CLASSIFICATION OF TAXPAYER

1. Individual Taxpayer 2. Corporate Taxpayer

a) Resident Citizen a) Domestic Corporations
b) Non-Resident Citizen b) Resident Corporations
c) Resident Alien c) Non-Resident
Corporations
d) Non-Resident Alien
i. Engaged in trade or
d) One Person Corporation
business in the Philippines (OPC) – under CREATE Law
ii. Not engaged in trade or e) Partnerships (Except General
business in the Philippines Prof. Partnerships)
Individual Tax Payers
These are natural persons with income derived
within the territorial jurisdiction of a taxing
authority.
CITIZENSHIP The following shall be considered citizens of the
Philippines:
• Those who are citizens of the Philippines at the time of
the adoption of the February 2, 1987 Constitution.
• Those whose fathers or mothers are citizens of the
Philippines
• Those born before January 17, 1973, the date of the
adoption of the 1973 Constitution, of Filipino Mothers,
who elect Philippine Citizenship upon reaching the age
of majority
• Those who are naturalized in accordance with law.

RESIDENT Is a Citizen who permanently resides in the

CITIZEN Philippines
 • A Citizen of the Philippines who establishes to the
NON-RESIDENT satisfaction of the Commissioner the fact of his physical
CITIZEN presence abroad with a definite intention to reside
therein.
• A Citizen of the Philippines who leaves the Philippines
during the taxable year to reside abroad, either as
immigrant or for employment on a permanent basis.
• A Citizen of the Philippines who has been previously
considered as non-resident citizen and who arrives in the
Philippines at any point of time during the taxable year to
reside permanently in the Philippines shall likewise 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.
RESIDENT ALIEN
An individual whose
residence is within the
Philippines and who is
not a citizen thereof. An
alien is considered a NON-RESIDENT ALIEN
resident or non-resident
NON-RESIDENT ALIEN ENGAGED IN TRADE OR
depending on his BUSINESS (NRAETB) – Is an alien that resides
intention with regard to outside the Philippines but is carrying on a
the length and nature of business in the Philippines. A nonresident alien
his stay. who has stayed in the Philippines for more than
180 days during any calendar year shall be
deemed doing business in the Philippines,
otherwise, he is considered as not doing business
in the Philippines
SITUS OF TAXATION FOR INCOME TAX
SOURCES OF INCOME SITUS
LABOR Place where labor is employed
RETURN ON CAPITAL/INVESTMENT Place where capital is employed
INCOME FROM SALE OR EXCHANGE OF Place where the sale or transaction
CAPITAL occurs
Sources of Income
Individual Taxpayer Sources of Income
Within Ph Outside Ph

Resident Citizen Taxable Taxable

Non-Resident Citizen Taxable Not Taxable

Resident Alien Taxable Not Taxable

Non-Resident Alien Taxable Not Taxable

 CLASSIFICATION OF TAXPAYER
1. Individual Taxpayer 2. Corporate Taxpayer
a) Resident Citizen a) Domestic Corporations
b) Non-Resident Citizen b) Resident Corporations
c) Resident Alien c) Non-Resident
Corporations
d) Non-Resident Alien
i. Engaged in trade or
d) One Person Corporation
business in the Philippines (OPC) – under CREATE Law
ii. Not engaged in trade or e) Partnerships (Except General
business in the Philippines Prof. Partnerships)
Non-Individual Taxpayers
A Corporation is an artificial being created by
operation of law, having the right of succession and
the powers, attributes, and properties expressly
authorized by law or incidental to its existence. (Sec.
2 RA 112321 “Revised Corporation Code of the
Philippines”.
Corporation does not include:
1. General Professional Partnership
2. Joint Venture or Consortium for engaging in
petroleum, coal, geothermal and other energy
operations pursuant to an operating or
consortium agreement under a service contract
with Government.
Domestic Corporation
These are entities organized and constituted under
the Corporation Code of the Philippines.
Two Kinds of Domestic Corporation:
1. Ordinary Corporation – Corporation with several stockholders
2. One Person Corporation (OPC) - Under CREATE LAW,
corporation with one stockholder-owner only.
Domestic Corporation
Domestic Corporation are subject to any or some of:
1. Capital Gains Tax
2. Final Tax on passive income
3. Regular Tax
4. Minimum Corporate Income Tax (MCIT)
Foreign Corporation
Is a corporation organized and existing under the laws of
foreign country irrespective of the nationality of its
stockholders. Whether resident or non-resident, are
taxable only on income from Philippine sources.
Resident Foreign Corporation – refers to a foreign
corporation that is engaged in business or trade in the
Philippines. Generally, it is establishes a branch or an
office for the purpose of doing business or trade.
Non Resident Foreign Corporation – FC not doing business
in the Philippines
One Person Corporation (OPC)
is composed of a single stockholder who can only be a
natural person, trust or estate. Its term of existence is
perpetual but in case of a trust or estate, the term shall
be co-terminous with the existence of the trust or estate.

Who can form an OPC in the Philippines?

• Natural Person of legal age (local or foreign)
• A trust - the subject being managed by a trustee.
• As estate
One Person Corporation (OPC)
Who can not form an OPC in the Philippines?
• Natural persons licensed to exercise a profession (if
the OPC is to operate in this profession)
• Public and publicly-listed companies
• Pre-need, trust, and insurance companies
• Banks, non-bank financial institutions, and quasi-banks
• Non-chartered Government-Owned and Controlled
Corporations (GOCCs)
One Person Corporation (OPC)
Benefits in form an OPC
• Limited liability (only the legal entity of the company is liable for its
debts, rather than the director as a person)
• Perpetual existence (despite bankruptcy, transfer of shares, change
of director, etc.)
• Complete control of the business (more like a sole proprietorship
rather than a traditional corporation with a board of directors)
• No minimum capital requirements (unless stated by law)
• An existing corporation can restructure as an OPC (if a single
stockholder acquires all shares of the company)
One Person Corporation (OPC)
Disadvantages of an OPC
• More complex than a sole proprietorship (due to more administration
requirements)
• Some limitations on foreign ownership (a foreigner cannot
incorporate an OPC in an industry included on the Foreign
Investments Negative List)
• Tax obligations are subjective on a case-to-case basis (most sole
proprietorships only pay 8% income tax, while the corporate income
tax rate is 30% — however, there are many more tax benefits that
come with a corporation)
One Person Corporation (OPC)
What Documents Are Required to Register an OPC in the Philippines?
• Articles of Incorporation, including:
Names and details of the single stockholder
Primary purpose
Term of existence
Principal office address
Nominee and alternate nominee
The authorized, subscribed, and paid-up capital
Other matters that are consistent with the law and may be necessary and convenient
• Consent in writing from the Nominee and Alternate Nominee
• Other requirements (if applicable by case)
Foreign Investments Act (FIA) Application Form (for use by foreign natural persons)
Authority to Act on Behalf of the Estate or Trust (for use by estates and trusts as an OPC)
Affidavit of Undertaking to Change Company Name (in the case this is not included in the Articles of
Incorporation)
Tax Identification Number (TIN) for a Filipino citizen director
Passport Number or Tax Identification Number (TIN) for a foreign director
Partnerships other than GPP
These are partnership formed by two or more individual to
perform ordinary business transactions (except practice of
profession). These partnership were registered to the Securities
and Exchange Commission same with Corporations.

The partnership is subject to the rules on corporations and it is

subject to:
1.Capital Gains Tax
2.Final Tax on passive income
3.Normal Tax
4.Minimum Corporate Income Tax
General Professional Partnership (GPP)
It is performed for the purpose of practicing of a common
profession, no part of the net income of which is derived from
engaging in any trade or business.
TAX IDENTIFICATION NUMBER
is a nine-digit number assigned by the BIR (plus a
three-digit branch code, if applicable) to individual
and corporate taxpayers for identification, tracking,
and record-keeping purposes.
Next Topic:
Tax on Individual Taxpayers