3 Introduction To Income Taxation

CSTC COLLEGE OF SCIENCES TECHNOLOGY AND COMMUNICATION, INC.
CSTC College Bldg. Gen. Luna St. Maharlika Hi-way, Pob. 3, Arellano Sub. Sariaya Province of Quezon R4A
Registrar’s Office: 042 3290850 / 042 7192818 | CSTC IT Center: 042 7192805 | Atimonan Contact Number: 042 7171420
SCHOOL OF BUSINESS AND ACCOUNTANCY

INSTRUCTIONAL MODULE IN
TAX 101A: INCOME TAXATION
PRELIMINARIES
Lesson No.: 3
Lesson Title: Introduction to Income Taxation
Objectives: At the end of this lesson, the students are expected to:
1. Understand the concept of gross income.
2. Identify the types of income taxpayers.
3. Determine the general rules of income taxation.
4. Understand the income tax situs rules.
INRODUCTION TO INCOME TAXATION

Income
Income, for tax purposes, is simply referred to as “gross income”. Gross income means all income derived
from whatever source, legal or illegal, that increases the net worth of a taxpayer. This is the best measure
of one’s ability to pay taxes, and for that reason, it is the best object of taxation.
Income means all wealth which flows into the taxpayer, other than return of capital. It imports something
distinct from principal or capital. On the other hand, capital constitutes the investment which is the source
of income. Therefore, capital is fund while income is the flow. Capital is wealth, while income is the service
of wealth. Capital is the tree while income is the fruit (Vincente Madrigal et. al. v. James Rafferty, 38 Phil.
414)
Elements of Gross Income

1. It is a return on capital that increases net worth.
Gross income is a return on capital because it increases the net worth of the taxpayer. And an
increase in net worth means an improvement in the ability to pay tax, thus, it is subject to income
tax. However, there are capital items that are deemed infinite in terms of value, making it incapable
of a pecuniary valuation. Because of this, anything received as compensation for their loss is
deemed a return of capital. Examples of these are:
A. Life
Under section 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 in his trade are also exempt. These
proceeds are viewed as advanced 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.
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.
B. 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.
C. 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.
Recovery of Lost Capital vs. Recovery of Lost Profits

The loss of capital results in a 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 making it taxable.
For example:
A farmer insured his crops for P200,000 coverage against calamities. Eventually, the crops
were destroyed by a storm and the farmer was paid P200,000 by the insurance company. The
payment of P200,000 received by the farmer constitutes reimbursement for the lost value of
the crops which will be realized when the crops are harvested and sold to the market. Thus, the
payment received by the farmer is considered as a recovery of lost profits.
2. It is a realized benefit.
An increase in the net worth indicates that the taxpayer has realized benefits. This happens when a
taxpayer receives income, donation or inheritance.
The term realized means earned. It requires that there is a degree of undertaking or sacrifice from
the taxpayer to be entitled to the benefit. A benefit is realized if:
a. There’s an exchange transaction.
b. It involves a transaction with another party.
c. It increases the net worth of the recipient.
Types of Transfers
a. Onerous Transfer – Transfer where a burden is imposed on both parties involved. These
transfers are simply referred to as “exchanges”. The most common examples of this type of
transfer are sale and barter.
b. Gratuitous Transfer – This is a transfer that neither imposes burden nor requires
consideration from the transferees or recipient. This is simply referred to as “transfers”.
c. Complex Transaction – this is partly onerous and partly gratuitous. This is commonly
referred to as “transfer for less than full and adequate consideration”. This happens when the
fair value of the property transferred is greater than the selling price or the consideration
received by the transferor.
Concept of “Another Entity”

Every person constitutes an entity. There are two types of persons: (1) Natural and (2) Juridical.
Natural persons are those who are naturally born as persons, humans. Juridical persons, on the
other hand, are persons created by law such as corporations and partnerships. An entity can either
be taxable or exempt.
Gains or income derived between relatives, corporations, and between a partner and the
partnership are taxable since it is made between separate entities. However, the income of the
home office to its branch office are not taxable because they pertain to one and the same taxable
entity. Furthermore, the income between businesses of a proprietor should not be taxed since
proprietorship business are taxable upon the same owner.
Benefits in the Absence of Transfers

The increases in the net worth of a taxpayer in the absence of sale transaction is not taxable.
These increases can be in the form of appreciation of value of properties or decrease in the value
of the obligations. These are referred to as “unrealized gains or holding gains”. They are
unrealized because they are yet to materialize in an exchange transaction.
Examples of these are, but not limited to:
a. Increase in value of investments in equity or debt securities
b. Increase in value of real properties held
c. increase in value of foreign currencies held or receivable
d. decrease in value of foreign currency denominated debt by virtue of favorable fluctuation
in exchange rate
e. Birth of animal offspring, accruals of fruits in an orchid or growth of vegetables
f. Increase in value of land due to the discovery of mineral reserves
Basis of Exemption of Unrealized Income

The general rule of taxability is that a taxpayer will be taxable when they realize income in an
exchange transaction since tax is generally payable in money. However, this does not mean that
only income realized in cash is subject to tax. That is just the general rule and there are always
exceptions.
For instance, 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 considerations.
Modes of Receipt/Realization Benefits

1. Actual Receipt – this involves actual physical taking of the income in the form of cash or
property.
2. Constructive Receipt – this involves no actual physical taking of the income, but the taxpayer
is effectively benefited.
3. It is not exempted by law, contract, or treaty.

The constitution does not exempt an item of gross income from taxation. However, there are
specific items of income that are excluded in the computation of gross income subject to tax. These
are, but not limited to:
a. Income of qualified employee trust fund
b. Revenue of non-profit, non-stock educational institutions
c. SSS, GSIS, Pag-IBIG, or PhilHealth benefits
d. Salaries and wages of minimum income earners and qualified senior citizen
e. Regular income of Barangay Micro-business Enterprises (BMBEs)
f. Income of foreign governments and foreign government-owned and controlled corporations
g. Income of international missions and organizations with income tax immunity
Classification of Income
1. Income as to Source
a. Compensation
b. Professional
c. Business
d. Other
2. Income as to Territorial Source
a. Income within the Philippines
b. Income without the Philippines
c. Mixed Income (partly within and without)
3. As to Taxability
a. Taxable Income
i. Ordinary or Regular Income subject to basic or normal tax such as the schedular
tax under Section 24(A) of the Tax Code, as amended.
ii. Certain Passive Income subject to final withholding taxes
iii. Capital Gains subject to capital gains tax, specifically:
1. Gain on sale of shares of stock of a domestic corporation sold directly to
a buyer.
2. Sale of real properties classified as capital assets located in the Philippines.
iv. Special Income subject to special rates
b. Tax-Exempt Income
i. By constitutional mandate
ii. By statute (general or special)
iii. By international comity
TYPES OF INCOME TAXPAYERS

A. Individual Income Taxpayers
a. Citizens
Under the Section 1, Article IV of the Philippine Constitution, the following are citizens of the
Philippines:
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 citizenship
upon reaching the age of majority
d. Those who are naturalized in accordance with the law
Accordingly, citizens are classified as follows:
a. Resident Citizen – A citizen residing in the Philippines
b. Non-resident Citizen – Sec 22(e) of the NIRC describes a non-resident citizen as a
citizen who:
1. Establishes, to the satisfaction of the Commissioner the fact of his physical
presence abroad with a definite intention to reside therein;
2. Leaves the Philippines during the taxable year to reside abroad
a. As an immigrant;
b. For employment on a permanent basis; or
c. For work and derives income from abroad whose employment thereat
requires him to be physically abroad most of the time during the taxable
year.
3. A citizen of the Philippines who shall have stayed outside the Philippines for an
aggregate of 183 days or more by the end of the year.
A non-resident citizen who arrives in the Philippines at any time during the taxable
year to reside permanently in the Philippines shall be considered a non-resident
citizen for the taxable year in which he/she arrives in the Philippines with respect to
income derived from sources abroad until the date of his/her arrival in the Philippines
[Sec. 22(E)(4)]
Overseas Contract Workers (OCW)/Overseas Filipino Workers (OFWs)

OCWs, as defined by RR1-2011, are Filipino citizens employed in foreign countries
who are physically present in a foreign country as a consequence of their employment.
They are classified as non-resident citizens for the purpose of taxation. However, a
person must be duly registered with the Philippine Overseas Employment
Administration (POEA) with a valid Overseas Employment Certificate (OEC) to be
considered as an OCW/OFW.
Seafarers or seamen, on the other hand, are Filipino citizens who receive
compensation for services rendered abroad as a member of a complement of a vessel
engaged exclusively for international trade. To be considered as an OCW/OFW, they
must be duly registered with the POEA with a valid OEC with Seafarers Identification
Record Book or Seaman’s Book issued by the Maritime industry Authority
(MARINA)
b. Aliens – all those that do not fall under the classification of citizens. Accordingly, aliens can
either be:
a. Resident Alien – Under Section 22(F) of the Tax Code, a resident alien is an individual
who is residing in the Philippines but is not a 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 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-Resident Alien – Under Section 22 (G) of the Tax Code, a non-resident alien is an
individual who is not residing in the Philippines and who is not a citizen thereof. They
are aliens who come to the Philippines for a definite purpose, which in nature may be
promptly accomplished.
1. Non-Resident Alien Engaged in Trade or Business – aliens who stayed in the
Philippines for an aggregate period of more than 180 days during the year
2. Non-Resident Alien Not Engaged in Trade or Business – aliens who:
a. Come to the Philippines for a definite purpose which in its nature may be
promptly accomplished.
b. Shall come to the Philippines and stay therein for an aggregate period of
not more than 180 days during the year.
Trade or Business include the performance of the function of a public office or
performance of personal services in the Philippines, except those services under an
employer-employee relationship. [Sec. 22(S)]
General Classification Rule for Individuals

Intention
The intention of the taxpayer regarding the nature of his stay within or outside the country shall
determine his appropriate residency classification. Documents showing evidence of the intention
like visas, working contracts, etc. shall be submitted to the CIR for the purpose of classification.
Length of Stay
In default of such documentary proof, the length of stay of the taxpayer is considered:
• Citizens staying abroad for a period of at least 183 days are considered non-resident
• Aliens who stayed in the Philippines for more than 1 year as of the end of the taxable year
are considered resident
• 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 trade or business
• Aliens who stayed in the Philippines for not more than 180 days are considered non-resident
aliens not engaged in trade or business
Taxable Estates and Trusts

Estate
This refers to the properties, rights, and obligations of a deceased person not extinguished by his
death. Estates under juridical settlement are treated as individual taxpayers. The estate is taxable
on the income of the properties left by the decedent. However, estates undergoing extrajudicial
settlements are exempt entities, thus, the income of the properties of the estate is taxable to the
heirs.
Trust
Trust is an arrangement whereby one person, called the grantor or trustor, transfers property to
another person, called the beneficiary, which will be held under the management of a third party,
called the fiduciary or trustee. A trust can be designated by the grantor revocably or irrevocably.
Irrevocable trusts are those which cannot be modified, amended, or terminated without the
permission of the beneficiary or court order. In this case, the income of the properties held in trust
is taxable to trust because the trust is treated as an individual taxpayer.
Revocable trusts, however, are not treated as an individual taxpayer, thus, income from properties
held in this kind of trust is taxable to the grantor.
B. Corporations
Section 2 of Republic Act 11232 otherwise known as the Revised Corporation Code of the
Philippines defines corporation as “an artificial being created by operation of law, having the right
of succession and the powers, attributes and properties expressly authorized by law or incident to
its existence”
Section 22 of the National Internal Revenue Code of 1997 as amended by RA 11534 otherwise
known as the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act enumerates
those entities to be classified as a corporation:
• One Person Corporations (OPCs)
• Partnerships, no matter how created or organized
• Joint Stock Companies
• Joint Accounts (cuentas en participacion)
• Associations
• Insurance Companies
The term corporation does not include:
• General Professional Partnership (GPP). A GPP is a partnership formed by persons for the
sole purpose of exercising their common profession, no part of the income of which is
derived from engaging in any trade or business.
•Joint Venture or Consortium that are:

o Formed for the purpose of undertaking construction projects pursuant to
Presidential Decree No. 929 to assist local contractors in achieving
competitiveness with foreign contractors by pooling their resources in undertaking
big construction projects.
o Engaged in petroleum, coal, geothermal, and other energy operations pursuant to
an operating consortium agreement under a service contract with the government
Corporations can be classified as follows:
A. Domestic Corporation – This is a corporation that is organized in accordance with
Philippine laws.
B. Foreign Corporation – This is a corporation that is organized under foreign laws. It can
either be:
1. Resident Foreign Corporation (RFC) – a foreign corporation which operates and
conducts business in the Philippines through a permanent establishment.
2. Non-Resident Foreign Corporation (NRFC) – a foreign corporation which does not
operate or conduct business in the Philippines.
Notes:
• A corporation that incorporates in the Philippines is a domestic corporation under the
Incorporation Test even if the same is controlled by foreigners.
• A foreign corporation that transacts business with residents through a resident branch is
taxable on such transactions 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.
• An individual that establishes a one-person corporation shall be taxable as a corporate
taxpayer for the business transactions of the OPC but he shall be subject to tax as an
individual for his personal transactions.
Co-ownership
A co-ownership is joint ownership of a property formed for the purpose of preserving the same
and/or dividing its income. According to Article 485 of the Civil Code, the portions belonging to
the co-owners in the co-ownership shall be presumed equal, unless the contrary is proved.
Co-owners are taxed individually on their distributive share of the income of the co-ownership.
Meaning, co-ownership itself is not taxable for the reason that the activities of co-ownership are
generally limited to the preservation of the common property and the collection of the income
therefrom. Should the co-owners invest the income in business for profit, they would be constituting
themselves into a partnership and such shall be taxable as a corporation.
When inherited property remained undivided for more than 10 years and no attempt was ever made
to divide the same among the co-heirs, nor was the property under administration proceedings nor
held in trust, the property should be considered as owned by an unregistered partnership,
consequently, taxable as corporation.
The General Rules in Income Taxation

Taxable Income Earned
Individual Taxpayers Within Without
Resident Citizen  
Non-Resident Citizen  
Resident Alien  
Non-Resident Alien  
Corporate Taxpayers Within Without

Domestic Corporation  
Resident Foreign Corporation  
Non-Resident Foreign Corporation  
The Residency and Citizenship Rule

Taxpayers who are residents and citizens of the Philippines such as resident citizens and domestic
corporations are taxable on all income from sources within and without (outside the Philippines). A
corporation is a citizen of the country of incorporation. Thus, a domestic corporation is a citizen of the
Philippines.
Basis of the Extraterritorial Taxation

Resident citizens and domestic corporations derive most of the benefits from the Philippine Government
compared to all other classes of taxpayers by virtue of their proximity to the Philippine Government. Since
resident citizens and domestic corporations enjoy more benefits from the Government than those of non-
residents and aliens, the taxation of their foreign income is consistent with the Benefits Received Theory.
The extra-territorial tax treatment of resident citizens and domestic corporations is also intended as a safety
net to the potential loss of tax revenues brought by situs relocation or the practice of executing or structuring
transactions such that income will be realized abroad to avoid Philippine income tax.
The Issue of International Double Taxation

The rule on extra-territoriality 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 citizens and domestic corporations pay minimal taxes in the Philippines on their income
abroad because of the tax credit.
Situs of Income
The situs of income is where the income is taxable. It is the jurisdiction that has authority to impose tax
upon the income.
The situs of income should be differentiated from the source of income. The latter pertains to the activity
or property where the taxpayer derives the income, while the former is the place where the income is
taxable.
Income Situs Rules

Types of Income Situs
Interest Income Debtor’s Residence
Royalties Where the intangible is employed
Rent Income Location of the property
Service Income Place where the service is received
Illustration
A taxpayer has the following income:
Interest income from deposits in a foreign bank P300,000
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 Philippines) 150,000
Professional fees for services rendered in the Philippines to non-resident
clients (paid in USD) 400,000
Compute for the income that are within and without the Philippines.
Solution:
Within Without Total
Interest income from foreign bank P300,000 P300,000
Interest from domestic bonds P 50,000 50,000
Royalties from books 100,000 100,000
Rent income 150,000 150,000
Professional fees 400,000 400,000
Total P550,000 P450,000 P1,000,000
Other Income 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 – situs depends on pre-dominance test
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, or for such
part of the period as the corporation has been in existence is:
• At least 50%, the portion of the dividend corresponding to the Philippine gross
income ratio that is earned within
• Less than 50%, the entire dividends received is deemed earned abroad
Dividends from non-resident foreign corporations will least likely pass this test due to their
absence of Philippine operations. Hence, dividends from non-resident foreign corporations
are generally presumed earned abroad.
C. Merchandising Income – earned where the merchandise is sold

D. Manufacturing Income – earned where the goods are manufactured and sold
Operations
Remarks
Production Distribution
Within Within Total income from production and distribution is earned
within the Philippines
Without Without Total income from production and distribution is earned
without the Philippines
Within Without Production income is earned within, Distribution income is
earned without
Without Within Distribution income is earned within, production income is

earned without
Illustration:
Gain on sale of domestic stocks P200,000
Gain on sale of foreign bonds 100,000
Gain on sale of a commercial lot in Baguio City 500,000
Gain on sale of car in Ontario, Canada 200,000
Gain on sale of machineries in Mexico, Pampanga 250,000
Interest income on foreign bonds 50,000
Dividends on domestic stocks 150,000
Compute for the income that are within and without the Philippines.
Solution:
Interest income from foreign bank P300,000 P300,000
Interest from domestic bonds P 50,000 50,000
Royalties from books 100,000 100,000
Rent income 150,000 150,000
Professional fees 400,000 400,000
Total P550,000 P450,000 P1,000,000
Illustration:
In 2024, Sarah received a P500,000 dividend income from ABC Corporation. ABC Corporation, a foreign
corporation, had the following gross income:
2021 2022 2023 Total
Philippines P100,000 P200,000 P300,000 P 600,000
Abroad 200,000 100,000 100,000 400,000
Total P300,000 P300,000 P400,000 P1,000,000
Determine the income taxable within of Sarah if ABC Corporation is a:
a. Domestic Corporation
b. Resident Foreign
Solution:
a. Domestic Corporation – the whole P500,000 is earned within
b. Resident Foreign Corporation

Total dividends received P500,000
Gross income ratio* 60%
Total dividends earned within P300,000
*Gross income ratio = P600,000 total income from the Philippines divided by the P1,000,000 total income
The P500,000 dividend shall be split into within and without since the gross income ratio of ABC
Corporation is at least 50%, otherwise, the whole P500,000 is earned within.
Illustration:
Goods purchased and sold within the Philippines P200,000
Goods purchased within the Philippines and sold abroad 100,000
Goods purchased abroad and sold within the Philippines 150,000
Goods purchased and sold abroad 350,000
Compute for the income within and without
Solution:
Goods purchased and sold within P200,000 P200,000
Purchased within and sold abroad P100,000 100,000
Purchased abroad and sold within 150,000 150,000
Purchased and sold abroad 350,000 350,000
Total P350,000 P450,000 P800,000
Illustration:
Island, Inc. manufactures goods and sells them through its branch. Island bill its branch at established
market prices. Island reported the following gross income:
Home Office Branch Total
Sales P4,000,000 P2,000,000 P6,000,000
Cost of goods sold 2,400,000 1,200,000 3,600,000
Gross income P1,600,000 P 800,000 P2,400,000
The following shows the situs of the gross income of Island under each of the following scenario:
Scenario Home Office Branch Within Without
No. 1 Philippines Philippines P2,400,000 P 0
No. 2 Abroad Abroad 0 2,400,000
No. 3 Philippines Abroad 1,600,000 800,000
No. 4 Abroad Philippines 800,000 1,600,000
Note that both the production and the distribution are conducted by the same taxable entity, Island, Inc. and
the branch is not a separate entity, but an integral part of Island, Inc.; hence, its income is taxable to Island,
Inc.
Assuming production is conducted by a parent corporation and the distribution is conducted by its
subsidiary corporation:
Parent Subsidiary Total
Sales P4,000,000 P2,000,000 P6,000,000
Cost of goods sold 2,400,000 1,200,000 3,600,000
Gross income P1,600,000 P 800,000 P2,400,000
The gross income recognized by each corporation is taxable to each corporation because each corporation
is a separate taxpayer. The situs of taxation shall be the place of sale without regard to the seller or the
supplier.
The following are the situs of income for the parent corporation:
Scenario Parent Subsidiary Within Without
No. 1 Philippines Philippines P1,600,000 P 0
No. 2 Abroad Abroad 0 1,600,000
No. 3 Philippines Abroad 1,600,000 0
No. 4 Abroad Philippines 0 1,600,000
The following are the situs of income for the subsidiary corporation:
Scenario Parent Subsidiary Within Without
No. 1 Philippines Philippines P800,000 P 0
No. 2 Abroad Abroad 0 800,000
No. 3 Philippines Abroad 800,000
No. 4 Abroad Philippines 800,000
Prepared by:
JOHN CARLO B. RABE, CPA

Instructor
Reviewed by: Approved by:
NONA BHEL S. LIMBO, DBA JESS JAY M. SAJISE, DBA

Dean, School of Business and Accountancy Vice President of Academic Affairs

3 Introduction To Income Taxation

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CSTC COLLEGE OF SCIENCES TECHNOLOGY AND COMMUNICATION, INC.

SCHOOL OF BUSINESS AND ACCOUNTANCY

INRODUCTION TO INCOME TAXATION

Elements of Gross Income

Recovery of Lost Capital vs. Recovery of Lost Profits

Concept of “Another Entity”

Benefits in the Absence of Transfers

Basis of Exemption of Unrealized Income

Modes of Receipt/Realization Benefits

3. It is not exempted by law, contract, or treaty.

TYPES OF INCOME TAXPAYERS

Overseas Contract Workers (OCW)/Overseas Filipino Workers (OFWs)

General Classification Rule for Individuals

Taxable Estates and Trusts

•Joint Venture or Consortium that are:

The General Rules in Income Taxation

Corporate Taxpayers Within Without

The Residency and Citizenship Rule

Basis of the Extraterritorial Taxation

The Issue of International Double Taxation

Income Situs Rules

Other Income Situs Rules

C. Merchandising Income – earned where the merchandise is sold

Without Within Distribution income is earned within, production income is

b. Resident Foreign Corporation

JOHN CARLO B. RABE, CPA

Reviewed by: Approved by:

NONA BHEL S. LIMBO, DBA JESS JAY M. SAJISE, DBA

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