CHAPTER 13 SOURCES OF INCOME

Classification of Income According to Source

1. Income which is derived in full from sources within the Philippines

2. Income which is derived in full from sources without the Philippines
3. Income which is derived partly from sources within and partly from sources without the
Philippines

2 Basic Principles:

4. Resident citizens & DCs – taxable on all income derived from sources both within and without
the Philippines
5. Non-resident citizens (OCWs, resident & non-resident aliens, FCs) - taxable only on income
derived from sources both within the Philippines

Source of income – activity/property/labor that give rise or produced income

Situs of income – place of taxation of the income/country which has the jurisdiction to impose the tax

Sources of Income

A. Gross Income From Sources Within the PH

1. Interest – interest income derived from sources within PH, interest income on bonds, notes
or other interest-bearing obligations of residents, corporate or otherwise
2. Dividends –
a. From a DC
b. From a FC – unless less than 50% of GI of such FC for the 3-year period preceding the
dividend declaration was derived from sources within PH
 Bears the same ratio to such dividends as the GI of the corporation for such
period derived from sources within PH
3. Services – compensation for labor/personal services performed in the PH
 If no accurate allocation/labor or service is performed partly within and partly
without the PH – amount included in GI shall be determined by apportionment
based on time
4. Rentals and royalties – from property located in the PH including
a. The use of/right or privilege to use any copyright, patent, design or model, plan, secret
formula/process, goodwill, trademark, trade brand, or other like property/right in the
PH
b. The use of/right or privilege to use any industrial, commercial, or scientific equipment in
the PH
c. Supply of scientific, technical, industrial, or commercial knowledge or info.
d. Supply of assistance that is ancillary & subsidiary to enabling the application or
enjoyment of property/right mentioned (a), (b), (c)
e. Supply of services by a non-resident person or his employee in connection with the use
of property/rights belonging to such non-resident person
f. Technical advice/assistance/services rendered in connection with technical
management or administration of scientific, technical, or commercial undertaking,
venture, project or scheme
g. The use of or right to use:
 Motion picture films
 Films/video tapes for use in connection with television
 Tapes for use in connection with radio broadcasting