Okay, so let's proceed to the discussion of income tax on individuals. Okay, actually we have a summary of the topics for individual taxpayers. So if you will notice, we have parts 1 to 6 here in the first slide. Okay, and then we have 7 to 13. So in short, we should have 15 videos. pertaining to income tax for individuals or income tax on individuals It's the same, okay?
And we're here in the first type, the first part of the discussion for income tax for individuals and that is types of individual taxpayers. So I really hope that by summarizing the different types of topics under this subject, income tax for individuals, It will be easier for you to find what you need to lecture for this topic. For example, you are a bit difficult in understanding income tax for self-employed, go to video number 4 or lecture number 4 of income tax for individuals.
And we have already arranged our playlist, so I hope you will follow it closely. So I hope this video that we are doing will be of great help to you. Either you will use it in your undergrad course to pass your income tax subject or tax subject or in preparation for the board exam.
And or in your practice or profession as an accountant or as an entrepreneur even if you want to learn about different topics about taxation. So again, We are on income tax for individuals and we are on the first topic. And the first topic is types of individual taxpayers.
Okay, so for us to understand more about the discussion about income tax for individuals, it's important to define first who are the so-called individual taxpayers. Okay, so when we say individual taxpayers we refer to natural persons E diba dalawang klase lang naman ang tao We have natural saka juridical or artificial Ano nga ba yung mga juridical or artificial? Tao lang sila sa mata ng batas Kagaya ng ABS-CBN Corporation Tao yan sa mata ng batas San Miguel Corporation They are human in the eyes of the law.
But they are not really true people in a way that you can talk to, you can befriend. nagmamahalan kayo, walang ganun. So they are only persons in the eyes of law.
So artificial persons sila. So yung mga natural persons, tayo. So si Enrico Tabag ay natural person yan.
Ikaw na nanonood ay natural person. So yun yung sapok ng tinatawag nating income tax for individuals. So kung ikaw ay natural person, This is where you get your tax. Income tax for individuals.
It depends if you are earning because you are an employee or you are earning because you are a businessman. We discussed all of that in our videos. Just look for it in our list or in our place list. Okay, next.
So, we know who are the individual taxpayers. We are pertaining to natural persons with income derived from within the territorial jurisdiction of a taxing authority. With income, of course, because we are talking about income tax.
So, we are pertaining to natural persons like Enrico Tabag, who has income. Where do you earn? Within the territorial jurisdiction of a taxing authority. Example, you have income in the Philippines.
So that you can... You are a natural person and you earn here in the Philippines, you have an income tax. Okay, so we already defined who are the individual taxpayers. Let's go to the... How do we classify individual taxpayers?
And why do we need to classify them? Okay? So, in our tax code, RAH 424, or we call it a tax code, or we call it...
National Internal Revenue Code or NIRC as amended by several laws like train law, create law so under our tax code individual taxpayers are classified as follows notice this, four Resident citizens, non-resident citizens, resident aliens, non-resident aliens Your non-resident alien could engage in trade, could not engage in trade And then the aliens employed by POGO or OGLs under the new law So those are the classifications of individual taxpayers Sir, why do we need to classify? Why do we need to know if that Filipino is a resident or not? Why do we need to know if that foreigner is a resident or not? Why do we need to know if that resident alien is doing business in the Philippines or not?
The answer is because they are taxed differently. Enrico Tabag is a resident citizen obviously because I am a Filipino living in the Philippines. I'm permanently residing in the Philippines. Tapos, yung iba kong kapatid, may kuya ako sa Canada, may kapatid ako sa Australia, Pinoy yung mga yun, pero they are residing there already.
They are already immigrants there. Even their family is already there. So we call them non-resident citizen. We are different in tax.
And that is what we will discuss here. So again, why do we need to classify? Because we are different in taxes. The tax of resident citizen is different. The tax of non-resident citizen is different.
The tax of citizen is different. The tax of alien is different. Okay, so I hope it is clear. why individual taxpayers should be classified Okay, so let's proceed How do we determine if the Pinoy is resident or not?
Let's go to the... This is our classification, summary So here are the Pinoy The one with the blue shirt Those are the aliens In our tax code, foreigners are called aliens So, if you notice, if it's a city, it's only two. Resident or non-resident.
If it's aliens or foreigners, it's the same. Resident or non-resident. But the non-resident is further classified into engaged in trade, not engaged. I'm not going to put an N here.
Don't say this in my PowerPoint. I'm not going to put an N. So, engaged in trade or not engaged in trade or business. I'm not going to put an N. It's edited to make you listen.
So you can relax later. Why is it the same? You'll force yourself to rewind.
Just to watch. So you'll know what this is. Then this one in Pogo, it doesn't fit my powerpoint, I put Pogo.
Aliens employed by Pogos including OGLs or Offshore Gaming Licenses. Okay? So therefore, foreigners who are employees of POGO or ODF are actually classified as NRAs under the law.
Okay, so next. So let's go back. When will you say that he is a Pinoy? When will you say that Tabag is a Pinoy?
Okay, we will see that in Article 4. Section 1 of our Constitution Our Constitution says that the next will be the Pinoy Let's see if Tabag is here First, the Pinoy Those who are citizens of the Philippines at the time of the adoption of the 1987 Constitution Am I alive here? Yes, I was born here So if I am a Pinoy when the 1987 Constitution was adopted I am a Pinoy, right? I'm already a Pinoy I'm already a student So elementary Okay, next, number 2 Those whose fathers or mothers are citizens My mother is a pure Pinoy My father is a pure Pinoy. Because they are both Pinoy, I am a Pinoy. So if your parents are Pinoy, you are also Pinoy.
Next, number 3. Those who were born before January 17, 1973. I didn't enter that. I was born after 1973. Those born before January 17, 1973 of Filipino mothers. Who elects Philippine citizenship upon reaching the age of majority?
In the past, if your father is Filipino, he is automatically Filipino. But if your father is not Filipino, but your mother is Filipino, then that's Isabel Granada. I know, okay?
Let's be honest. I know Isabel Granada, her mother is Filipino. Her father is not Filipino, obviously. And she was born a little older than me. He was born before January 17, 1973. So when he was 18 years old, that's when he was elected as Pinay.
So Isabel Granada was named Pinay. I think she's dead. What I know is that if she was born I'm sorry if I'm wrong. So, that's it. And lastly, those who are naturalized in accordance with the law or with Philippine laws.
The one we are the most familiar with. Do you like basketball? Do you know Justin Brownlee?
The import of the Hinebra San Miguel, right? He is one of the naturalized players of the Gilas Pilipinas basketball team. So, for you to be included in the team of the Philippines, you should be a Pinoy. Either natural Pinoy or naturalized. Justin Brownlee became a Pinoy because he was declared by the Congress that he is a Pinoy.
So, he went through the process. So in the blood, he is not a Filipino but the Philippines has already loved him so he was naturalized. So he can play in the Philippines.
Okay? So these are the two Filipinos. Now the question is, when will you say that the Filipino is a resident or not?
When will you say that Tabag is a resident citizen? or non-resident citizen our tax code says this the tax code says these people are non-resident citizen If you are not here, you are a resident citizen. So what our tax code describes are non-resident citizens. If you are not on the list of non-resident citizens, obviously you are a resident citizen.
So first, section 22 paragraph E of our tax code. The following are non-resident citizens or section 22 describes a non-resident citizen as follows. So number one. Those citizens of the Philippines who establishes to the satisfaction of the Commissioner of Internal Revenue or BIR of the fact of his physical presence abroad with intention to reside therein.
Kung makapatunayan mo sa BIR na physically wala ka sa pilas. At ang intention mo ay mag-reside na doon. With a definite intention to reside therein. You're now a resident of Canada, Australia or other countries. So if you can prove to the B.I.R. that you're really living there.
and that's where your intention is to stay you are not from the Philippines so you are an RSI next Filipinos who left during the year that's March March 2023 and I hope we have made a lot of people happy in March because of our new videos of course we are inspired by your support of our videos we are thankful to those who appreciate our videos our efforts, our videos, and our lectures So anyway, that's our goal here to help you understand better loss on taxation So let's go back before we get into drama So for example, it's March now, right? You left the country, he said Leaves the Philippines during the year So this March, you left the country Why did you leave? Sir, I'm going to migrate to another country Oh, you're going to migrate So my brother said From now on, you are an NRC because you are a member of the country. But until tomorrow, you are a Timoy. You are still a Pinoy, but until tomorrow, you are a resident citizen.
If you're not here anymore, you're a non-resident citizen from now on. Can it be like that, sir? If it's January and February, I'm a resident citizen.
And then from March, I'm a non-resident citizen. Yes! There's a difference in the computation, sir.
Yes! Because if you're a resident citizen, you're taxable for everything you earn. even if you earned it in the Philippines or abroad but if you are a non-resident citizen you will just be taxed on your income in the Philippines okay so I hope you understand I will repeat it if you left during the year and your reason is you will be an immigrant there you are now RC and what we explained earlier is it possible that January to February you will be a resident citizen and then in March you will be a non-resident citizen yes, does that have a bearing? yes, look at this so for example, this is what is in our tax code if you are a classified resident citizen you will be subject to income tax in all your income within the Philippines and without the Philippines So, if you are a resident citizen, you have income in the Philippines It is taxable in the Philippines You also have income abroad For example, you have income abroad It is also taxable here in the Philippines Sir, you are being taxed in other country It is okay to be taxed in the Philippines Because if you are a resident citizen You are taxable in your income within and without You have income abroad when he was still in his boxing career was Manny Pacquiao a resident citizen? Yes where did he usually go to box?
America so his income in America is taxed by the BIR in the Philippines? Yes because in our law, if you are a resident citizen you will be taxed for all your income whether it is earned in the Philippines or abroad so in our example where you left for the market in March So from January to February, you will be in RC. So from January to February, you can tax all your income, whether it's in the Philippines or abroad.
But from March, because we said that in March you are not in RC, you are in NRC, what you will tax in the Philippines is all your income here in the Philippines. So if you will earn abroad, where will you go? Those are no longer taxable in the Philippines.
Because since you are an NRC in that period, the tax of the Philippines is only for those in the Philippines. There are differences. That's why we need to classify individual taxpayers. We said earlier, why do we need to classify?
Because they are taxed differently. Okay? So let's go back.
So who else are considered NRC? Those who leave the Philippines during the year to reside abroad or for employment on a permanent basis. So why did you leave the country? Because that's where I will work on a permanent basis in RCK Or, you left because for work and derived income from abroad and whose employment there at requires him to be physically present abroad most of the time during the year I repeat, why did you leave the Philippines? Sir, that's where I will work How long have you been there?
And how long have you been working there? I mean sir, most of the time I'm in another country. So if most of the time you're in another country, it's not because you're just working there. It's because you're working there. So if most of the time during the year you work there, you will be classified as NRC.
The question is, when will you say that you have the most of the time? What does most of the time mean in Tagalog? Kadalasan. How many days do we have in a year? 365 days in a year.
So you need to say that most of the time you are abroad. If more than 50% you are in another country. And the reason why you are there is because your work is there. So in short, to call that most of the time you are in another country, you should at least you should have stayed outside the Philippines for 183 days or more. In short, if you are in another country for at least 183 days in a year, you should have been there.
It needs to be done continuously. In one year, we will just do a calendar year for individuals. From January to December, you have at least 183 days that are in other countries. Most of the time you are in another country Because 50% of the time in one year is 182.5 Using 365 days So if you have 183 days, most of the time you are in another country And the reason should be employment. Because if my son is rich, he can stay in another country for 200 days.
Why? Nothing. He just works. Because my son is rich. Even if I'm in another country for most of the time, I will still work.
I will not be classified as NRC because I am not there most of the time for employment purposes. I just go back and forth. So let me repeat it. If you leave the country because you are going to migrate, you are NRC.
If you leave the country because you are working there on a permanent basis, you are NRC. Most of the time during the year, you are in another country for employment, you are NRC. Okay, so I hope maliwanag na.
At ulitin ko, yung mga wala dito ay tatawagin mong RC. Okay, let's illustrate para mas mag-iintindihan natin. Okay, galing din ito sa libro natin ha.
And by the way ha, I hope tangkilitin niyo yung mga libro natin. So thank you sa mga nagbibigay ng magandang komplemento or mga comments doon sa libro natin. So we appreciate that of course.
Rest assured that I will continue improving our books so that it will be more useful to you all. Okay? So illustration number one is in our book.
Pedro is an OFW. The OFW is NRC. Return in the Philippines for good on May 2021. We will buy in 2023. I didn't edit it.
2023, regardless, 2021 or 2022, 2023. We said, if that's the case, He returned to the country prior to May and he is now in Asia. Now he returned to the country in May. What is the reason?
He said, he returned to the Philippines for good. It means that his intention is not to stay here. So therefore, if that's the case, from January to April, he is in Asia. But from May to May onwards, he is in Asia. What is the importance of that?
We said that it is important because if you are RC you are taxable for all your income whether it is earned in the Philippines or abroad so in short from May onwards So, he taxed all of his income, including his income abroad. But before he returned to the Philippines, he only taxed all of his income in the Philippines. That's why it's important to classify individual taxpayers. Next, illustration number 2. Anna left the country on July 1 Why? To reside permanently in America We discussed that But she left on July 1 So in short, from January to June She is a R.C.
But since she left So, in one year, you have two income tax computes. Because one is taxable within and without. The other portion is taxable on income in the Philippines. That's why this is very important.
This is very important. Okay, next. So, let's proceed. So...
OFW or OCWs are actually classified as NRCs. Just read it. It's obvious, right?
OFW, that's where they are really living in other countries. And that's where they are employed. We say that if you are employed in other countries on a permanent basis, then you are NRC. Okay, next.
Let's go to Aliens. If you say alien, we are pertaining to a foreign born person. Who is not qualified to acquire Philippine citizenship either by birth or after birth.
What is after birth? That's naturalized. In City Sense, you're not really Filipino but you were naturalized like Justin Brownlee.
Okay, so when you say aliens, we will classify our aliens. Where is my powerpoint? I just changed my powerpoint.
Let's go back to our powerpoint. Okay, so again, this is our classification when we are an individual. Aliens classified as resident and non-resident.
So when we will say resident alien, when we will say non-resident alien. We have already discussed Rc and Rc. Let's go back.
When is Ra? When is Ra? Of course, in our tax code, Ra is defined. If you need to say that he is a resident alien.
So therefore, those who are not on the list, they are the ones we will call non-resident alien. So our tax code says, under section 22F, defines resident alien as an individual whose residence is within the Philippines and who is not a citizen thereof. Let's go back to basketball. Sorry, we're all guys.
Tim Cohn, you might know Tim Cohn. He was a former PBA coach in Alaska. Now, he's still a PBA coach but in Hinebrenna. Who else?
You might know him now, Tab Baldwin. If you're watching UAAP, Tab Baldwin has been here for a few years. Coach of Ateneo. They are not actually Pinoys, they are foreigners. But they are staying in our country.
country permanently so they are considered as resident alien okay so we pertain to an individual whose residence is in the Philippines but not in the Philippines those are the resident aliens okay what else? aliens who are actually present in the Philippines and who are not mere transients So if they are foreigners, they are not here because they are temporarily in the Philippines or because they are tourists. So pay attention to what he said, who are not mere transgenders or sojourners. They are not just tourists or they are not temporarily in the Philippines.
So if their stay in the Philippines is not temporary they are classified as resident aliens who else are classified as resident aliens as stated in the tax code in section 22f that alien is also a resident alien if he is an alien who lives in the Philippines with no definite intention as to his stay until when he is here? not definite ah, section 22a and 22f said if that's the case, you are a resident alien so if your stay here is So if you are classified, even if you need an extension or extended stay, and you don't know when, then you are classified as RA. And of course, all that is missing here... will be classified as NRT. Okay?
So the term non-resident aliens under section 22G of the tax code means an individual who's resident is not in the Philippines and who is not a resident thereof. Okay? Okay, next.
It also says here, if you are a foreigner, you go to the Philippines, then your stay is promptly accomplished. Okay, we watched Brian Adams'concert last night. Because my ex-girlfriend's favorite, and now I'm married to her, is Bryan Adams.
You know, girls love to listen, right? So when he found out Bryan Adams was having a concert, he said, Do you remember Bryan Adams? I said, yes, I do.
I don't know Bryan Adams. He said, he's having a concert. It's just like that.
He said, he's having a concert in La La Land. We're the ones who know what that means. It means, we're going to have a concert.
Okay? So, in short, we watched it. Thank you Lord for the opportunity to watch it. We enjoyed it naturally, especially him.
So, question. Is Bryan Adams? Of course, he's a foreigner.
Yes, of course, he's a foreigner. Okay? Just by looking, he's a foreigner.
Question! Is he a resident alien or not? Question! Why is he here?
To do a concert. How long is his concert? Actually, promptly accomplished. So for example, It's only late at night.
Or if he stays in the Philippines for a week, he will get sick or he will leave in a week. Promptly accomplished. Ah, NRA.
Can you follow? Non-resident aliens. Or they are aliens who are mere transients or non-residents. Therefore classified as NRA. Hey, and let's say in...
In our illustration earlier, NRA has two types of NRAs. In fact, there are three types of NRAs. But generally, there are two types of NRAs, Engaged in Trade or Non-Engaged in Trade.
So, when can you say that non-resident aliens are doing business in the Philippines? There are two instances. First, they really have a business in the Philippines. So, foreigners who have business income in the Philippines. They built a restaurant.
Bryan Adams left immediately But because he loves the Philippines and the Filipinos He said he wanted to come back here Not just because he wanted to sing So he put up a restaurant Bryan Adams doesn't have a business in the Philippines Bryan Adams is not a resident alien But because he has a restaurant and he's in business Or, according to the tax code, you need to say that the resident alien is doing business in the Philippines. He said, if most of the time they are in the Philippines. You need to say that most of the time they are in the Philippines.
If they are here in the Philippines for an aggregate period of more than 180 days. Sir, earlier, you called a non-resident citizen if most of the time they are abroad. Yes.
And we said earlier, to say most of the time, time nasa ibang bansa sila dapat at least naka 183 days sila yes at kaya natin dinamit yung 183 days kasi on the assumption na in a year there are 365 days ang kalahagi ng 365 182.5 so kung naka 183 days most of the time nasa ibang bansa siya yes so therefore nrc siya yes e pagdating sa answer mga foreigners Let's say, most of the time, if most of the time, that foreigner is in the Philippines, we will call him NRA and Gage and Trade. Yes, but what about 180 days? Earlier in the Philippines, it was 183. Here, it's more than 180 days.
Here, I will just say it. Because in accounting, If you were asked, how many days in a year? As accountants, normally, we can answer two questions.
If the assumption is 30 days a month, then 360 days. The other one, exact days, 365 days. Don't include the length. so therefore, if you are Filipino, you will probably use 365 days that's why the most of the time is 183 if you are foreigner, you will use 360 days isn't 360 days equal to 180? If it's more than 180, then most of the time, it's here in the Philippines.
The assumption is that non-resident alien is engaged in trade or business. Okay? So I hope it's clear. So those are non-resident alien, not engaged in trade or business.
And there are other talks of NRA not engaged. Let's just go to the table so it's easier to understand. okay generally the income tax of the individual taxpayer is basic income tax using the graduated rate what is the graduated rate?
the tax table The tax table is in another video. So, notice, this GR is not replaced. This is graduated rate.
So that it can fit in the column. GR is graduated rate. Tax table.
Notice, if the individual is Pinoy, tax table. Resident alien, tax table. Non-resident alien engaged in trade, tax table.
But if NRA is not engaged, The tax is not taxable but it is called 25% final tax. Okay? So as to how we are going to apply the graduated rates, FWT, etc. That was discussed in our other videos because the topic of this video is how to classify or what are the classifications of individual tax payers.
Okay? So I hope you understand who are the individual taxpayers and who are the individual taxpayers You need to say that the Filipino is resident or non-resident You need to say that the foreigner is resident or non-resident You need to say that the non-resident alien is doing business or not I hope you understand all of that So I hope when it comes to... You can answer the question as to classification of individual taxpayers either in your class, exam, or undergrad course or most importantly in the municipality So again, thank you for watching I hope we learned something and of course, I hope to see you in our other videos