loss.

However, the following are taxable return on capital from insurance policies:
a. Any excess amount received over premiums paid by the insured upon
surrender or maturity of the policy (i.e. the insured outlives the policy.)
b. Gain realized by the insured from the assignment or sale of his insurance
policy.
c. Interest income from the unpaid balance of the proceeds of the policy
d. Any excess of the proceeds received over the acquisition costs and
premium payments by an assignee of a life insurance policy.
Health

Any compensation received in consideration for the loss

of health such as compensation for personal injuries or
tortuous acts is deemed a return of capital.

Human Reputation

The value of one’s reputation cannot be measured

financially. Any indemnity received as compensation for
its impairment is deemed a return of capital exempt
from income tax.

Examples include moral damages received from:

a. Oral defamation or slander
b. Alienation of affection
c. Breach of promise to marry
Recovery of lost capital vs. Recovery of lost profits

The loss of capital results in decrease in net worth while the

loss of profits does not decrease net worth. The recovery of
lost capital merely maintains net worth while the recovery of
lost profits increases net worth. Therefore, the recovery of lost
profits is a return on capital.

Taxable recovery of lost profits

The recovery of lost profits through insurance, indemnity

contracts, or legal suits constitutes a taxable return on capital.

The following are taxable recoveries of lost profits:

a. Proceeds of crop or livestock insurance
b. Guarantee payments
c. Indemnity received from patent infringement suit
Illustration 1

Mang Tomas insured his strawberry crop in a P200,000 crop insurance coverage against calamities.
The crop was eventually destroyed by an unusual frost. Mang Tomas was paid the P200,000
insurance proceeds.

The P200,000 proceeds which is a reimbursement for the lost value of the future harvest, is an item of gross
income. The value of the lost crops is, in effect, realized not through actual harvest but through the insurance
contract.

Illustration 2

Mr. Santiago purchased a franchise. The franchisor guaranteed an annual franchise income of
P100,000 to Mr. Santiago. In the first year of operation, Mr. Santiago’s outlet only earned P60,000.
The franchisor paid the P40,000 difference to Mr. Santiago.

The P40,000 guarantee payment is not a gratuity but a recovery of lost profit for Mr. Santiago; hence,
subject to income tax Mr. Santiago shall report P100,000 as franchise income.

Illustration 3

Mindoro Inc. experienced an unusual decline in its income after a competitor copied its patented
invention. Mindoro sued the competitor for patent infringement and was awarded an indemnity of
P3,000,000.

The P3,000,000 indemnities are a compensation for the income not realized by Mindoro due to the patent
infringement. The same is an item of gross income.

The recovery of lost income or profits is not intended to compensate for the loss of capital. It is as good as
realization of income; hence, it is an item of gross income.
REALIZED BENEFIT

What is meant by realized benefit?

The “benefit” concept

The term “benefit” means any form of advantage derived by the taxpayer.
There is benefit when there is an increase in the net worth of the taxpayer.
An increase in net worth occurs when one receives income, donation or
inheritance.

The following are not benefits, hence, not taxable:

a. Receipt of a loan – properties increase but obligations also increase
resulting in an offsetting effect in net worth
b. Discovery of lost properties – under the law, the finder has an
obligation to return the same to the owner
c. Receipt of money or property to be held in trust for, or to be remitted
to, another person

If the taxpayer is entitled to keep for his account portion of a receipt, only
that portion is a benefit.
Illustration

1. An employee was granted P20,000 transportation

advance. He liquidated P18,000 transportation
expenses and was allowed by his employer to keep
the P2,000. Only the P2,000 retained by the employee
is considered income since this was the extent he was
benefited. (RR2-98)

2. A security agency receives P120,000 from clients,

P100,000 of which is for the salaries of security
guards. Under RMC 39-2007, only the P20,000
attributable to the agency is considered income of the
agency since it is the extent it is benefited. The
P100,000 pertaining to salaries of security guards is
recognized by the agency as a liability upon receipt.
The “realized” concept

The term realized means earned. It requires that there

is a degree of undertaking or sacrifice from the
taxpayer to be entitled of the benefit.

Requisites of a realized benefit:

1. There must be an exchange transaction.

2. The transaction involves another entity.

3. It increases the net worth of the recipient.

Types of Transfers

1. Bilateral transfers or exchanges, such as:

a. Sale
b. Barter

These are referred to as “onerous transactions”.

2. Unilateral transfers, such as:

a. Succession – transfer of property upon death
b. Donation

These are also referred to as “gratuitous transactions”.

Under current usage, unilateral transfers are simply referred to as “transfers” while
bilateral transfers are called “exchanges”. Benefits derived from onerous transactions are
“earned or realized”; hence, they are subject to income tax. Benefits derived from
gratuitous transactions are not realized because of the absence of an earning process.
Benefits derived from gratuitous transactions are subject to transfer tax, not income tax.
3. Complex transactions

Complex transactions are partly gratuitous and partly onerous. These are
commonly referred to as “transfers for less than full and adequate consideration”.
The gratuitous portion of the transaction is subject to transfer tax while the benefit
from the onerous portion is subject to income tax.

Illustration
A taxpayer sold his car which was previously purchased for P100,000 and with a
current fair value of P180,000 for only P130,000.

The transaction will be analyzed as follows:

Fair value ₱ 180,000
₱50,000 – subject to transfer tax
Selling price 130,000
₱30,000 – subject to income tax
Cost 100,000

The excess of fair value over selling price is a gratuity or gift whereas the excess
of the selling price over the cost is an item of gross income.
What is meant by another entity?

Every person, natural or juridical, is an entity. Natural persons

are living persons while juridical persons are those created by
law such as partnerships and corporations. An entity may be a
taxable entity or an empty entity. A taxable item of gross
income arises from transactions which involve another natural
or juridical entity.

Gains or income derived between relatives, corporations, and

between a partner and the partnership are taxable since it is
made between separate entities. Likewise, the income between
affiliated companies such as between a holding parent
company and its subsidiaries and between sister companies are
taxable because each corporation is a separate entity. This
applies regardless of the underlying economic relationship.
Benefits in the absence of transfer

The increase in wealth of the taxpayer in the form of appreciation or increase in the value
of his properties or decrease in the value of his obligations in the absence of a sale or barter
transaction is not taxable.

These are referred to as unrealized gains or holding gains because they have not yet
materialized in an exchange transaction.

Examples of unrealized gains or holdings gains:

a. Increase in value of investments in equity or debt securities.
b. Increase in value of real properties held (revaluation increment)
c. Increase in value of foreign currencies held or receivable
d. Decrease in value of foreign currency denomination debt by virtue of favorable
fluctuation in exchange rates
e. Birth of animal offspring, accruals of fruits in an orchard or growth of farm
vegetables
f. Increase in value of land due to the discovery of mineral reserves

Rendering of services

The rendering of services for a consideration is an exchange but does not cause a loss of
capital. Hence, the entire consideration received from rendering of services such as
compensation income or service fees is an item of gross income.
Illustration

Mr. Saladin lists the following possible items of gross income:

Compensation income ₱ 200,000
Winning from gambling 100,000
Increase in value of investments 50,000
Appreciation in the value of land owned 300,000
Debt of Saladin cancelled by creditors in consideration
for services he rendered to them 150,000
Debt of Saladin cancelled by his creditor out of affection 250,000
Loan received from a bank 400,000

The items of gross income are:

Compensation income ₱ 200,000

Winning from gambling 100,000
Debt of Saladin forgiven in consideration
for services rendered to his creditors 150,000

Note:
1. Gains from gambling and the forgiveness of debt in consideration of services or properties received are
realized gains from exchanges.
2. The forgiveness of debt out of affection or mere generosity of the creditor is a gratuitous transfer subject to
transfer tax.
3. The loan received from a bank constitutes a transfer but is not a benefit.
Basis of Exemption of Unrealized Income

Normally, taxpayers will have the ability to pay tax when

their income materializes in an exchange transaction since
tax is generally payable in money.

This does not mean, however, that only income realize in

cash is subject to tax. Income realized in non-cash
properties are, in effect, received in cash but the taxpayer
used the same to acquire the non-cash property. Income
received in non-cash considerations is taxable at the fair
value of the property received. Moreover, exempting
income realized in non-cash considerations would open a
wide avenue for tax evasion since taxpayers can easily
divert their income in the form of non-cash consideration.
Mode of Receipt/Realization Benefits

Taxable items of income may be realized by the taxpayer in two ways:

1. Actual receipt
Actual receipt involves actual physical taking of the income in the form
of cash or property.

2. Constructive receipt
Constructive receipt involves no actual physical taking of the income
but the taxpayer is effectively benefited.

Examples:
a. Offset of debt of the taxpayer in consideration for the sale of goods or
service
b. Deposit of the income to the taxpayer’s checking account
c. Matured detachable interest coupons on coupon bonds not yet encashed
by the taxpayer
d. Increase in the capital of a partner from the partner from the profit of the
partnership
Inflow of wealth without increase in net worth

The inflow of wealth to a person that does not increase his

net worth is not income due to the total absence of benefit.

Examples:
a. Receipt of property in trust
b. Borrowing of money under an obligation to return

In law, the proceeds of embezzlement or swindling where

money is taken without an original intention to return are
considered as income because of the increase in net worth
of the swindler.
NOT EXEMPTED BY LAW, CONTRACT, OR TREATY

An item of gross income is not exempted by the Constitution, Law,

Contracts or Treaties from taxation.

The following items of income are exempted by the law from taxation;
hence, they are not considered items of gross income:

1. Income of qualified employee trust fund

2. Revenues of non-profit non-stock educational institutions
3. SSS, GSIS, Pag-ibig, or PhilHealth benefits
4. Salaries and wages of minimum wage earners and qualified senior
citizen
5. Regular income of Barangay Micro-Business Enterprises
(BMBEs)
6. Income of foreign governments and foreign government-owned
and controlled corporations
7. Income of international missions and organizations with income
tax immunity.
TYPES OF INCOME TAXPAYERS

A. Individuals

1. Citizen
a. Resident citizen
b. Non-resident citizen

2. Alien
a. Resident alien
b. Non-resident alien
i. Engaged in trade or business
ii. Not engaged in trade or business

3. Taxable estates and trusts

B. Corporations

1. Domestic corporation
2. Foreign corporation
a. Resident foreign corporation
b. Non-resident foreign corporation
INDIVIDUAL INCOME TAXPAYERS

Citizens
Under the Constitution, citizens are:
a. Those who are citizens of the Philippines at the time of
adoption of the Constitution on February 2, 1987
b. Those whose fathers or mothers are citizens of the
Philippines
c. Those born before January 17, 1973 of Filipino
mothers who elected Filipino citizen upon reaching the
age of majority
d. Those who are not naturalized in accordance with the
law
Classification of citizens:

A. Resident citizen – A Filipino citizen residing in the Philippines

B. Non-resident citizen includes:

1. A citizen of the Philippines who establishes to the satisfaction of the
Commissioner the fact of his physical presence abroad with a definite
intention to reside therein;
2. A citizen of the Philippines who leaves the Philippines during the taxable
year to reside abroad, either as an immigrant or for an employment on a
permanent basis;
3. A citizen of the Philippines who works a derives income from abroad and
whose employment thereat requires him to be physically present abroad most
of the time during the taxable year;
4. A citizen who has been previously considered as non-resident citizen and
who arrives in the Philippines at anytime during the taxable year to reside
permanently in the Philippines shall likewise to be treated as a non-resident
citizen for the taxable year in which he arrives in the Philippines with respect
to his income derived from sources abroad until the date of his arrival in the
Philippines.

Filipinos working in the Philippines embassies or Philippine consulate offices are

considered non-resident citizens.
Alien

A. Resident alien – an individual who is residing in the Philippines but is not citizen
thereof, such as:

1. An alien who lives in the Philippines without definite intention as to his stay; or
2. One who comes to the Philippines for a definite purpose which in its nature would
require an extended stay and to that end makes his home temporarily in the
Philippines, although it may be his intention at all times to return to his domicile
abroad;

An alien who has acquired residence in the Philippines retains his status as such until he
abandons the same or actually departs from the Philippines.

B. Non-residence alien – an individual who is not residing in the Philippines a who is

not a citizen thereof

1. Non-resident aliens engaged in business (NRA-ETB)- aliens who stay in the

Philippines for an aggregate period of more than 180 days during the year.
2. Non- resident aliens not engaged in business (NRA-NETB) include:
a. Aliens who come to the Philippines for a definite purpose which in nature
may be promptly accomplished;
b. Aliens who shall come to the Philippines and stay therein for aggregate
period of not more than 180 days during the year.
THE GENERAL CLASSIFICATION RULE FOR INDIVIDUALS

1. Intention

The intention of the taxpayer regarding the nature of his stay within or outside the
Philippines shall determine his appropriate residency classification. The taxpayer shall
submit to the CIR of the BIR documentary proofs such as visas, work contracts and
other documents indicating such intention.

Documents purporting short term stay such as tourist visa shall not result in the
reclassification of the taxpayer’s normal residency. Documents purporting a long-term
stay such as immigration visa or working visa for an extended period would result in
the automatic reclassification of the taxpayer’s residency.

Examples:
a. An alien is normally non-resident. An alien who come to the Philippines with a
tourist visa would still be classified as non-resident alien.
b. A citizen is normally resident. A citizen who would go abroad under a tourist
visa would still be considered a resident citizen.
c. An alien who come to the Philippines with an immigration visa would be
reclassified as a resident alien upon his arrival.
d. A citizen who would go abroad with two-year working visa would be reclassified
as a non-resident citizen upon his departure.
2. Length of stay

In default of such documentary proof, the length of stay of the

taxpayer is considered:
a. Citizens staying abroad for a period of at least 183 days are
considered non-resident.
b. Aliens who stayed in the Philippines for more than 1 year
as of the end of the taxable year are considered resident.
c. Aliens who are staying in the Philippines for not more than
1 year but more than 180 days are deemed non-resident
aliens engaged in business.
d. Aliens who stayed in the Philippines for not more than 180
days are considered non-resident aliens not engaged in
trade or business.
Illustration 1

Luiz Mario Aresmendi, a Mexican actor, was contracted by Philippine television company to do a
project in the Philippines. He arrived in the country on February 29, 2019 and returned to Mexico
three weeks later upon completion of the project.

Luiz Mario Aresmendi shall be classified as an NRA-NETB in 2019. His stay is for a definite purpose
which in its nature will be accomplished immediately.

Illustration 2

Mamoud Jibril, a Libyan national, arrived in the country on November 4, 2019. Mr. Jibril stayed in the
Philippines since then without any working visa or work permit.

For the year 2019, Mr. Jibril would be considered on NRA-NETB because he stayed in the Philippines
for less than 180 days as of December 31, 2019. If he is still within the Philippines until December 31,
2020, he will qualify as a resident alien for 2020.

Illustration 3

Without any definite intention as to the nature of his stay, Juan Masipag, a Filipino citizen, left the
Philippines and stayed abroad from March 15, 2019 to April 1, 2020 before returning to the
Philippines.

For the year 2019, Juan is a non-resident citizen because he us absent for more than 183 days but he
will be classified as resident citizen for the year 2020 because he is absent for less than 183 days in
2020.
Taxable Estates and Trusts

1. Estate

Estate refers to the properties, rights, and obligations of a deceased person not extinguished by his death.

Estates under judicial settlement are treated as individual taxpayers. The estate is taxable on the income of the
properties left by the decedent. Estates under extrajudicial settlement are exempt entities. The income of the
properties of the estate under extrajudicial settlement is taxable to the heirs.

2. Trust

A trust is an arrangement whereby one person (grantor or trustor) transfers (i.e. donates) property to another
person (beneficiary), which will be held under the management of a third party (trustee or fiduciary)

A trust that is irrevocably designated by the grantor is treated in taxation as if it is an individual taxpayer. The
income of the property held in trust is taxable to the trust. Trusts that are designated as revocable by the
grantor are not taxable entities and are not considered as individual taxpayers. The income of properties held
under revocable trusts is taxable to the grantor not to the trust.

When the trust agreement is silent as to revocability of the trust, the trust is presumed to be revocable.
CORPORATE INCOME TAXPAYERS

The term ‘corporation’ shall include partnerships, no matter how

created or organized, joint-stock companies, joint accounts,
association, or insurance companies, except general professional
partnerships and a joint venture or consortium formed for the purpose
of undertaking construction projects or engaging in petroleum, coal,
geothermal, and other energy operations pursuant to an operating
consortium agreement under a service contract with the government.

Hence, the term corporation includes profit-oriented and non-profit

institutions such as charitable institutions, cooperatives, government
agencies and instrumentabilities, associations, leagues, civic or
religious and other organizations.

Domestic Corporation

A domestic corporation is a corporation that is organized in accordance

with Philippine laws.
Foreign Corporation

A foreign corporation is one organized under a foreign law.

Types of foreign corporations:

1. Resident foreign corporation (RFC) – a foreign corporation which operates and

conduct business in the Philippines through a permanent establishment (i.e. a
branch).
2. Non-resident foreign corporation (NFRC) – a foreign corporation which does not
operate or conduct business in the Philippines.

Note:
1. A corporation that incorporates in the Philippines is a domestic corporation under the
Incorporation Test even if the same is controlled by foreigners.
2. A foreign corporation that transacts business with residents through a resident branch
is taxable on such transaction as a resident foreign corporation through its branch.
However, if it transacts directly to residents outside its branch, it is taxable as a non-
resident foreign corporation on the direct transactions.

Special Corporations

Special corporations are domestic or foreign corporations which are subject to special tax
rules or preferential tax rates.
OTHER CORPORATE TAXPAYERS

1. Partnership

A partnership is a business organization owned by two or more

persons who contribute their industry or resources to a common
fund for the purpose of dividing the profits from the venture.

Types of Partnership
a. General professional partnership (GPP)
A GPP is a partnership formed for the exercise of a common profession. All
partners must belong to the same profession.

A GPP is not treated as a corporation and is not a taxable entity. It is exempt

from income tax, but the partners are taxable in their individual capacity with
respect to their share in the income of the partnership.

b. Business partnership
A business partnership is one formed for profit. It taxable as a corporation.
2. Joint Venture
A joint is a business undertaking for a particular purpose. It may be
organized as a partnership or a corporation.

Types of joint ventures

a. Exempt joint ventures
Exempt joint ventures are those formed for the purpose of undertaking
construction projects or engaging in petroleum, coal, geothermal and others
energy operations pursuant to an operating consortium agreement under a
service contract with the Government.

Similar to a GDP, this type of joint venture is not treated as a corporation

and is tax –exempt on its regular income, but their ventures are taxable their
share in the net income of the joint venture.

b. Taxable joint ventures

All other joint ventures are taxable as corporations.
3. Co-ownership

A co-ownership is joint ownership of a property formed for the

purpose preserving the same and / or dividing its income.

A co- ownership that is limited to property preservation or

income collections is not a taxable entity and is exempt but the
co-owners are taxable on the share on the income of the co-
owned property.

However, a co-ownership that reinvests the income of the co-

owned property to other income-producing properties or
ventures will be considered an unregistered partnership taxable
as a corporation.
The General Rules in Income Taxation
Taxable on Income Earned

Individual taxpayers Within Without

Resident citizen  

Non-resident citizen 

Resident alien 

Non-resident alien 

Corporate taxpayers

Domestic corporation  

Resident foreign

corporation

Non-resident foreign

corporation
The issue of international double taxation

The rule on extraterritorial taxation on

resident citizens and domestic corporations
exposes these taxpayers to double taxation.
However, the NIRC allows a tax credit for
taxes paid in foreign countries. In fact,
resident’s citizen and domestic corporations
pay minimal taxes in the Philippines on their
foreign income because of the tax credit.
Situs of Income

The situs of income is the place of taxation of income. It is the

jurisdiction that has the authority to impose tax upon the
income.

Situs of income vs. Source of income

Situs of income should be differentiated from the source of

income. The latter pertains to the activity or property that
produces the income.

Situs is important in determining whether or not an income is

taxable in the Philippines. Situs is particularly important to
taxpayers taxable only on income within. However, it is also
important to taxpayers taxable on global income for purposes
of the computation of the foreign tax credit.
Income Situs Rules

Place of taxation
Types of income
(situs)
Interest income Debtor’s residence

Where the intangible is

Royalties
employed

Location of the
Rent income
property

Place where the

Service income
service is rendered
Illustration

A taxpayer had the following income:

Interest income from deposits in a foreign bank ₱ 300,000

Interest from domestic bonds 50,000
Royalties from books published in the Philippines 100,000
Rent income from properties abroad (the lease
contracts were executed in the Phils.) 150,000
Professional fees for services rendered in the Philippines
to non-resident clients (paid in US Dollars) 400,000

Applying the situs rules, the following are the situs of the aforementioned income:

Within Without World total

Interest on foreign deposits - ₱300,000 ₱300,000
Interest from domestic bonds 50,000 - 50,000
Royalties from books in the Phils. 100,000 - 100,000
Rent income on foreign properties - 150,000 150,000
Professional fees 400,000 -___ 400,000
Total ₱ 550,000 ₱ 450,000 ₱1,000,000
Other Income Tax Situs Rules

A. Gain on sale of properties

1. Personal property
✓ Domestic securities – presumed earned within
the Philippines
✓ Other personal properties – earned in the place
where the property is sold
2. Real property – earned where the property is
located
B. Dividend income from:
1. Domestic corporation – presumed earned within
2. Foreign corporation
a. Resident foreign corporation – depends on the pre-
dominance test

The pre-dominance test

If the ratio of the Philippine gross income over the world gross income of
the resident foreign corporation in the three-year period preceding the year
of dividend declaration is:
✓ At least 50%, the portion of the dividend corresponding to the
Philippine gross income ratio is earned within
✓ Less than 50%, the entire dividends received is earned abroad

b. Non-resident foreign corporation – earned abroad

Illustration
In 2019, Sarah received a ₱400,000 dividend income from ABC Corporation.
ABC Corporation had the following gross income in 2016 through 2018:

2016 2017 2018 Total

Philippines ₱ 100,000 ₱ 200,000 ₱ 300,000 ₱ 600,000
Abroad 200,000 100,000 100,000 400,000
Total ₱ 300,000 ₱ 300,000 ₱ 400,000 ₱ 1,000,000

If ABC Corporation is a:
1. Domestic corporation – the entire ₱400,000 is earned within
2. Non-resident foreign corporation – the entire ₱400,000 is earned abroad
3. Resident foreign corporation – the ₱400,000 dividend shall be split

Gross income ratio = ₱600,000/₱1,000,000 = 60%

Earned within the Philippines (60% x ₱400,000) ₱ 240,000

Earned without the Philippines (40% x ₱400,000) 160,000
Total dividends ₱ 400,000
C. Merchandising income – earned where the property is
sold

D. Manufacturing income – earned where the goods are

manufactured and sold
Operations Remark
Production Distribution
Total income from production and
Within Within distribution is earned in the Philippines
Total income from production and
Without Without distribution is earned without the Philippines
Production income is earned within,
Within Without distribution income is earned without
Distribution income is earned within,
Without Within production income is earned without