Classification of Taxpayers

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Classification of Taxpayers

Classification of Taxpayers

Classification of Individual Taxpayers

  1. Citizen
    • Resident Citizen
    • Non-Resident Citizen
  2. Alien
    • Resident Alien
    • Non-Resident Alien
      • Engaged in Trade or Business (ETB)
      • Not Engaged in Trade or Business (NETB)

Citizenship Classification (1987 Constitution, Article IV, Section 1)

A person is considered a citizen of the Philippines if they meet any of the following conditions:

  • Citizens of the Philippines at the time of the Constitution’s adoption on February 2, 1987.
  • Those whose fathers or mothers are citizens of the Philippines.
  • Those born before January 17, 1973, to Filipino mothers, who elected Filipino citizenship upon reaching the age of majority.
  • Those naturalized in accordance with law.

Classification of Citizens

1. Resident Citizen

A Filipino citizen residing in the Philippines.

2. Non-Resident Citizen

A Filipino citizen who:

  • Establishes physical presence abroad with a definite intention to reside there.
  • Leaves the Philippines during the taxable year to reside abroad as an immigrant or for permanent employment.
  • Works and derives income from abroad, requiring physical presence there "most of the time" during the taxable year.
  • Was previously classified as a non-resident citizen and returns to the Philippines to reside permanently. (Income from abroad before their arrival is still considered as derived by a non-resident citizen.)

Classification of Aliens

1. Resident Alien

An individual who resides in the Philippines but is not a citizen. Characteristics include:

  • Residing in the Philippines without being a transient.
  • Having no definite intention as to the length of their stay.
  • Staying for purposes requiring extended residence, making the Philippines their temporary home.

2. Non-Resident Alien

An individual who is not residing in the Philippines and is not a citizen. Subcategories include:

  • Engaged in Trade or Business (ETB):
    • Stayed in the Philippines for more than 180 days during the taxable year.
    • Has business income or a profession in the Philippines.
  • Not Engaged in Trade or Business (NETB):
    • Stayed in the Philippines for an aggregate period of not more than 180 days during the taxable year.

Guiding Principles

Intention

The taxpayer's intention regarding their stay within or outside the Philippines determines residency classification.

Length of Stay

  • Citizens: Staying abroad for at least 183 days are classified as non-residents.
  • Aliens:
    • Stayed in the Philippines for more than 1 year as of the taxable year’s end → Resident Alien.
    • Stayed for more than 180 days but not more than 1 year → Non-Resident Alien ETB.
    • Stayed for not more than 180 days → Non-Resident Alien NETB.

Examples

Scenario 1

Jerry Yan, a Taiwanese actor, arrived in the Philippines on February 28, 2023, for a project and returned to Taiwan three weeks later.

Classification: Non-Resident Alien (NETB).

Scenario 2

Benjamin Putin, an Iranian, arrived in the Philippines on November 4, 2022, and stayed without a work visa or permit.

Classification: Non-Resident Alien (NETB).

Scenario 3

Pedro Juan, a Filipino citizen, left the Philippines on March 15, 2022, and stayed abroad until April 1, 2023, with no definite intention regarding his stay.

Classification: Non-Resident Citizen.

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