Income Tax- a tax on all yearly profits arising from property, professions, trades or offices, or as a tax on a person's income,

emoluments, profits and the like.; direct tax on actual or presumed1 income (gross or net) of taxpayers during the taxable year.

- The Philippine income tax law is embodied in Title II (Tax on Income) of the National Internal Revenue Code ("Tax Code")

Income Tax Systems

Global Tax System. — the total allowable deductions as well as personal and additional exemptions, in case of individuals, or the total
allowable deductions, in case of corporations, are deducted from the gross income.
Schedular Tax System. —adopted by the Philippines by virtue of BP Blg. 135, there are different types of incomes that are subject to
different sets of graduated or flat income tax rates. The applicable tax rate(s) will depend on the classification of the taxable income
and the basis could be gross income (without deductions) or net income.
Semi-Schedular or Semi-Global Tax System. — all compensation income, business or professional income, capital gain, passive
income, and other income not subject to final tax are added together to arrive at the gross income, and after deducting the sum of
allowable deductions from business or professional income, capital gain and passive income, and other income not subject to final tax,
in the case of corporation, as well as personal and additional exemptions, in the case of individual taxpayer, the taxable income is
subjected to one set of graduated tax rates (if an individual) or normal corporate income tax rate (if a corporation).
Features of the Philippine Income Tax Law:
- a direct tax because the tax burden is borne by the income recipient upon whom the tax is imposed;
- a progressive tax, since the tax base increases as the tax rate increases. It is founded on the ability to pay principle;
- Phils. has adopted most comprehensive system of imposing income tax by adopting the citizenship principle, the residence
principle, and the source principle;
- Phils. follows the semi-schedular or semiglobal system of income taxation;
- Phil. income tax law is a law of American origin. Thus, the authoritative decisions of the U.S. courts and officials charged
with enforcing the U.S. Internal Revenue Code have peculiar force and persuasive effect for the Philippines.
Criteria in Imposing Philippine Income Tax:
Citizenship or nationality principle. - Filipino citizens are subject to (a) on his worldwide income, if he resides in the Philippines, or
(b) only on his Philippine source income, if he qualifies as a non- resident citizen.
Residence or domicile principle. — a resident alien is now liable to pay Philippine income tax only on his income from sources within
the Philippines but is exempt from tax on his income from sources outside the Philippines.
Source of income principle. a non-resident alien or non-resident foreign corporation is liable to pay Philippine income tax on income
from sources within the Philippines, such as dividend, interest, rent, or royalty, despite the fact that he has not set foot in the
Philippines.
Types of Philippine Income Tax:
1. Graduated income tax on individuals;
2. Normal corporate income tax on corporations;
3. Minimum corporate income tax on corporations;
4. Special income tax on certain corporations (e.g., private educational institutions; foreign currency deposit units; and
international carriers);
5. Capital gains tax on sale or exchange of unlisted shares of stock of a domestic corporation classified as a capital asset;
6. Capital gains tax on sale or exchange of real property located in the Philippines classified as a capital asset;
7. Final withholding tax on certain passive investment incomes;
8. Final withholding tax on income payments made to nonresidents (individual or corporation);
9. Fringe benefit tax;
10. Branch profit remittance tax; and
11. Tax on improperly accumulated earnings.
Income, gain, or profit is subject to income tax when the following conditions are present:
1. There is income, gain or profit;
2. The income, gain or profit is received or realized during the taxable year; and
3. The income, gain or profit is not exempt from income tax.
Income:
- "an amount of money coming to a person or corporation within a specified time, whether as payment for services, interest or
profit from investment."
- realized from the sale, exchange or other disposition of real property.
- No income is derived nor a loss incurred by the owner until after the actual sale or other disposition of the property in excess
of its cost.
 In case of difference between the provisions of the Tax Code and the rules and regulations implementing the Tax Code, on
one hand, and the generally accepted accounting principles (GAAP) and the generally accepted auditing standards (GAAS),
on the other, the provisions of the Tax Code and the rules and regulations issued implementing the said Tax Code shall
prevail.
 In case of conflict between the provisions of a tax treaty and domestic law, the provisions of the tax treaty generally prevail
over the provisions of the domestic law. However, where the rate of tax imposed under the domestic law is lower than the
rate imposed under the tax treaty, the lower tax rate under the domestic law shall prevail.