Classification of Individual Taxpayer (Residency)
Summary
TLDRIn this educational video, Leroy discusses the classification of taxpayers based on residency for income tax purposes in the Philippines. He explains the four categories: resident citizens, non-resident citizens, resident aliens, and non-resident aliens. Each classification has specific tax implications, with resident citizens taxed on worldwide income and non-resident citizens on income from the Philippines only. The video emphasizes the importance of establishing residency status through documents like visas and contracts, which can affect tax obligations and potentially estate taxes.
Takeaways
- 📚 The video discusses the classification of taxpayers based on residency for income tax purposes.
- 🏠 Resident citizens are those who reside within the Philippines and are defined by the 1987 Constitution.
- 🌐 Non-resident citizens are those who establish physical presence abroad with the intention to reside there.
- 🏢 Resident aliens are individuals who live in the Philippines but are not citizens.
- 🚀 Non-resident aliens are individuals who do not reside in the Philippines and are not citizens.
- 🔍 Non-resident aliens are further divided into those engaged in trade or business and those not engaged, based on their stay duration in the Philippines.
- 💼 Taxation for resident citizens includes income from both within and outside the Philippines.
- 🌍 Non-resident citizens are taxed only on income derived from within the Philippines.
- 🏦 Alien individuals, whether resident or not, are taxed only on income derived within the Philippines.
- 📑 Taxpayers' intentions regarding their stay are determined by submitting documents like visas and contracts to the Bureau of Internal Revenue (BIR).
- 👍 The video emphasizes the importance of understanding these classifications for both income and estate tax implications.
Q & A
What are the four classifications of taxpayers based on residency mentioned in the video?
-The four classifications of taxpayers based on residency are: Resident Citizen, Non-Resident Citizen, Resident Alien, and Non-Resident Alien.
According to the 1987 Philippine Constitution, who are considered citizens of the Philippines?
-According to the 1987 Constitution, citizens of the Philippines include those who were citizens at the time of the constitution's adoption, those whose fathers or mothers are citizens, those born before January 17, 1973 of Filipino mothers who elect Philippine citizenship upon reaching the age of majority, and those who are naturalized in accordance with the law.
What is the definition of a Non-Resident Citizen as per the Philippine Tax Code?
-A Non-Resident Citizen is defined as a citizen of the Philippines who establishes to the satisfaction of the Commissioner the fact of his physical presence abroad with the definite intention to reside therein.
What are the conditions for a citizen to be considered a Non-Resident Citizen for tax purposes?
-A citizen can be considered a Non-Resident Citizen for tax purposes if they leave the Philippines during the taxable year to reside abroad either as an immigrant or for employment on a permanent basis, work and derive income from abroad requiring them to be physically present abroad most of the time, or have been previously considered a Non-Resident Citizen and arrive in the Philippines to reside permanently.
What is the difference between a Resident Alien and a Non-Resident Alien?
-A Resident Alien is an individual who resides within the Philippines but is not a citizen thereof. A Non-Resident Alien is an individual whose residency is not in the Philippines and is not a citizen thereof.
How are Non-Resident Aliens classified for tax purposes in the Philippines?
-Non-Resident Aliens are classified based on their engagement in trade or business and their aggregate stay in the Philippines. If their stay is more than 180 days, they are engaged in trade or business. If their stay is 180 days or less, they are not engaged in trade or business.
How is the tax liability determined for Resident Citizens and Non-Resident Citizens?
-Resident Citizens are taxed on income derived within and outside of the Philippines, whereas Non-Resident Citizens are taxed on income derived within the Philippines only.
What is the tax liability for Alien individuals, whether Resident or Non-Resident, in the Philippines?
-Alien individuals, whether Resident or Non-Resident, are only taxed on income derived within the Philippines.
Why is the intention of the taxpayer with regards to the nature of their stay important for tax purposes?
-The intention of the taxpayer regarding the nature of their stay is important because it determines their residency status, which in turn affects how they are taxed and which tax regulations apply to them.
What documents can be submitted to the Bureau of Internal Revenue (BIR) to demonstrate the intention of residency?
-Documents such as visas, contracts, and others that show the intention of residency can be submitted to the BIR. For example, a Resident Citizen with a tourist visa would typically be classified as a Resident Citizen, while one with a working visa for three years might be reclassified as a Non-Resident Citizen upon departure.
How does understanding the classification of taxpayers based on residency relate to estate taxes?
-Understanding the classification of taxpayers based on residency is important for estate taxes as it determines the tax liabilities and regulations that apply to the estate of a deceased individual, especially concerning their residency status and the location of their assets.
Outlines
📚 Classification of Taxpayers Based on Residency
This tutorial video discusses the classification of taxpayers based on residency, which is crucial for income tax purposes. The presenter, Leroy, explains that the classification affects how individuals are taxed. The classifications include Resident Citizens, Non-Resident Citizens, Resident Aliens, and Non-Resident Aliens. Resident Citizens are those who live in the Philippines and are defined by the 1987 Constitution. Non-Resident Citizens are those who establish their intention to reside abroad, either as immigrants or for permanent employment. Resident Aliens are individuals living in the Philippines who are not citizens, while Non-Resident Aliens are not residents or citizens of the Philippines. The video further explains the sub-classifications of Non-Resident Aliens based on their business activities and duration of stay in the Philippines. The taxation rules differ for each classification, with Resident Citizens taxed on global income, Non-Resident Citizens on income from the Philippines, and Aliens on income derived within the Philippines. The presenter emphasizes the importance of understanding the taxpayer's intention regarding their stay, which can be demonstrated through documents like visas and contracts, and how this affects their tax residency status.
Mindmap
Keywords
💡Taxation
💡Residency
💡Resident Citizen
💡Non-Resident Citizen
💡Resident Alien
💡Non-Resident Alien
💡Income Tax
💡Tax Code
💡Intention of Stay
💡Taxpayer Classification
💡Gross Income
Highlights
Classification of taxpayers based on residency affects how they are taxed.
Resident citizens are defined by the 1987 Philippine Constitution.
Non-resident citizens are those with a definite intention to reside abroad.
Resident aliens are individuals residing in the Philippines but not citizens.
Non-resident aliens are further classified based on their stay and business activity in the Philippines.
Non-resident aliens engaged in trade or business are taxed if they stay more than 180 days.
Non-resident aliens not engaged in trade or business are taxed on gross income if they stay 180 days or less.
Resident citizens are taxed on worldwide income.
Non-resident citizens are taxed only on Philippine-sourced income.
Alien individuals are taxed on income derived within the Philippines, regardless of residency status.
Taxpayers' intentions regarding the nature of their stay determine residency for tax purposes.
Documents like visas and contracts are submitted to the BIR to demonstrate residency intentions.
A resident citizen with a tourist visa is still classified as a resident citizen.
A resident with a working visa for three years is reclassified as a non-resident upon departure.
Understanding taxpayer classification is crucial for income and estate taxation.
The tutorial connects to broader tax implications beyond income tax.
Transcripts
what's up guys this is leroy back to you
with another tutorial video on taxation
on this video i'm going to be talking
about classification of taxpayers
based on residency
so in terms of income taxes it's
important to determine the
classification of taxpayers
with regards to residency because this
affects how they are taxed
now the classification are as follows we
have resident citizen
non-resident citizen resident aliens
and non-resident aliens which shall be
further classified later
now when we say resident citizens as the
term suggests these are citizens who
reside
within the philippines the 1987
constitution defines the following as
citizens of the philippines first is
those who are citizens of the
philippines at the time of adoption
of the 1987 constitution and then those
whose fathers or mothers are citizens of
the philippines
third would be those born before january
17
1973 of filipino mothers who elect
philippine
citizenship upon reaching the age of
majority then lastly
those who are naturalized in accordance
with the law
next up is non-resident citizen the term
non-resident citizen according to the
tax code as amended
means a citizen of the philippines who
establishes to the satisfaction of the
commissioner
the fact of his physical presence abroad
with the definite intention
to reside therein so a citizen of the
philippines who leaves the philippines
during the taxable year
to reside abroad either as an immigrant
or for employment on a permanent basis
third would be a citizen of the
philippines who works
and derives income from abroad and whose
employment
they're at requires him to be physically
present abroad
most of the time during the taxable year
and then fourth one
a citizen who has been previously
considered as a non-resident citizen
and who arrives in the philippines at
that time during the taxable year to
reside permanently
in the philippines shall likewise be
treated as a non-resident citizen
for the taxable year in which he arrives
in the philippines
with respect to his income derived from
sources abroad
until the date of his arrival in the
philippines the third classification is
resident alien now the term resident
alien is
an individual who resides within the
philippines
but is not a citizen thereof lastly
non-resident aliens
are individuals whose residency is not
here in the philippines
and are not citizens thereof they are
further classified as
non-resident aliens engage in trade or
business
which are aliens whose aggregate stay in
the philippines
is more than 180 days the other
classification is
non-resident aliens not engaged in trade
or business
wherein their aggregate stay is 180 days
or less
so non-resident aliens not engage in
trade or business
are taxed based on gross income
under section 23 of the tax code as
amended resident citizens
are taxed on income derived within and
outside of the philippines whereas
non-resident citizens are taxed on
income
derived within the philippines only for
alien individuals regardless if they are
resident or not
they are only taxed on income derived
within the philippines
take note on the intention of the
taxpayer with regards to
nature of stay because this will
determine residency
now this is done by submitting documents
to the bir such as
visa contracts and others which show
the intention of residency some example
of this is a resident citizen
who has a tourist visa shall normally be
still classified as
a resident citizen whereas a resident
who has a working visa
for three years shall be reclassified as
non-resident citizen
upon departure and that's it so it's
important for us to understand this
topic
because it's not only connected in
income taxation but may also relate to
estate taxes so as always a huge thanks
for watching if you found this video
very helpful give it a thumbs up
and make sure to check out the relevant
content at the end of this video
so make sure to subscribe and hit that
notification bell
so this is gerard and i'll talk to you
in the next one
you
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