Please enable JavaScript.

Coggle requires JavaScript to display documents.

VIII. INCOME TAXATION OF FOREIGN PERSONS - Coggle Diagram

- - - - D. RESIDENT FOREIGN CORPORATION vs. NON-RESIDENT FOREIGN CORPORATION
        
        E. SOURCE RULES FOR VARIOUS ITEMS OF INCOME
        
        F. SPECIAL TREATMENT OF CERTAIN FOREIGN PERSONS or SOME ITEMS OF INCOME
        
        INCOME WITHIN PH
        SEC. 42. Income from Sources Within the Philippines. -
        (A) Gross Income from Sources Within the Philippines. - The following items of gross income shall be treated as gross income from sources within the Philippines:
        
        INTEREST: SOURCES IN PH
        (1) Interests. - Interests derived from sources within the Philippines, and interests on bonds, notes or other interest-bearing obligation of residents, corporate or otherwise;
        
        DIVIDENDS: DOMI-CORP
        (2) Dividends. - The amount received as dividends:
        (a) From a domestic corporation; and
        DIVIDENDS: FOREIGN CORP
        50% and ABOVE PH INCOME
        (PH INCOME/WORLD INCOME)
        (b) From a foreign corporation,
        unless less than fifty percent (50%) of the gross income of such foreign corporation for the three-year period ending with the close of its taxable year preceding the declaration of such dividends or for such part of such period as the corporation has been in existence) was derived from sources within the Philippines as determined under the provisions of this Section;
        but only in an amount which bears the same ratio to such dividends as the gross income of the corporation for such period derived from sources within the Philippines bears to its gross income from all sources;
        
        SERVICES
        (3) Services. - Compensation for labor or personal services performed in the Philippines;
        
        2 more items...
        
        TAXABLE INCOME IN PH
        (B) Taxable Income From Sources Within the Philippines. –
        
        (1) General Rule. - From the items of gross income specified in Subsection (A) of this Section, there shall be deducted the expenses, losses and other deductions properly allocated thereto and a ratable part of expenses, interests, losses and other deductions effectively connected with the business or trade conducted exclusively within the Philippines which cannot definitely be allocated to some items or class of gross income:
        
        (2) Exception. - No deductions for interest paid or incurred abroad shall be allowed from the item of gross income specified in subsection (A) unless indebtedness was actually incurred to provide funds for use in connection with the conduct or operation of tra
        
        Provided, That such items of deductions shall be allowed only if fully substantiated by all the information necessary for its calculation. The remainder, if any, shall be treated in full as taxable income from sources within the Philippines.
        
        GROSS INCOME NOT IN PH
        (C) Gross Income From Sources Without the Philippines. - The following items of gross income shall be treated as income from sources without the Philippines:
        
        INTEREST: SOURCE SITUS
        (1) Interests other than those derived from sources within the Philippines as provided in paragraph (1) of Subsection (A) of this Section;
        
        DIVIDENDS: SOURCE SITUS
        (2) Dividends other than those derived from sources within the Philippines as provided in paragraph (2) of Subsection (A) of this Section;
        
        LABOR/SERVICES: PERFORMANCE
        (3) Compensation for labor or personal services performed without the Philippines;
        
        RENT/ROYAL: PROP LOCATION
        (4) Rentals or royalties from property located without the Philippines or from any interest in such property
        including rentals or royalties for the use of or for the privilege of using without the Philippines, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises and other like properties; and
        
        REAL PROPERTY: LOCATION
        (5) Gains, profits and income from the sale of real property located without the Philippines.
        
        DEDUCTIONS:
        EXPENSES, LOSSES, AND OTHER DEDUCTIONS
        (D) Taxable Income From Sources Without the Philippines. -
        From the items of gross income specified in Subsection (C) of this Section, there shall be deducted the expenses, losses, and other deductions
        
        2 more items...
        
        (E) Income From Sources Partly Within and Partly Without the Philippines.- Items of gross income, expenses, losses and deductions, other than those specified in Subsections (A) and (C) of this Section, shall be allocated or apportioned to sources within or without the Philippines, under the rules and regulations prescribed by the Secretary of Finance, upon recommendation of the Commissioner.
        
        2 more items...