TAXATION

ATTY. GERRY SEBASTIAN, CPA

ALL RIGHTS RESERVED 2017

AGS COPYRIGHT 2017

!
Philippine Copyright 2017. Atty. Gerry Sebastian, CPA. All rights reserved. No part of this may be

"
reproduced in any form or any means, electronic or mechanical, including photocopying or
xeroxing without written permission from the author. Any copy of this without the express written
consent of the author or his duly authorized representative, either proceeds from an illegitimate
source or is in the possession of one who has no authority to dispose of the same. Unauthorized
users, in addition to the penalties provided by law, shall be punished by the law of karma and
they will not pass the examinations they shall take or be unsuccessful and unhappy in life.

ATTY. GERRY SEBASTIAN, CPA

DEFINITIONS
AGS ALL RIGHTS RESERVED 2017

DEFINITIONS
INCOME TAX IN GENERAL

☞
Persons
• Includes the following:
• Individual
• Corporation
• Estate
• Trust
• These are the income taxpayers under the Tax
Code.

AGS ALL RIGHTS RESERVED 2017 1

DEFINITIONS
INCOME TAX IN GENERAL

Corporations • But does not include:

• It shall include:
• Partnerships, no matter
how created or organised
• Joint-stock companies
• Joint accounts (cuentas
en participacion)
• Association or
• Insurance companies
• General professional partnerships (GPP) and
• Joint venture or consortium formed for the
purpose of:
• undertaking construction projects or
• engaging in petroleum, coal, geothermal
and other energy operations under an
operating consortium agreement under a
service contract with the government.

AGS ALL RIGHTS RESERVED 2017 2

DEFINITIONS
INCOME TAX IN GENERAL

☞
General Professional Partnerships
• These are partnerships formed by persons:
• Sole purpose of exercising their common profession.
• No part of income from engaging in trade or business.

AGS ALL RIGHTS RESERVED 2017 3

DEFINITIONS
INCOME TAX IN GENERAL

General Professional Partnerships

☞ • The Tax Code excluded General Professional Partnerships from
Corporations. The entity itself is exempt from tax.
• But it does not mean that their income is not taxable. The share in
the income (computed as a corporation) of the entity will be included
in their respective Income Tax Returns as Individuals.
• The Tax Code presupposes that common professions are those
professions that are generally regulated by the Professional
Regulation Commission. However, it also includes the practice of law
for such purpose as well as other common profession as long as it
does not involve trade or business.

AGS ALL RIGHTS RESERVED 2017 4

DEFINITIONS
INCOME TAX IN GENERAL

☞
Co-Ownerships
• The definition of General Professional Partnerships does not include
co-ownerships.
• As it is not within the purview of the definitions under the Tax Code, it
is considered a tax-exempt entity.
• The share in the income and any expenses (based on percentage of
ownership) of the entity will be included in their respective Income Tax
Returns as Individuals.
• However, they may be considered as an unregistered partnership
and subject to corporate income taxes if there is an intention to form
a partnership or joint venture.

AGS ALL RIGHTS RESERVED 2017 5

DEFINITIONS
INCOME TAX IN GENERAL

Joint Ventures
☞ • Joint ventures, on the other hand, are considered corporation for tax
purposes.
• However, if the purpose is, as stated earlier, for construction projects
or energy operations, they will be treated like a general professional
partnership and their respective shares will be part of their income tax
returns as an entity.

AGS ALL RIGHTS RESERVED 2017 6

DEFINITIONS
INCOME TAX IN GENERAL

Non-Resident Citizen

2 4
Non-Resident
Immigrant or

OFW
Citizen Employment

1 3 5
Physical Presence
Employment

Seaman
Abroad requires Presence

AGS ALL RIGHTS RESERVED 2017 7

DEFINITIONS
INCOME TAX IN GENERAL

“Most of the time”

☞ • The term non-resident citizen depends on the proof submitted to the
Commissioner of Internal Revenue. In this connection, the phrase
"most of the time“ which is used in determining when a citizen's
physical presence abroad will qualify him as non-resident, shall mean
that the said citizen shall have stayed abroad for at least 183 days in
a taxable year.

AGS ALL RIGHTS RESERVED 2017 8

DEFINITIONS
INCOME TAX IN GENERAL

☞
Doing Business in the Philippines
• It implies continuity of commercial dealings for the exercise of some
functions normally incident to purpose or object of organization.
• However, it does not include mere investment as a shareholder by
foreign entity in the domestic corporation, and all the exercise of such
rights as such investor, nor having any nominee, director or offices to
represent its interest in such corporation nor appointing a distributor
domiciled in the Philippines which transact business in its own name
and for its own account.

AGS ALL RIGHTS RESERVED 2017 9

 TAXATION
ATTY. GERRY SEBASTIAN, CPA

ALL RIGHTS RESERVED 2017

TAXATION