Questions and Answers
What is the classification of Individual Taxpayers under RA 8424?
A Resident Citizen is defined as a citizen of the Philippines residing outside of the Philippines.
False
What is the definition of a Non-resident Citizen?
A citizen of the Philippines whose physical presence abroad is with a definite intention to reside there.
Who qualifies as a Resident Alien?
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A citizen of the Philippines who leaves during the taxable year to reside abroad is a ___ citizen.
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What is the classification of a taxpayer who is a natural born Filipino and returns to the Philippines after living in the U.S.?
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What classification does G.I. Joe hold while working in the Philippines?
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A Non-resident Alien working in the Philippines is considered a Resident Alien.
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What is considered 'most of the time' for a citizen working abroad?
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Study Notes
Individual Taxpayers Classification
- Individual taxpayers are natural persons with income from a taxing authority's territorial jurisdiction.
- The Philippine National Internal Revenue Code (NIRC), or Tax Code, classifies individual taxpayers based on various factors.
Criteria for Classification
- Factors for classification include:
- Situs of income
- Method of tax computation
- Treatment of passive income
- Allowable deductions
Classification Types
- Resident Citizens (RC): Citizens residing in the Philippines.
- Nonresident Citizens (NRC): Citizens residing abroad with the intention to stay.
- Resident Aliens (RA): Aliens living in the Philippines without a definite exit plan.
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Nonresident Aliens (NRA): Aliens not living permanently in the Philippines, further categorized into:
- Engaged in trade (NRAET)
- Not engaged in trade or business (NRANET)
Resident Citizens (RC)
- Defined as a citizen of the Philippines residing in the country.
- Citizens include:
- Those existent at the Constitution's adoption in 1987.
- Individuals with Filipino parentage.
- Those born before January 17, 1973, to Filipino mothers who elected citizenship.
- Naturalized Filipino citizens.
Nonresident Citizens (NRC)
- Defined as citizens living abroad with a definite intention to reside outside the Philippines.
- Includes Overseas Contract Workers (OCWs), Overseas Filipino Workers (OFWs), and seamen considered OCWs.
- A citizen working abroad must stay outside the Philippines for at least 183 days to be classified as NRC.
Resident Aliens (RA)
- Classified as aliens living in the Philippines without a specified exit intention.
- Those with a purpose that necessitates an extended stay are deemed RA.
Nonresident Aliens (NRA)
- Defined as aliens present in the Philippines for specific, short-term objectives.
- An NRA who stays over 180 days becomes classified as NRA engaged in trade or business (NRAETB).
Illustrations of Taxpayer Classification
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Case 1: Edgar, a natural-born Filipino who returned on March 1, 2021, was classified as:
- NRC from January to February 2021.
- RC from March 1, 2021, onward.
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Case 2: G.I. Joe, an American IT expert employed in the Philippines from January to March 2021, becomes:
- RA because of his role requiring an extended stay; his intent to return home does not change his classification.
These classifications are crucial for the determination of tax responsibilities based on individual taxpayer status.
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Description
This quiz covers the classification of individual taxpayers as per RA 8424, also known as the National Internal Revenue Code. It highlights the significant differences among taxpayers, including income situs, tax computation methods, and allowable deductions. Test your understanding of these crucial tax concepts!
