Taxation: Key Definitions

• Various terms related to taxation are defined within this section.

Key Definitions

• Person: Includes individuals, trusts, estates, and corporations.
• Corporation: Encompasses one-person corporations, partnerships, joint-stock companies, joint accounts, associations, and insurance companies.
  • It excludes general professional partnerships and joint ventures/consortia for construction or energy operations under a service contract with the Government.
  • General professional partnerships are formed by individuals solely to practice their common profession, without deriving income from trade or business.
• Domestic Corporation: A corporation created or organized in the Philippines or under its laws.
• Foreign Corporation: A corporation not considered domestic.
• Nonresident Citizen:
  • A Philippine citizen with physical presence abroad and intention to reside there.
  • A Philippine citizen leaving the Philippines to reside abroad as an immigrant or for permanent employment.
  • A Philippine citizen working and earning income abroad, requiring physical presence abroad most of the time during the taxable year.
  • A citizen previously considered nonresident, arriving in the Philippines to reside permanently, is treated as nonresident for the income year until the arrival date regarding income from foreign sources.
  • Taxpayers must provide proof of their intent to reside permanently abroad or return to the Philippines.
• Resident Alien: An individual residing in the Philippines who is not a citizen.
• Nonresident Alien: An individual not residing in the Philippines and not a citizen thereof.
• Resident Foreign Corporation: A foreign corporation engaged in trade or business within the Philippines.
• Nonresident Foreign Corporation: A foreign corporation not engaged in trade or business within the Philippines.
• Fiduciary: Includes guardians, trustees, executors, administrators, receivers, conservators, or anyone acting in a fiduciary capacity for another person.
• Withholding Agent: Any person required to deduct and withhold tax as per Section 57.
• Shares of Stock: Includes shares of stock of a corporation, warrants/options to purchase shares, and units of participation in partnerships (excluding general professional partnerships), joint stock companies, joint accounts, taxable joint ventures, associations, recreation/amusement clubs, and mutual fund certificates.
• Shareholder: Includes holders of shares of stock, warrants/options, unit holders in partnerships (excluding general professional partnerships), members of joint stock companies, joint accounts, taxable joint ventures, associations, recreation/amusement clubs, and mutual fund certificate holders.
• Taxpayer: Any person subject to tax imposed by this Title.
• Including/Includes: These terms do not exclude other items within the meaning of the defined term.
• Taxable Year: The calendar year or fiscal year ending during the calendar year, which is the basis for computing net income.
  • It also includes a fractional part of a year for which a return is made under specific provisions or regulations.
• Fiscal Year: An accounting period of twelve months ending on the last day of any month other than December.
• Paid or Incurred/Paid or Accrued: Interpreted according to the accounting method used to compute net income.
• Trade or Business: Includes performing the functions of a public office.
• Securities: Includes shares of stock in a corporation and rights to subscribe for or receive such shares, bonds, debentures, notes, certificates, or other evidence of indebtedness issued by corporations (including government entities).
• Dealer in Securities: A merchant of stocks or securities with an established business, regularly engaged in purchasing securities and reselling them to customers for profit.
• Bank: Every banking institution as defined in Section 2 of Republic Act No. 337, as amended, also known as the “General Banking Act”.
  • Banks can be commercial, thrift, development, rural, or specialized government banks.
• Non-Bank Financial Intermediary: A financial intermediary authorized by the Bangko Sentral ng Pilipinas (BSP) to perform quasi-banking activities.
• Quasi-Banking Activities: Borrowing funds from 20 or more individual or corporate lenders at any one time through debt instruments (excluding deposits) or similar instruments for relending or purchasing receivables.
  • Commercial, industrial, and non-financial companies borrowing for their own or their agents' needs are not considered as performing quasi-banking functions.
• Deposit Substitutes: Alternatives to deposits for obtaining funds from the public (20 or more lenders) through debt instruments for relending, purchasing receivables, or financing their own/agents' needs.
  • Examples include bankers' acceptances, promissory notes, repurchase agreements, certificates of assignment, etc.
  • Interbank call loans with maturity of not more than five days to cover deficiency in reserves against deposit liabilities are not considered as deposit substitute debt instruments.
• Ordinary Income: Gain from the sale or exchange of property that is not a capital asset.
  • Any gain treated as 'ordinary income' under this Title is considered gain from the sale or exchange of property that is not a capital asset.
• Ordinary Loss: Loss from the sale or exchange of property that is not a capital asset.
  • Any loss treated as 'ordinary loss' under this Title is considered loss from the sale or exchange of property that is not a capital asset.
• Rank and File Employees: Employees not holding managerial or supervisory positions as defined under the Labor Code of the Philippines.
• Mutual Fund Company: An open-end and close-end investment company as defined under the Investment Company Act.
• Trade, Business, or Profession: Does not include the performance of services by a taxpayer as an employee.
• Regional or Area Headquarters: A branch established in the Philippines by multinational companies that does not earn income from the Philippines, acting as a supervisory and coordinating center for affiliates in the Asia-Pacific Region.
• Regional Operating Headquarters: A branch established in the Philippines by multinational companies engaged in general administration, business planning, sourcing, corporate finance advisory, marketing control, training, logistics, R&D, technical support, data processing, and business development.
• Long-Term Deposit or Investment Certificate: A certificate of time deposit or investment in savings, trust funds, deposit substitutes, or investment management accounts with a maturity of at least five years.
  • Must be issued by banks only to individuals in denominations of P10,000 and other denominations as prescribed by the BSP.
• Statutory Minimum Wage: The rate fixed by the Regional Tripartite Wage and Productivity Board.
• Minimum Wage Earner: A worker in the private sector paid the statutory minimum wage or a public sector employee with compensation income not more than the statutory minimum wage in the non-agricultural sector.
• Offshore Gaming Licensee: An offshore gaming operator licensed by the Philippine Amusement and Gaming Corporation or any special economic zone authority to conduct offshore gaming operations, including accepting bets from offshore customers.
  • Offshore gaming licensees are considered engaged in doing business in the Philippines.
  • No offshore gaming license shall be issued by the Aurora Pacific Economic Zone and Freeport Authority, with existing licensees transferred to and regulated by the Philippine Amusement and Gaming Corporation.
• Offshore Gaming Licensee-Gaming Agent: A representative in the Philippines of an offshore-based operator who acts as a resident agent for receiving legal documents and complying with SEC disclosure requirements.
  • The agent shall not be involved in the business operations of the offshore gaming licensee and shall not derive income therefrom.
• Filing of Return: Accomplishing and submitting the prescribed tax return, electronically or manually, to the Bureau of Internal Revenue, or through any authorized agent bank or authorized tax software provider.
• Payment of Tax/Remittance of Tax: Delivering the amount of tax due or withheld, either electronically or manually, to the Bureau of Internal Revenue, or through any authorized agent bank or authorized tax software provider.