Item No. 1 - Taxable Period: 1. Purely Compensation Income Earner BIR Annual Income Tax Return (ITR) Form No. 1700

1.
PURELY COMPENSATION INCOME EARNER

BIR Annual Income Tax Return (ITR)
Form No. 1700
Item No. 1 – Taxable Period
Taxable Year – It determines for what year the present Annual Income
Tax Return is to be filed. It may be Calendar Year or Fiscal Year.
Under the National Internal Revenue Code (NIRC), rules and

jurisprudence, the Calendar Year is any 12-month period beginning from
January and ending in December. The Fiscal Year is any 12-month period
beginning anytime, beginning in the first of the month, except January but
ending after the 12-month period.
Section 22. Definitions. When used in this Title:
(P) The term ‘taxable year’ means the calendar year, or the fiscal year
ending during such calendar year, upon the basis of which the net
income is computed under this Title. ‘Taxable year’ includes, in the case
of a return made for a fractional part of a year under the provisions of
this Title or under rules and regulations prescribed by the Secretary of
Finance, upon recommendation of the Commissioner, the period for
which such return is made.
For individual taxpayers, whether engaged in trade or business or not,

they are only allowed to choose the calendar year for purposes of filing income
tax. Only corporations, they can choose between fiscal year or calendar year for
purposes of filing income tax. Hence, Compensation Income Earners are only
allowed to file income tax using the Calendar year as taxable period.
Item No.2 – If the current ITR is an Amended Return
The purpose and relevance of this item is that if the Self-Employed

Individual filed an amended return for possibility of taxes paid before amending
the return.
Section 6.
Any return, statement of declaration filed in any office authorized to

receive the same shall not be withdrawn: Provided, That within three (3)
years from the date of such filing, the same may be modified, changed,
or amended: Provided, further, That no notice for audit or investigation
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of such return, statement or declaration has in the meantime been
actually served upon the taxpayer.
Section 74. Declaration of Income Tax for Individuals. –
(A) In General. - Except as otherwise provided in this Section, every

individual subject to income tax under Sections 24 and 25(A) of this
Title, who is receiving self-employment income, whether it constitutes
the sole source of his income or in combination with salaries, wages
and other fixed or determinable income, shall make and file a
declaration of his estimated income for the current taxable year on or
before April 15 of the same taxable year. In general, 'self-employment
income' consists of the earnings derived by the individual from the
practice of profession or conduct of trade or business carried on by him
as a sole proprietor or by a partnership of which he is a member.
Nonresident Filipino citizens, with respect to income from without the
Philippines, and nonresident aliens not engaged in trade or business in
the Philippines, are not required to render a declaration of estimated
income tax. The declaration shall contain such pertinent information as
the Secretary of Finance, upon recommendation of the Commissioner,
may, by rules and regulations prescribe. An individual may make
amendments of a declaration filed during the taxable year under the
rules and regulations prescribed by the Secretary of Finance, upon
recommendation of the Commissioner.
This item is also important as to the date of such filing of the amended
return will have an effect on the reckoning period for purposes of the remedy of
taxpayer in protesting the validity of the assessment of income tax of the BIR
and the recovery of excessive and illegally collected taxes under Section 203
and 229 of the Tax Code.
Section 203. Period of Limitation Upon Assessment and
Collection. –
Except as provided in Section 222, internal revenue taxes shall be

assessed within three (3) years after the last day prescribed by law for
the filing of the return, and no proceeding in court without assessment
for the collection of such taxes shall be begun after the expiration of
such period: Provided, That in a case where a return is filed beyond the
period prescribed by law, the three (3)-year period shall be counted
from the day the return was filed. For purposes of this Section, a return
filed before the last day prescribed by law for the filing thereof shall be
considered as filed on such last day.
Section 229. Recovery of Tax Erroneously or Illegally Collected. –
No suit or proceeding shall be maintained in any court for the recovery

of any national internal revenue tax hereafter alleged to have been
erroneously or illegally assessed or collected, or of any penalty claimed
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to have been collected without authority, or of any sum alleged to have
been excessively or in any manner wrongfully collected without
authority, or of any sum alleged to have been excessively or in any
manner wrongfully collected, until a claim for refund or credit has been
duly filed with the Commissioner; but such suit or proceeding may be
maintained, whether or not such tax, penalty, or sum has been paid
under protest or duress.
In any case, no such suit or proceeding shall be filed after the expiration
of two (2) years from the date of payment of the tax or penalty
regardless of any supervening cause that may arise after payment:
Provided, however, That the Commissioner may, even without a written

claim therefor, refund or credit any tax, where on the face of the return
upon which payment was made, such payment appears clearly to have
been erroneously paid.
Under jurisprudence, if the amendment to the ITR is not substantial in
determining his income tax liability and the taxpayer paid the assessed tax, the
original date of the filing of the ITR will be considered as the date of the filing of
such despite the amendment. If the amendment is substantial, the date of the
filing of the amended return will be considered as the date of the filing of the
return of the taxpayer who paid thereafter and for purposes of reckoning
period, such date will be considered, if the taxpayer subsequently realized that
after filing the amended return, the tax paid is erroneous or illegally collected.
Item No. 3 – Alphanumeric Tax Code
This is provided for by BIR in the Form itself as 1011 for purposes of
what category of tax is paid for by the taxpayer. Alphanumeric tax codes (ATCs)
reflects the type of tax to be paid. They are indicated in tax returns,
representing the actual rate and type of tax to be paid.
PART I – BACKGROUND INFORMATION ON TAXPAYER/FILER
Item No. 4 – Taxpayer’s Identification No. (TIN No.)
The relevance of this item is the (TIN) supplied by the BIR to a taxpayer
as provided for under the NIRC under the Chapter on Administrative Provisions
particularly Section 236 (I) on Registration Requirements.
Section 236. Registration Requirements

xxxx
(I) Supplying of Taxpayer Identification Number (TIN). – Any
person required under the authority of this Code to make, render or file
a return, statement or other document shall be supplied with or
assigned a Taxpayer Identification Number (TIN) which he shall indicate
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in such return, statement or document filed with the Bureau of Internal
Revenue for his proper identification for tax purposes, and which he
shall indicate in certain documents. x x x x
x x x x In cases where a registered taxpayer dies, the administrator or

executor shall register the estate of the decedent in accordance with
Subsection (A) hereof and a new Taxpayer Identification Number (TIN)
shall be supplied in accordance with the provisions of this Section.
In the case of a non-resident decedent, the executor or administrator of

the estate shall register the estate with the Revenue District Office
where he is registered: Provided, however; That in case such executor
or administrator is not registered, registration of the estate shall be
made with and the Taxpayer Identification Number (TIN) supplied by
the Revenue District Office having jurisdiction over his legal residence.
Only one Taxpayer Identification Number (TIN) shall be assigned to a

taxpayer. Any person who shall secure more than one Taxpayer
Identification Number shall be criminally liable under the provisions of
Section 275 on ‘Violation of Other Provisions of this Code or Regulations
in General.”
Item No. 5 – Revenue District Office Code (RDO)
This is the Code as designated by the BIR which corresponds to the

Revenue District Office (RDO) which is where the Compensation Income Earner
will file his ITR in which such RDO is determined by basis on the address
provided for by the individual taxpayer. Section 51 (B) of the Tax Code
provides:
Section. 51. Individual Returns
(B) Where to File. - Except in cases where the Commissioner otherwise

permits, the return shall be filed with an authorized agent bank,
Revenue District Officer, Collection Agent or duly authorized Treasurer
of the city or municipality in which such person has his legal residence
or principal place of business in the Philippines, or if there be no legal
residence or place of business in the Philippines, with the Office of the
Commissioner.
Item No. 6 – Taxpayer Type (Employee or NRANETB)
The purpose and relevance of this item is the difference of the applicable
tax rates to be used in imposing the income tax liability of the Compensation
Income Earner upon filing the ITR, as indicated, “Employee” or “NRANETB”.
This item is to determine that if the Compensation Income Earner is an
“Employee”, which pertains to whether Resident Citizen (RC), Non-Resident
Citizen (NRC), Resident Alien (RA) or “Non-Resident Alien Engaged in Trade or
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Business (NRAETB)”, to which the Tax Code imposes the regular tax rates
under Section 24 or on the other hand a Non-Resident Alien Not Engaged in
Trade or Business (NRANETB), to which the Tax Code imposes a different rate
of 25% for his compensation income. This flows from the rule that their income
is taxable for those derived arising out of Employer-Employee relationship
being a Compensation Income Earner.
A Resident Citizen (RC) is a citizen of the Philippines and residing
therein. They are physically staying or present in the Philippines or has an
intention to reside here permanently or those who are absent but has an
intention to return thereto.
Under the NIRC, Section 23 (A) provides that a citizen of the Philippines
residing (RC) therein is taxable on all income from sources within and without
the Philippines.
Section 23 (B) then provides that a Non-Resident Citizen (NRC) is taxable
only on income derived from sources within the Philippines.
Section 22 defined who are Non-Resident Citizens:

(E) The term ‘non-resident citizen’ means:
(1) A citizen of the Philippines who establishes to the satisfaction of the

Commissioner the fact of his physical presence abroad with a definite
intention to reside therein.
(2) 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.
(3) A citizen of the Philippines who works and derives income from
abroad and whose employment thereat requires him to be physically
present abroad most of the time during the taxable year.
(4) A citizen who has been previously considered as nonresident citizen

and who arrives in the Philippines at any time during the taxable year
to reside permanently in the Philippines shall likewise be treated as a
nonresident 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.
Section 22 (F) provides that the term ‘Resident Alien’ means an
individual whose residence is within the Philippines and who is not a citizen
thereof. Section 22 (G) provides that the term ‘Non-Resident Alien’ means an
individual whose residence is not within the Philippines and who is not a
citizen thereof.
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Sec.23 (D) provides that an alien individual, whether a resident or not of
the Philippines (RA) or (NRA), is taxable only on income derived from sources
within the Philippines.
Then applying Sec. 24 (a) (2), it provides that for Compensation Income
Earner (CIE) individual taxpayers whether RC, NRC or NRAETB, they are
subject to Net Income Tax Rates (NIT) under the Tax Code.
Section 24. Income Tax Rates
(A) (2) (c):
(1) All Income from Compensation – The rates prescribed under

Subsection (A)(2)(a) of this Section.
However, for the Compensation Income of the NRANETB, Section 25

provides that all his income is subject to Gross Income Tax (GIT), which is
taxed by Final Tax at the rate of 25 %.
Section 25. Tax on Non-Resident Alien Individual
(B) Non-resident Alien Individual Not Engaged in Trade or Business

Within the Philippines. –There shall be levied, collected and paid for
each taxable year upon the entire income received from all sources
within the Philippines by every non-resident alien individual not
engaged in trade or business within the Philippines as interest, cash
and/or property dividends, rents, salaries, wages, premiums,
annuities, compensation, remuneration, emoluments, or other fixed or
determinable annual or periodic or casual gains, profits, and income,
and capital gains, a tax equal to twenty-five percent (25%) of such
income.
This is the purpose and relevance of this item on Taxpayer Type on

whether the Compensation Income Earner is an Employee or Non-Resident
Alien Not Engaged in Trade or Business (NRANETB). The applicable tax rates
are different upon the filing of the ITR.
Item No. 7 – Taxpayer’s Name
The purpose and relevance of this to determine who is filing the current
Income Tax Return (ITR) and upon whom the assessment upon which the
ultimate tax liability will be imposed.
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Item No. 8 – Registered Address
The purpose and relevance of this item is to determine the present

address of the individual taxpayer indicated in item no. 7 as registered in the
records of the BIR for purposes of filing of ITR. It also pertains to the place
where the BIR will send its pre-assessment notice (PAN) and final-assessment
notice (PAN) and other notices and inquiries it makes in accordance to its
powers to assess and collect taxes under the Tax Code, based upon the income
tax return filed to impose upon the taxpayer his tax liability for the taxable
period indicated in the return. This is pursuant to the requirements under
Section 51 (A) (5) (a).
Section 51. Individual Return. –
(A) Requirements. –
(5) The income tax return (ITR) shall consist of a maximum of four (4)
pages in paper form or electronic form, and shall only contain the
following information:
(a) Personal profile and information;
Item No. 8A – Zip Code
The purpose and relevance of this in relation to item no. 8 for mailing
purposes of notices and inquiries of BIR corresponding to the registered
address of the individual taxpayer filing the return.
Item No. 9 – Date of Birth
The purpose and relevance of this item is to determine the date of birth
of the individual taxpayer. This is pursuant to the requirements under Section
51 (A) (5) (a).
Item No. 10 – Email Address
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The purpose and relevance of this item is to determine email address of
the individual taxpayer for electronic communication. This is pursuant to the
requirements under Section 51 (A) (5) (a).
Item No. 11 – Citizenship
The purpose and relevance of this item is in relation to item no. 6 to

determine the applicable tax rates as Compensation Income Earner.
As the rule is that their income is taxable for those derived arising out of
Employer-Employee relationship being a Compensation Income Earner for RC,
NRC, RA, NRAETB or NRANETB, there are differences
the Philippines.
Therefore, for RC, if he indicates in this item that he or she is a Filipino,
upon establishing that he or she is staying here or has an intention to reside
permanently, all his compensation income is within and outside the Philippines
is taxable. But if he establishes that he is a NRC under the situations under
Section 22 (E) upon inquiry by BIR, his compensation income derived only
within the Philippines is taxable.
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citizen thereof.
Hence, if the taxpayer indicates in this item that he or she is not a
Filipino, it means that he or she is an alien. He will then establish upon inquiry
of the BIR of whether he is a Resident Alien (RA), Non-Resident Alien (NRA),
engaged in business or not, (NRAETB) or (NRANETB). However, their
compensation income derived from only from sources within the Philippines is
taxable.
Item No. 12 – Claiming Foreign Tax Credits
The purpose and relevance of this item is the desire of Compensation

Income Earner to claim foreign tax credits under the Tax Code.
However, it not is allowed as a deduction from gross income of a

compensation income earner individual taxpayer, on the category of taxes
under Section 34 (C) (3) (b) of the Tax Code which provides:
Section 34. Deductions from Gross Income. – Except for taxpayers
earning compensation income arising from personal services rendered
under an employer-employee relationship where no deductions shall be
allowed under this Section, in computing taxable income subject to
income tax under Sections 24(A); 25(A); 26; 27(A), (B), and (C); and
28(A)(1), there shall be allowed the following deductions from gross
income:
(3) Credit Against Tax for Taxes of Foreign Countries. – If the taxpayer
signifies in his return his desire to have the benefits of this paragraph,
the tax imposed by this Title shall be credited with:
(a) Citizen and Domestic Corporation. – In the case of a citizen of the

Philippines and of a domestic corporation, the amount of income taxes
paid or incurred during the taxable year to any foreign country; and
(b) Partnerships and Estates. – In the case of any such individual who
is a member of a general professional partnership or a beneficiary of an
estate or trust, his proportionate share of such taxes of the general
professional partnership or the estate or trust paid or incurred during
the taxable year to a foreign country, if his distributive share of the
income of such partnership or trust is reported for taxation under this
Title.
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An alien individual and a foreign corporation shall not be allowed the
credits against the tax for the taxes of foreign countries allowed under
this paragraph.
The provision also expressly states that alien individual, whether, RA,
NRAETB or NRAETB, are not allowed the credits against the tax for the taxes of
foreign countries allowed under Section 34 (C) (3) (b).
Item No. 13 – Foreign Tax Number
This purpose of this is in relation to item no. 12 in claiming foreign tax

credits. This is with the process of the BIR in verifying the validity and
correctness in determining the amount of taxes paid abroad to be allowed as
deduction to the gross income of the Compensation Income Earner as tax
credit.
Item No. 14 – Contact Number
The purpose and relevance of this item is to inform BIR of contact

information of the individual taxpayer for communication purposes. This is
pursuant to the requirements under Section 51 (A) (5) (a).
Item No. 15 – Civil Status
The purpose and relevance of this item is in relation for the manner of
filing of the income tax return.
If the Compensation Income Earner indicated that he is “Single”, he will

file the return on the basis solely of his earned income for the taxable period to
determine his taxable income. However, if he indicates that he is “Married”, the
filing of the return and the conditions therein to arrive at the taxable income
will be governed by the following provisions under the Tax Code:
Section 24 - Income Tax Rates.
(A) (2) (a)
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For married individuals, the husband and wife, subject to the provision
of Section 51 (D) hereof, shall compute separately their individual
income tax based on their respective total taxable income: Provided,
That if any income cannot be definitely attributed to or identified as
income exclusively earned or realized by either of the spouses, the
same shall be divided equally between the spouses for the purpose of
determining their respective taxable income.
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Section 51. Individual Return.
(D) Husband and Wife. – Married individuals, whether citizens, resident
or non-resident aliens, who do not derive income purely from
compensation, shall file a return for the taxable year to include the
income of both spouses, but where it is impracticable for the spouses to
file one return, each spouse may file a separate return of income but the
returns so filed shall be consolidated by the Bureau for purposes of
verification for the taxable year.
As a rule, Section 51 above provides that married individuals whether
resident or non-resident aliens, who do not derive income purely from
compensation income, are not required to file an income tax return to include
the income of both spouses. However, as an exception, each spouse may file a
separate return of income, if it is impracticable for the spouses to file one
return. The returns shall be consolidated by BIR for purposes of verification for
the taxable year.
If the Compensation income earner indicates that he or she is married,

they shall file separately their income tax returns on their respective total
taxable income under Section 24 (A) (2) (a) in relation to Section 51 (D).
However, if after such separate filing of income tax returns for both
spouses, some income cannot clearly be attributed as income exclusively
realized by either of them, those income will be divided equally between them
to arrive at each of their final taxable income
Item No. 16 – Spouse Indication
The purpose and relevance of this item is in relation to item no. 15 for
matters of filing method of spouses to determine the taxable income. If the
individual taxpayer indicated that he or she has a spouse, the BIR will further
inquire on the manner of filing and if separate filing was done, details will be
further required to the taxpayer filing the current return, to determine their
respective taxable income.
Item No. 17 – Filing Status
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The purpose and relevance of this item is in relation to items no. 15 and
16 for matters of filing method of spouses to determine the taxable income in
accordance with Sections 24 (A) (2) (a) and 51 (D) for the separate filing of each
spouse’ income tax return.
If joint filing is indicated, the taxable income will be determined

considering the income of both spouses for the taxable year. If separate filing is
indicated, their returns shall be consolidated by BIR for verification for the
taxable year, and their individual income tax will be based on their respective
total taxable income.
PART II – BACKGROUND INFORMATION ON SPOUSE
Item No. 18 – Spouse’s TIN
The purpose and relevance of this item is in relation to item no. 1. This is
for the BIR to look for the records of the spouse’s income tax return in relation
to the current income tax return to be filed by the other spouse, whether they
are jointly filing their income tax return or if they are separately filing. This is
for consolidation purposes of the BIR for the other spouse’s income tax return
with the current ITR to be filed also by one of the spouses as provided in
Section 51(D)
The relevance of this item is the (TIN) supplied by the BIR to a taxpayer as
provided for under the NIRC under the Chapter on Administrative Provisions
particularly Section 236 (I) on Registration Requirements.
Section 236. Registration Requirements

xxxx
(I) Supplying of Taxpayer Identification Number (TIN). – Any
person required under the authority of this Code to make, render or file
a return, statement or other document shall be supplied with or
assigned a Taxpayer Identification Number (TIN) which he shall indicate
in such return, statement or document filed with the Bureau of Internal
Revenue for his proper identification for tax purposes, and which he
shall indicate in certain documents. x x x x
x x x x In cases where a registered taxpayer dies, the administrator or

executor shall register the estate of the decedent in accordance with
Subsection (A) hereof and a new Taxpayer Identification Number (TIN)
shall be supplied in accordance with the provisions of this Section.
In the case of a non-resident decedent, the executor or administrator of

the estate shall register the estate with the Revenue District Office
where he is registered: Provided, however; That in case such executor
or administrator is not registered, registration of the estate shall be
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made with and the Taxpayer Identification Number (TIN) supplied by
the Revenue District Office having jurisdiction over his legal residence.
Only one Taxpayer Identification Number (TIN) shall be assigned to a

taxpayer. Any person who shall secure more than one Taxpayer
Identification Number shall be criminally liable under the provisions of
Section 275 on ‘Violation of Other Provisions of this Code or Regulations
in General.”
Item No. 19 – Revenue District Office Code (RDO) of Spouse
This is the Code as designated by the BIR which corresponds to the

Revenue District Office (RDO) which is where the spouse of the Compensation
Income Earner files his ITR in which such RDO is determined by basis on the
address provided for by the spouse as individual taxpayer. Section 51 (B) of the
Tax Code provides:
Section. 51. Individual Returns
(B) Where to File. - Except in cases where the Commissioner otherwise

permits, the return shall be filed with an authorized agent bank,
Revenue District Officer, Collection Agent or duly authorized
Treasurer of the city or municipality in which such person has his legal
residence or principal place of business in the Philippines, or if there be
no legal residence or place of business in the Philippines, with the Office
of the Commissioner.
Item No. 20 – Taxpayer Type of Spouse (Employee or NRANETB)
The purpose and relevance of this item is to aid the BIR and determine
the applicable tax rates to be used in imposing the income tax liability of the
spouse of the Compensation Income Earner upon filing the ITR, as indicated,
“Employee” or “NRANETB”.
This item is to determine that if the Compensation Income Earner is an
“Employee”, which pertains to whether Resident Citizen (RC), Non-Resident
Citizen (NRC), Resident Alien (RA) or “Non-Resident Alien Engaged in Trade or
Business (NRAETB)”, to which the Tax Code imposes the regular tax rates
under Section 24 or on the other hand a Non-Resident Alien Not Engaged in
Trade or Business (NRANETB), to which the Tax Code imposes a different rate
of 25% for his compensation income. This flows from the rule that their income
is taxable for those derived arising out of Employer-Employee relationship
being a Compensation Income Earner.
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the Philippines.
Section 22 defined who are Non-Resident Citizens:

(E) The term ‘non-resident citizen’ means:
(1) A citizen of the Philippines who establishes to the satisfaction of the

Commissioner the fact of his physical presence abroad with a definite
intention to reside therein.
(2) 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.
(3) A citizen of the Philippines who works and derives income from
abroad and whose employment thereat requires him to be physically
present abroad most of the time during the taxable year.
(4) A citizen who has been previously considered as nonresident citizen

and who arrives in the Philippines at any time during the taxable year
to reside permanently in the Philippines shall likewise be treated as a
nonresident 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.
citizen thereof.
Then applying Sec. 24 (a) (2), it provides that for Compensation Income
Earner (CIE) individual taxpayers whether RC, NRC or NRAETB, they are
subject to Net Income Tax Rates (NIT) under the Tax Code.
Section 24. Income Tax Rates
(A) (2) (c):
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(1) All Income from Compensation – The rates prescribed under
Subsection (A)(2)(a) of this Section.
However, for the Compensation Income of the NRANETB, Section 25

provides that all his income is subject to Gross Income Tax (GIT), which is
taxed by Final Tax at the rate of 25 %.

income.
This is the purpose and relevance of this item on Taxpayer Type on

whether the Compensation Income Earner is an Employee or Non-Resident
Alien Not Engaged in Trade or Business (NRANETB). The applicable tax rates
are different upon the filing of the ITR.
Item No. 21 – Spouse’s Name
The purpose and relevance of this to determine for the identification of

the spouse of the one filing the current Income Tax Return (ITR) and upon
whom the assessment upon which the ultimate tax liability will be imposed.
This is for consolidation purposes of the BIR for the other spouse’s ITR with the
current ITR to be filed also by one of the spouses as provided in Section 51(D).
This is pursuant to the requirements under Section 51 (A) (5) (a).
Item No. 22 – Contact Number of Spouse
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The purpose and relevance of this to determine for the identification of
the spouse of the one filing the current Income Tax Return (ITR) and upon
whom the assessment upon which the ultimate tax liability will be imposed.
This is for consolidation purposes of the BIR for the other spouse’s ITR with the
current ITR to be filed also by one of the spouses as provided in Section 51(D).
Item No. 23 – Citizenship
The purpose and relevance of this item is in relation to item no. 6 to

determine the applicable tax rates of the spouse of the Compensation Income
Earner currently filing his ITR, whether joint filing or separate filing as their
incomes are consolidated to determine their respective total taxable income.
As the rule is that their income is taxable for those derived arising out of
Employer-Employee relationship being a Compensation Income Earner for RC,
NRC, RA, NRAETB or NRANETB, there are differences
the Philippines.
Therefore, for RC, if he indicates in this item that he or she is a Filipino,
upon establishing that he or she is staying here or has an intention to reside
permanently, all his compensation income is within and outside the Philippines
is taxable. But if he establishes that he is a NRC under the situations under
Section 22 (E) upon inquiry by BIR, his compensation income derived only
within the Philippines is taxable.
citizen thereof.
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Hence, if the taxpayer indicates in this item that he or she is not a
Filipino, it means that he or she is an alien. He will then establish upon inquiry
of the BIR of whether he is a Resident Alien (RA), Non-Resident Alien (NRA),
engaged in business or not, (NRAETB) or (NRANETB). However, their
compensation income derived from only from sources within the Philippines is
taxable.
Item No. 24 – Claiming Foreign Tax Credits
The purpose and relevance of this item is the applicability for the spouse
of the Compensation Income Earner to claim foreign tax credits under the Tax
Code in determining their respective total tax liability as spouses.
Foreign Tax Credits is allowed as a deduction from gross income of the

spouse of a compensation income earner individual taxpayer as long as the
spouse is not a Compensation Income Earner and not an alien individual,
expressly provided under Section 34 (C) (3) of the Tax Code which provides:
income:
(3) Credit Against Tax for Taxes of Foreign Countries. – If the taxpayer
signifies in his return his desire to have the benefits of this paragraph,
the tax imposed by this Title shall be credited with:
(a) Citizen and Domestic Corporation. – In the case of a citizen of the

Philippines and of a domestic corporation, the amount of income taxes
paid or incurred during the taxable year to any foreign country; and
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this paragraph.
As a Resident Citizen (RC) is taxable on all income derived from

worldwide sources and Non-Resident Citizen (NRC) for taxes derived within, it
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is possible that the foreign-source income was also subjected to taxation in the
country from which it was derived. Another importance of this is to minimize
the possibility of double taxation which the taxpayer may avail of the benefits
provided under an applicable and effective tax treaty, which may either be in
the form of tax exemption or a preferential tax rate. The amount of income
taxes paid during the taxable year to any foreign country may be used as
credits against Philippine income taxes.
The provision expressly states that alien individual, whether, RA,

NRAETB or NRAETB, are not allowed the credits against the tax for the taxes of
foreign countries allowed under Section 34.
Hence, it is possible that the Compensation Income of the spouse of the

present CIE individual taxpayer is a RC or NRC derived from abroad was
already taxed by the taxing authority of the foreign country. He or she may
indicate in the ITR that he or she wants to claim such taxes paid as tax credit
in the current taxable period subject of the return.
To avail of this benefit, the taxpayer must submit a Certificate of

Residency (COR) to the tax authority of the foreign jurisdiction to prove that he
is a resident of the tax partner treaty of said foreign country. A COR shall only
be issued to resident taxpayer with an existing Tax Identification Number (TIN)
who has complied with the documentary requirements prescribed by BIR.
Item No. 25 – Foreign Tax Number for Spouse
This purpose and relevance of this is in relation to item no. 12 in

claiming foreign tax credits of the spouse of the current CIE individual
taxpayer, in determining is total taxable income whether his or her ITR is
jointly or separately filed the other spouse. This is with the process of the BIR
in verifying the validity and correctness in determining the amount of taxes
paid abroad to be allowed as deduction to the gross income of the
Compensation Income Earner as tax credit.
PART III – TOTAL TAX PAYABLE
Item No. 26 – Tax Due
The purpose and relevance of this item is the tax due to be paid by the
Compensation Income Earner either as an Employee RC, NRC or RA or an
Employee NRANETB. The amount to be indicated in this item is referred to as
the tax payable after the determining the net taxable income and applying the
graduated income tax rates or the 25 % Final Tax on gross or NRANETB.
This item is the same as that of item of either 47 A or B or 53 A or B,

meaning either of the taxpayer or the spouse depending on whether the
Compensation Income Earner is subject to the graduated income tax rates if he
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is a RC, NRC or RA or subject to 25% Final Tax on gross income if he is a
NRANETB. The mentioned items and their relevance are further discussed
below.
Item No. 27 – Less Total Tax Credits/Payments
The purpose of this item is to indicate the amount from item 58 A or B,

meaning either of the taxpayer or the spouse pertaining to the summation of
the total credits or tax payments withheld or paid under items 54 to 57 which
will be deducted from item no. 26. In order to arrive at the Net Tax Payable, or
Overpayment of the Compensation Income Earner if it appears the result will
be in the negative.
Item No. 28 – Net Tax Payable / (Overpayment)
The purpose and relevance of this item is the indicated amount arrived at
after deducting the amount in item no. 27 from item no. 26. It is called the Net
Taxable Payable if it not appears to be in the negative. It is called Overpayment
if it appears in the negative in which the combined taxes withheld with the
credits availed of and taxes previously paid if the current return is an amended
return, is in excess after deducting the tax due computed.
Item No. 29 – Less: Portion of Tax Payable Allowed for 2 nd Installment to

be paid on or before October 15 (50% or less of item 26) (not applicable to
NRANETB)
The purpose and relevance of this item is the allowed amount by which
the Compensation Income Earner will be deducting from the Net Tax Payable or
Overpayment in item 28 that he will pay for this current return, if he desired to
avail of the option to pay the remaining balance by installment on or before
October 15 after filing this return as provided under Section 56 of the Tax
Code. This is available only for Compensation Income Earners subject to the
graduated income tax rates. Hence, not applicable for NRANETB.
Section 56. Payment and Assessment of Income Tax for
Individuals and Corporations. –
(A) Payment of Tax. –
(2) Installment of Payment. – When a tax due is in excess of Two

thousand pesos (PhP2,000), the taxpayer other National Tax Research
Center 109 than a corporation, may elect to pay the tax in two (2) equal
installments, in which case, the first installment shall be paid at the
time the return is filed and the second installment on or before October
15 following the close of the calendar year, if any installment is not
paid on or before the date fixed for its payment, the whole amount of
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the tax unpaid becomes due and payable together with the delinquency
penalties.
Item No. 30 – Amount of Tax Payable / (Overpayment)
The purpose and relevance of this item is the indication of the sum after
the amount in item no. 29, referring to the portion of the tax due computed
after computing the net taxable income and the income tax rates, is deducted
from item no. 28. It is called the Taxable Payable if it not appears to be in the
negative. It is called Overpayment if it appears in the negative in which the
combined taxes withheld with the credits availed of and taxes previously paid if
the current return is an amended return, is in excess after deducting item no.
29 representing the portion of the tax due to be paid on installment.
PENALTIES
Item No. 31 – Surcharge
The purpose and relevance of this item is for the imposition of the BIR of
surcharge civil penalty to the Compensation Income Earner under Section 248
of the Tax Code.
Section. 248. - Civil Penalties.
(A) There shall be imposed, in addition to the tax required to be paid, a

penalty equivalent to twenty-five percent (25%) of the amount due, in
the following cases:
(1) Failure to file any return and pay the tax due thereon as required
under the provisions of this Code or rules and regulations on the date
prescribed; or
(2) Unless otherwise authorized by the Commissioner, filing a return

with an internal revenue officer other than those with whom the return
is required to be filed; or
(3) Failure to pay the deficiency tax within the time prescribed for its
payment in the notice of assessment; or
(4) Failure to pay the full or part of the amount of tax shown on any
return required to be filed under the provisions of this Code or rules and
regulations, or the full amount of tax due for which no return is required
to be filed, on or before the date prescribed for its payment.
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Fifty percent (50%) of the tax or deficiency tax is imposed in case of:
a. Willful neglect to file return within the period prescribed by the Code
or by rules and regulations
b. A false or fraudulent return is willfully made
Under the 25% surcharge, it presupposes that the taxpayer inadvertently

failed to file and pay the return and tax respectively on the prescribed period
and subsequently filed without the demand of BIR
Under the 50% surcharge, it reflects a situation whereby there was no

filing of return and BIR made a demand. Despite the demand, the taxpayer still
failed to file the required the return.
Item No. 32 – Interest
interest civil penalty to the Compensation Income Earner under Section 249 of
the Tax Code.
Section 249. Interest. –
(A) In General. – There shall be assessed and collected on any unpaid

amount of tax, interest at the rate of double the legal interest rate for
loans or forbearance of any money in the absence of an express
stipulation as set by the Bangko Sentral ng Pilipinas from the date
prescribed for payment until the amount is fully paid: Provided, That in
no case shall the deficiency and the delinquency interest prescribed
under Subsections (B) and (C) hereof, be imposed simultaneously.
(B) Deficiency Interest. – Any deficiency in the tax due, as the term is
defined in this Code, shall be subject to the interest prescribed in
Subsection (A) hereof, which interest shall be assessed and collected
from the date prescribed for its payment until the full payment thereof,
or upon issuance of a notice and demand by the Commissioner of
Internal Revenue, whichever comes earlier.
(C) Delinquency Interest. – In case of failure to pay:
(1) The amount of the tax due on any return required to be filed, or
(2) The amount of the tax due for which no return is required, or
(3) A deficiency tax, or any surcharge or interest thereon on the

due date appearing in the notice and demand of the
Commissioner, there shall be assessed and collected on the
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unpaid amount, interest at the rate prescribed in Subsection (A)
hereof until the amount is fully paid, which interest shall form part
of the tax.
(D) Interest on Extended Payment. – If any person required to pay the

tax is qualified and elects to pay the tax on installment under the
provisions of this Code, but fails to pay the tax or any installment
hereof, or any part of such amount or installment on or before the date
prescribed for its payment, or where the Commissioner has authorized
an extension of time within which to pay a tax or a deficiency tax or any
part thereof, there shall be assessed and collected interest at the rate
hereinabove prescribed on the tax or deficiency tax or any part thereof
unpaid from the date of notice and demand until it is paid.
Item No. 33 – Compromise
compromise civil penalty to the Compensation Income Earner under Section
255, 250 and 275 of the Tax Code and RMO. No. 7-2015.
Section 255. Failure to File Return, Supply Correct and Accurate
Information, Pay Tax Withhold and Remit Tax and Refund
Excess Taxes Withheld on Compensation. – Any person required
under this Code or by rules and regulations promulgated thereunder to
pay any tax make a return, keep any record, or supply correct the
accurate information, who willfully fails to pay such tax, make such
return, keep such record, or supply correct and accurate information, or
withhold or remit taxes withheld, or refund excess taxes withheld on
compensation, at the time or times required by law or rules and
regulations shall, in addition to other penalties provided by law, upon
conviction thereof, be punished by a fine of not less than Ten thousand
pesos (PhP10,000) and suffer imprisonment of not less than one (1) year
but not more than ten (10) years.
Any person who attempts to make it appear for any reason that he or
another has in fact filed a return or statement, or actually files a return
or statement and subsequently withdraws the same return or statement
after securing the official receiving seal or stamp of receipt of internal
revenue office wherein the same was actually filed shall, upon
conviction therefor, be punished by a fine of not less than Ten thousand
pesos (PhP10,000) but not more than Twenty thousand pesos
(PhP20,000) and suffer imprisonment of not less than one (1) year but
not more than three (3) years.
In addition, Annex A of Revenue Memorandum Order (RMO) No. 7-
2015 provides for the Revised Consolidated Schedule of Compromise Penalties
for Violations of the National Internal Revenue Code (NIRC),
Page | 22
For late filing of Tax Returns with NO Tax Due to be paid, the
compromise penalty will be imposed upon filing of the Tax Return based on the
following:
a. For violations of the NIRC provisions which are subject to

compromise, the reference is found in page 4 of Annex A of RMO No.
7-2015.
For violations of the NIRC provisions which may be the subject of

criminal actions, Section 250 of the NIRC will apply as follows:
Section 250. Failure to File Certain Information Returns. -

In the case of each failure to file an information return, statement or list,
or keep any record, or supply any information required by this Code or
by the Commissioner on the date prescribed therefor, unless it is shown
that such failure is due to reasonable cause and not to willful neglect,
there shall, upon notice and demand by the Commissioner, be paid by
the person failing to file, keep or supply the same, One Thousand Pesos
(P 1,000) for each failure: Provided, however, That the aggregate
amount to be imposed for all such failures during a calendar year shall
not exceed Twenty-Five Thousand Pesos (P 25,000).
For late filing of Statements/Reports required to be filed with No Tax Due

to be paid, the compromise penalty will be imposed upon filing of the Tax
Return based on the following:
Section 275. Violation of Other Provisions of this Code or Rules

and Regulations in General.- Any person who violates any provision
of this Code or any rule or regulation promulgated by the Department of
Finance, for which no specific penalty is provided by law, shall, upon
conviction for each act or omission, be punished by a fine of not more
than One Thousand Pesos (P 1,000) or suffer imprisonment of not more
than six (6) months, or both.
Item No. 34 – Total Penalties
The purpose and relevance of this item is for the total amount of
penalties imposed by BIR to the Compensation Income Earner under items 31
to 33 in relation to filing of his return as required by BIR and the compliance to
the corresponding payment of the tax subject thereof, in accordance of the
applicability of the provisions on Civil Penalties under Section 248, 249, 250,
255, 275 of the Tax Code and RMO. No 7-2015 as discussed above in the
previous items.
Item No. 35 – Total Amount Payable / (Overpayment)
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The purpose and relevance of this item is for the total sum of item no.
30, referring to the Amount of Tax Payable or Overpayment and the amount in
item no. 34, the sum of penalties to be paid by the Compensation Income
Earner imposed by BIR.
This Total Amount Payable or Overpayment is the amount tax payable or

that which may be overpaid if it appears that the amount is in the negative,
hence having excess payment of tax.
Item No. 36 – Aggregate Amount Payable / (Overpayment)
The purpose and relevance of this item is for the total sum of item no.
35, the Total Amount Payable or Overpayment, which is the sum of the amount
indicated on such item for the Compensation Income Earner and the spouse
indicated if the CIE taxpayer chose joint filing with the other spouse for the
income tax return for the taxable year.
This Aggregate Amount Payable or Overpayment is the amount tax

payable or that which may be overpaid if it appears that the amount is in the
negative, hence having excess payment of tax. Hence, for purposes of
overpayment, Section 79 (C) (1) may be applied as what is involved is a
Compensation Income Earner, on refunds and credits.
Section 79. Income Tax Collected at Source. –
(C) Refunds or Credits. –
(1) Employer. – When there has been an overpayment of tax under this
Section, refund or credit shall be made to the employer only to the
extent that the amount of such overpayment was not deducted and
withheld hereunder by the employer.
(2) Employees. – The amount deducted and withheld under this Chapter
during any calendar year shall be allowed as a credit to the recipient of
such income against the tax imposed under Section 24(A) of this Title.
Refunds and credits in cases of excessive withholding shall be granted
under rules and regulations promulgated by the Secretary of Finance,
upon recommendation of the Commissioner.
Any excess of the taxes withheld over the tax due from the taxpayer
shall be returned or credited within three (3) months from the fifteenth
(15th) day of April. Refunds or credits made after such time shall earn
interest at the rate of six percent (6%) per annum, starting after the
lapse of the three-month period to the date the refund of credit is made.
Page | 24
Refunds shall be made upon warrants drawn by the Commissioner or
by his duly authorized representative without the necessity of counter-
signature by the Chairman, Commission on Audit or the latter’s duly
authorized representative as an exception to the requirement prescribed
by Section 49, Chapter 8, Subtitle B, Title 1 of Book V of Executive
Order No. 292, otherwise known as the Administrative Code of 1987.
Item No. 37 – No. of Attachments
The purpose and relevance of this item is for the number of additional
sheets attached by the taxpayer in relation to the other items which needs
more filling spaces in addition to the details in the return. It also includes
attachments for proof to substantiate tax credits, payments, deductions and
other relevant matters involving the taxpayer’s income tax liability.
PART IV – DETAILS OF PAYMENT
Item Nos. to 38 to 41 – Bank Matters
The purpose and relevance of this item if for the details of the particulars
of the payment mode of the taxpayer. The particulars of this item relating to
details of payment are; Cash/Bank Debit Memo, the Drawee Bank or Agency,
Check Payment, Tax Debit Memo and others as can be indicated by the
taxpayer.
PART V – COMPUTATION OF TAX
PART V. A – If Taxpayer Subject to Graduated Rates
Item No. 42 – Gross Compensation Income
The purpose and relevance of this item is to determine the compensation

income of the taxpayer under Section 32 (A) for purposes of determining his
taxable income and further arrive at the amount tax due for a Compensation
Income Earner RC, NRC or RA applying the taxability consequences to them, in
relation to Section 42 (A) (3) and (C) (3)
Section 32. Gross Income. –
(A) General Definition. – Except when otherwise provided in this Title,

gross income means all income derived from whatever source, including
(but not limited to) the following items:
(1) Compensation for services in whatever form paid, including,

but not limited to fees, salaries, wages, commissions, and
similar items;
xxxx
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Section 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:
(3) Services. – Compensation for labor or personal services performed in

the Philippines;
xxxx
(C) Gross Income from Sources without the Philippines. –
The following items of gross income shall be treated as income from

sources without the Philippines:
xxxx
(3) Compensation for labor or personal services performed without the

Philippines;
Item No. 43 – Less: Non-Taxable / Exempt Transaction
The purpose and relevance of this item is to indicate the amounts

received as income of the Compensation Income Earner but are excluded from
the gross income and exempt from taxation provided under Section 32 (B) as
applied to the nature and tax consequences of the CIE as a RC, NRC or RA.
Section 32. Gross Income
(B) Exclusions from Gross Income. – The following items shall not be
included in gross income and shall be exempt from taxation under this
Title:
(1) Proceeds of Life Insurance. –
(2) Amount Received by Insured as Return of Premium.
(3) Gifts, Bequests, and Devises. –
(4) Compensation for Injuries or Sickness. –
(5) Income Exempt under Treaty. –
(6) Retirement Benefits, Pensions, Gratuities, etc. –
(a) Retirement benefits received under Republic Act No. 7641 and
those received by officials and employees of private firms, whether
individual or corporate, in accordance with a reasonable private
benefit plan maintained by the employer:
Page | 26
(b) Any amount received by an official or employee or by his heirs
from the employer as a consequence of separation
(c) The provisions of any existing law to the contrary

notwithstanding, social security benefits, retirement gratuities,
pensions and other similar benefits received by resident or non-
resident citizens of the Philippines or aliens who come to reside
permanently in the Philippines from foreign government agencies
and other institutions, private or public.
(d) Payments of benefits due or to become due to any person

residing in the Philippines under the laws of the United States
administered by the United States Veterans Administration.
(e) Benefits received from or enjoyed under the Social Security

System in accordance with the provisions of Republic Act No.
8282. (f) Benefits received from the GSIS under Republic Act No.
8291, including retirement gratuity received by government
officials and employees.
(7) Miscellaneous Items. –
(a) Income Derived by Foreign Government.

(i) foreign governments,
(ii) financing institutions owned, controlled, or enjoying refinancing
from foreign governments, and
(iii) international or regional financial institutions established by
foreign governments.
(b) Income Derived by the Government or its Political Subdivisions.
(c) Prizes and Awards. – Prizes and awards made primarily in

recognition of religious, charitable, scientific, educational, artistic,
literary, or civic achievement but only if:
(i) The recipient was selected without any action on his part
to enter the contest or proceeding; and
(ii) The recipient is not required to render substantial future

services as a condition to receiving the prize or award.
(d) Prizes and Awards in Sports Competition. – All prizes and

awards granted to athletes in local and international sports
competitions and tournaments whether held in the Philippines or
abroad and sanctioned by their national sports associations.
(e) 13th Month Pay and Other Benefits. — Gross benefits received
by officials and employees of public and private entities: Provided,
however, That the total exclusion under this subparagraph shall
not exceed ninety thousand pesos (PhP90,000)
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(i) Benefits received by officials and employees of the
national and local government pursuant to Republic Act No.
6686;
(ii) Benefits received by employees pursuant to Presidential

Decree No. 851, as amended by Memorandum Order No. 28,
dated August 13, 1986;
(iii) Benefits received by officials and employees not covered

by Presidential Decree No. 851, as amended by
Memorandum Order No. 28, dated August 13, 1986; and
(iv) Other benefits such as productivity incentives and

Christmas bonus. (f) GSIS, SSS, Medicare and Other
Contributions. – GSIS, SSS, Medicare and Pag-Ibig
contributions, and union dues of individuals.
(g) Gains from the Sale of Bonds, Debentures or other Certificate of

Indebtedness. – Gains realized from the sale or exchange or
retirement of bonds, debentures or other certificate of
indebtedness with a maturity of more than five (5) years.
(h) Gains from Redemption of Shares in Mutual Fund. – Gains

realized by the investor upon redemption of shares of stock in a
mutual fund company as defined in Section 22 (BB) of this Code.
Item No. 44 – Gross Taxable Compensation Income
The purpose and relevance of the this item is that it pertains to the
Compensation Income earned by the RC, NRC or RA taxpayer in whatever form
paid under Section 32 (A) (1) less the exclusions under Section 32 (B) , which
pertains to income received but expressly provided as not included in gross
income and shall be exempt from taxation.
Section 31. Taxable Income Defined. –
The term ‘taxable income’ means the pertinent items of gross income
specified in this Code, less deductions, if any, authorized for such types
of income by this Code or other special laws.
Section 32. Gross Income –
Title:
xxxx
Page | 28
Normally, the gross taxable compensation income is first determined,
after excluding those income exempt under Section 32 (B) that are received by
the Compensation Income Earner. From the result of such, deductions will be
made under Section 34 to arrive at the taxable income referred in Section 31.
However, in the present case, Compensation Income Earners are not allowed to
avail any of the deductions as expressly provided for under Section 34. Hence,
the end result after excluding those under Section 32 (B) is the taxable income,
except if there are other income derived by the CIE, which may be indicated in
the next item in the return before arriving at the net taxable income.
Item No. 45 – Add: Other Taxable Non-Business/Non-Profession Income
An importance of this item is to determine why is the individual taxpayer

earning compensation income filing an income tax return, because
Compensation Income Earner who earned other income during the taxable
year, which with that fact, is required to file an annual tax return. Should
there no other income from other employers, there will be no need for to file an
income tax return. The BIR Form 2316, the Certificate of Compensation
Payment/Tax Withheld is enough proof that the compensation income has
already been subjected to income tax.
Another purpose and relevance of this item is that it does not forego the
possibility of income the Compensation Income Earner may derive which are
non-business and non-profession which may be received in some dealings he
has, referring to those remaining in the list under Section 32, as part of gross
income not subject to Final Withholding Tax (FWT), like passive income, sale of
shares of stocks and sale of real property under Section 24 (B) (C) (D).
Section 32. Gross Income -

xxxx
(3) Gains derived from dealings in property;
(4) Interest
(5) Rents
(6) Royalties
(7) Dividends
(8) Annuities
(9) Prizes and Winnings
(10) Pensions; and
(11) Partner’s distributive share from the net income of the general
professional partnership.
For Gains derived from dealings in property, it is possible that the

Compensation Income Earner earns income from isolated transactions of
Page | 29
disposition of property whether real or personal or mixed for sale or exchange
or combination of both, which results in gain. This is in relation to the
taxability consequences on whether the CIE is a RC, NRC or RA applying
Section 42 (A) (5), (6) and (C) (5).
In case of personal property, what is included as additional in the gross

income is the capital and ordinary asset profit gained or loss in dealing with
the property, sale or exchange which is in relation to Section 42 (E) regarding
sale of personal property partly within and partly without. This excludes sale or
exchange of stocks not traded in the stock exchange which is imposed of a final
tax at 15 % under Section 24 (C).
In Section 42 (E), the importance of which is that if the seller is not the
manufacturer, the gain or profit shall be treated as derived entirely within the
country the personal property is sold. Sold means the perfection and
consummation of the transaction. If the seller is also the manufacturer and the
personal property is produced within the Philippines and sold outside or vice-
versa, the income shall be treated as derived partly within and partly without
the Philippines.
In case of real property, only sale or exchange of ordinary assets are

included in the computation of gross income and those property sold located
outside the Philippines, which is different from the real property taxed under
Section 24 (B) which pertains to real property classified as capital asset which
imposes Final Tax on capital gains.
(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:
(5) Sale of Real Property. – Gains, profits and income from the sale of
real property located in the Philippines; and
(6) Sale of Personal Property. – Gains, profits and income from the sale
of personal property, as determined in Subsection (E) of this Section
xxxx
(C) Gross Income from Sources without the Philippines. – The following
items of gross income shall be treated as income from sources without
the Philippines:
(5) Gains, profits and income from the sale of real property located
without the Philippines.
xxxx
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(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. . .
xxxx
For interest, the compensation income earner should include in his gross
income interest from banks located outside the Philippines. If situated in the
Philippines, subject to final tax under Section 24 (B) (1). This is in relation to
Section 42 (A) (1) and (C) (1) for purposes of considering of gross income.
(1) Interests. – Interests derived from sources within the Philippines,

and interests on bonds, notes or other interestbearing obligation of
residents, corporate or otherwise;
xxxx
the Philippines:
(1) Interests other than those derived from sources within the
Philippines as provided in paragraph (1) of Subsection (A) of this
Section;
For rents and royalties, it is not limited to rents and royalties received as
a leasing business owner engaged in trade or business. These are fixed sum
either in cash or property equivalent, to be paid at a definite period for the use
of enjoyment of a thing or right. The scope is all rentals derived from the lease
of property whether used in business or not, real or personal, earnings from
intellectual property rights. This is in relation to Section 42 (A) (4) an (C) (4). If
the source of this other income under this category is derived outside the
Philippines, then it is added to other taxable gross income because it is not
subject final tax under Section 24 (B) (1).
Page | 31
(4) Rentals and Royalties. – Rentals and royalties from property located
in the Philippines or from any interest in such property, including
rentals or royalties for-
(a) The use of or the right or privilege to use in the Philippines any
copyright, patent, design or model, plan, secret formula or process,
goodwill, trademark, trade brand or other like property or right;
(b) The use of, or the right to use in the Philippines any industrial,
commercial or scientific equipment;
(c) The supply of scientific, technical, industrial or commercial

knowledge or information;
(d) The supply of any assistance that is ancillary and subsidiary to,
and is furnished as a means of enabling the application or enjoyment
of, any such property or right as is mentioned in paragraph (a), any
such equipment as is mentioned in paragraph (b) or any such
knowledge or information as is mentioned in paragraph (c);
(e) The supply of services by a non-resident person or his employee in

connection with the use of property or rights belonging to, or the
installation or operation of any brand, machinery or other apparatus
purchased from such non-resident person;
(f) Technical advice, assistance or services rendered in connection with

technical management or administration of any scientific, industrial or
commercial undertaking, venture, project or scheme; and
(g) The use of or the right to use:

(i) Motion picture films;
(ii) Films or video tapes for use in connection with television; and
(iii) Tapes for use in connection with radio broadcasting
xxxx
the Philippines:
xxxx
(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;
For dividends, the Compensation Income Earner may derive such income
from a domestic and foreign corporation. If derived from a domestic corporation
it is subject to final income tax under Section 24 (B) (1) hence not to be
Page | 32
included in gross income. If derived from a foreign corporation, it is to be added
and included in his gross income under and subject to Section 42 (2) and (C)
(2).
(2) Dividends. – The amount received as dividends:
(a) From a domestic corporation; and
(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.
xxxx
the Philippines:
xxxx
(2) Dividends other than those derived from sources within the
Section;
For Annuities, to be added in the gross income are those annuities not
falling under the exclusions under Section 32 (B).
For Prizes and Winnings, the Compensation Income Earner may earn
such which may be subject to Final Tax under Section 24 (B) (1) hence need
not be added to gross income otherwise, it will be considered as additional
taxable income. If it is derived from the Philippines and exceeds 10, 000. 00
pesos, it will be subjected to Final Tax. If it is derived within but not exceeding
10, 000. 00 pesos, it considered as additional taxable income and included in
the gross income. If it is derived outside the Philippines regardless of the
amount, it is also included in the gross income.
Page | 33
For Pensions, similar rule applies as for annuities. Those pensions not
falling under the exclusions under Section 32 (B) are considered additional
taxable income which are included in the gross income.
Moreover, other income that are not found among those items of Gross
Income enumerated under Section 32 may still be derived by the Compensation
Income Earner. Another relevance of this item is that it shows that the list of
sources of income within the Philippines under the above provision is not an
exclusive list for income that can be derived by a Compensation Income Earner
aside from those above items. Provided that any activity, services or prizes is
performed, entered and consummated and done in the Philippines and income
is derived, and not found in the enumeration in Section 32 (A) on items on
Gross Income, it is considered as income derived within the Philippines which
must be included in the gross income, hence, taxable. This is the reason for the
phrase “including, but not limited to the following items”.
Hence, this item in the return sees the possibility that aside from
compensation income, the Compensation Income earner may derive income
received during the course of his employment, from sources within or without if
the CIE is a Resident Citizen, or from sources only within of he is a Non-
Resident Citizen or Resident Alien.
Item No. 46 – Total Taxable Income
The purpose and relevance of this item is the indication of the total
amount of taxable income of the Compensation Income Earner who is a RC,
NRC or RA. Upon arriving at his gross taxable compensation income, other
taxable income by which he may receive other than those under Section 32
comprising gross income and not subject to FWT will be added in which the
result is indicated in this item, which will be the net taxable income.
The Compensation Income Earner who is a RC, NRC or RA is subject to

the graduated income tax rates under Section 24. No deductions are allowed as
expressly provided under Section 34 of the Tax Code as amended by TRAIN
law.
Section 34. Deductions from Gross Income. –
Except for taxpayers earning compensation income arising from

personal services rendered under an employer-employee relationship
where no deductions shall be allowed under this Section, in computing
taxable income subject to income tax under Sections 24(A); 25(A); 26;
27(A), (B), and (C); and 28(A)(1), there shall be allowed the following
deductions from gross income: x x x x
Page | 34
Item No. 47 – Tax Due (Item 46 multiplied by Applicable Income Tax
Rates
The purpose and relevance of this item is the indication of the amount of
the ultimate tax liability of the Compensation Income Earner who is a RC,
NRC, or RA. The formula to arrive at the amount for the tax liability in this
item is:
Taxable Income (amount in item no. 46)

x Applicable Tax Rate under Section 24 (A) (2)
Amount of Tax Due
A RC, NRC or RA Compensation Income Earner is taxed subject to the

graduated income tax rates under Section 24 (A) (2).
PART V. B – If Subject to 25% (Flat Rate for NRANETB)
Item No. 48 – Gross Compensation Income
The purpose and relevance of this item is to determine the compensation

income of the taxpayer under Section 32 (A) for purposes of determining his
taxable income and further arrive at the amount tax due for a Compensation
Income Earner NRANETB applying the taxability consequences to them, in
relation to Section 42 (A) (3) and (C) (3)
Section 32. Gross Income. –

(1) Compensation for services in whatever form paid, including,

but not limited to fees, salaries, wages, commissions, and
similar items;
xxxx
(B) Gross Income From Sources Within the Philippines . –
The following items of gross income shall be treated as gross income

from sources within the Philippines:
(3) Services. – Compensation for labor or personal services performed in

the Philippines;
xxxx
(C) Gross Income from Sources without the Philippines. –
Page | 35
The following items of gross income shall be treated as income from
sources without the Philippines:
xxxx
(3) Compensation for labor or personal services performed without the

Philippines;
Item No. 49 – Less: Non-Taxable/Exempt Compensation
The purpose and relevance of this item is to indicate the amounts

received as income of the Compensation Income Earner but are excluded from
the gross income and exempt from taxation provided under Section 32 (B) as
applied to the nature and tax consequences of the CIE as a NRANETB.
Section 32. Gross Income
Title:
(1) Proceeds of Life Insurance. –
(2) Amount Received by Insured as Return of Premium.
(3) Gifts, Bequests, and Devises. –
(4) Compensation for Injuries or Sickness. –
(5) Income Exempt under Treaty. –
(6) Retirement Benefits, Pensions, Gratuities, etc. –
(a) Retirement benefits received under Republic Act No. 7641 and
those received by officials and employees of private firms, whether
individual or corporate, in accordance with a reasonable private
benefit plan maintained by the employer:
(b) Any amount received by an official or employee or by his heirs

from the employer as a consequence of separation
(c) The provisions of any existing law to the contrary

notwithstanding, social security benefits, retirement gratuities,
pensions and other similar benefits received by resident or non-
resident citizens of the Philippines or aliens who come to reside
permanently in the Philippines from foreign government agencies
and other institutions, private or public.
(d) Payments of benefits due or to become due to any person

residing in the Philippines under the laws of the United States
administered by the United States Veterans Administration.
Page | 36
(e) Benefits received from or enjoyed under the Social Security
System in accordance with the provisions of Republic Act No.
8282. (f) Benefits received from the GSIS under Republic Act No.
8291, including retirement gratuity received by government
officials and employees.
(7) Miscellaneous Items. –
(a) Income Derived by Foreign Government.

(i) foreign governments,
(ii) financing institutions owned, controlled, or enjoying refinancing
from foreign governments, and
(iii) international or regional financial institutions established by
foreign governments.
(b) Income Derived by the Government or its Political Subdivisions.
(c) Prizes and Awards. – Prizes and awards made primarily in

recognition of religious, charitable, scientific, educational, artistic,
literary, or civic achievement but only if:
(i) The recipient was selected without any action on his part
to enter the contest or proceeding; and
(ii) The recipient is not required to render substantial future

services as a condition to receiving the prize or award.
(d) Prizes and Awards in Sports Competition. – All prizes and

awards granted to athletes in local and international sports
competitions and tournaments whether held in the Philippines or
abroad and sanctioned by their national sports associations.
(e) 13th Month Pay and Other Benefits. — Gross benefits received
by officials and employees of public and private entities: Provided,
however, That the total exclusion under this subparagraph shall
not exceed ninety thousand pesos (PhP90,000)
(i) Benefits received by officials and employees of the

national and local government pursuant to Republic Act No.
6686;
(ii) Benefits received by employees pursuant to Presidential

Decree No. 851, as amended by Memorandum Order No. 28,
dated August 13, 1986;
(iii) Benefits received by officials and employees not covered

by Presidential Decree No. 851, as amended by
Memorandum Order No. 28, dated August 13, 1986; and
(iv) Other benefits such as productivity incentives and

Christmas bonus. (f) GSIS, SSS, Medicare and Other
Page | 37
Contributions. – GSIS, SSS, Medicare and Pag-Ibig
contributions, and union dues of individuals.
(g) Gains from the Sale of Bonds, Debentures or other Certificate of

Indebtedness. – Gains realized from the sale or exchange or
retirement of bonds, debentures or other certificate of
indebtedness with a maturity of more than five (5) years.
(h) Gains from Redemption of Shares in Mutual Fund. – Gains

realized by the investor upon redemption of shares of stock in a
mutual fund company as defined in Section 22 (BB) of this Code.
Item No. 50 – Gross Taxable Compensation Income
The purpose and relevance of the this item is that it pertains to the
Compensation Income earned by the NRANETB taxpayer in whatever form paid
under Section 32 (A) (1) less the exclusions under Section 32 (B) , which
pertains to income received but expressly provided as not included in gross
income and shall be exempt from taxation as indicated in item no. 49 above.
Section 31. Taxable Income Defined. –
The term ‘taxable income’ means the pertinent items of gross income
specified in this Code, less deductions, if any, authorized for such types
of income by this Code or other special laws.
Section 32. Gross Income –
Title:
xxxx
Normally, the gross taxable compensation income is first determined,

after excluding those income exempt under Section 32 (B) that are received by
the Compensation Income Earner. From the result of such, deductions will be
made under Section 34 to arrive at the taxable income referred in Section 31.
However, in the present case, Compensation Income Earners are not allowed to
avail any of the deductions as expressly provided for under Section 34. Hence,
the end result after excluding those under Section 32 (B) is the taxable income,
except if there are other income derived by the CIE, which may be indicated in
the next item in the return before arriving at the net taxable income.
Item No. 51 – Add: Other Taxable Income
An importance of this item is to determine why is the individual taxpayer

earning compensation income filing an income tax return, because
Compensation Income Earner who earned other income during the taxable
Page | 38
year, which with that fact, is required to file an annual tax return. Should
there no other income from other employers, there will be no need for to file an
income tax return. The BIR Form 2316, the Certificate of Compensation
Payment/Tax Withheld is enough proof that the compensation income has
already been subjected to income tax.
Another purpose and relevance of this item is that it does not forego the
possibility of income the Compensation Income Earner may derive which are
non-business and non-profession which may be received in some dealings he
has, referring to those remaining in the list under Section 32, as part of gross
income not subject to Final Withholding Tax (FWT), like passive income, sale of
shares of stocks and sale of real property under Section 24 (B) (C) (D).
Section 32. Gross Income -

xxxx
(3) Gains derived from dealings in property;
(4) Interest
(5) Rents
(6) Royalties
(7) Dividends
(8) Annuities
(9) Prizes and Winnings
(10) Pensions; and
(11) Partner’s distributive share from the net income of the general
professional partnership.
For Gains derived from dealings in property, it is possible that the

Compensation Income Earner earns income from isolated transactions of
disposition of property whether real or personal or mixed for sale or exchange
or combination of both, which results in gain. This is in relation to the
taxability consequences on when the CIE is a NRANETB applying Section 42
(A) (5), (6) and (C) (5).
In case of personal property, what is included as additional in the gross

income is the capital and ordinary asset profit gained or loss in dealing with
the property, sale or exchange which is in relation to Section 42 (E) regarding
sale of personal property partly within and partly without. This excludes sale or
exchange of stocks not traded in the stock exchange which is imposed of a final
tax at 15 % under Section 24 (C).
In Section 42 (E), the importance of which is that if the seller is not the
manufacturer, the gain or profit shall be treated as derived entirely within the
Page | 39
country the personal property is sold. Sold means the perfection and
consummation of the transaction. If the seller is also the manufacturer and the
personal property is produced within the Philippines and sold outside or vice-
versa, the income shall be treated as derived partly within and partly without
the Philippines.
In case of real property, only sale or exchange of ordinary assets are

included in the computation of gross income and those property sold located
outside the Philippines, which is different from the real property taxed under
Section 24 (B) which pertains to real property classified as capital asset which
imposes Final Tax on capital gains.
(5) Sale of Real Property. – Gains, profits and income from the sale of
real property located in the Philippines; and
(6) Sale of Personal Property. – Gains, profits and income from the sale
of personal property, as determined in Subsection (E) of this Section
xxxx
the Philippines:
(5) Gains, profits and income from the sale of real property located
without the Philippines.
xxxx
(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. . .
xxxx
For interest, the compensation income earner should include in his gross
income interest from banks located outside the Philippines. If situated in the
Philippines, subject to final tax under Section 24 (B) (1). This is in relation to
Section 42 (A) (1) and (C) (1) for purposes of considering of gross income.
Page | 40
(1) Interests. – Interests derived from sources within the Philippines,

and interests on bonds, notes or other interestbearing obligation of
residents, corporate or otherwise;
xxxx
the Philippines:
(1) Interests other than those derived from sources within the
Section;
For dividends, the Compensation Income Earner may derive such income
from a domestic and foreign corporation. If derived from a domestic corporation
it is subject to final income tax under Section 24 (B) (1) hence not to be
included in gross income. If derived from a foreign corporation, it is to be added
and included in his gross income under and subject to Section 42 (2) and (C)
(2).
(2) Dividends. – The amount received as dividends:
(a) From a domestic corporation; and
(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.
xxxx
the Philippines:
Page | 41
xxxx
(2) Dividends other than those derived from sources within the
Section;
For Annuities, to be added in the gross income are those annuities not
falling under the exclusions under Section 32 (B).
For Prizes and Winnings, the Compensation Income Earner may earn
such which may be subject to Final Tax under Section 24 (B) (1) hence need
not be added to gross income otherwise, it will be considered as additional
taxable income. If it is derived from the Philippines and exceeds 10, 000. 00
pesos, it will be subjected to Final Tax. If it is derived within but not exceeding
10, 000. 00 pesos, it considered as additional taxable income and included in
the gross income. If it is derived outside the regardless of the amount, it is also
included in the gross income.
For Pensions, similar rule applies as for annuities. Those pensions not
falling under the exclusions under Section 32 (B) are considered additional
taxable income which are included in the gross income.
Moreover, other income that are not found among those items of Gross
Income enumerated under Section 32 may still be derived by the Compensation
Income Earner. Another relevance of this item is that it shows that the list of
sources of income within the Philippines under the above provision is not an
exclusive list for income that can be derived by a Compensation Income Earner
aside from those above items.
Provided that any activity, services or prizes is performed, entered and

consummated and done in the Philippines and income is derived, and not
found in the enumeration in Section 32 (A) on items on Gross Income, it is
considered as income derived within the Philippines which must be included in
the gross income, hence, taxable. This is the reason for the phrase “including,
but not limited to the following items”.
Hence, this item in the return sees the possibility that aside from
compensation income, the Compensation Income earner may derive income
received during the course of his employment, from sources only within the
Philippines being a NRANETB.
Item No. 52 – Total Taxable Income
The purpose and relevance of this item is the indication of the total
amount of taxable income of the Compensation Income Earner who is a
NRANETB. Upon arriving at his gross taxable compensation income, other
Page | 42
taxable income by which he may receive other than those under Section 32
comprising gross income and not subject to FWT will be added in which the
result is indicated in this item which will be the net taxable income.
The Compensation Income Earner NRANETB is subject to Gross Income

Tax subject to final tax. No deductions allowed as he is already taxed at gross
income. The corresponding amount arrived will be indicated in the next item.
Item No. 53 – Tax Due (Item 52 multiplied to 25% Flat Rate)
The purpose and relevance of this item is the indication of the amount of
the ultimate tax liability of the Compensation Income Earner who is a Non-
Resident Alien Not Engaged in Trade or Business (NRANETB). The formula to
arrive at the amount for the tax liability in this item is:
Taxable Income (amount in item no. 52)

x 25 % (Final Tax Rate under Section 25 of the Tax Code)
Amount of Tax Due
A NRANETB Compensation Income Earner is taxed according to his

Gross Income, therefore not allowed to avail of the deductions under Section 34
because he is taxed according to source.

income.
PART V. C – Tax Credits/Payments
Item No. 54 – Tax Withheld per BIR Form No. 2316, if applicable
The purpose and relevance of this item is for the indication of the tax
withheld related to BIR Form No. 2316, the Certificate of Compensation
Payment or Tax Withheld, to the current income tax return to be filed by the
Compensation Income Earner.
Page | 43
The BIR defines compensation as either salaries, wages or other forms of
remuneration given by an employer to an employee. This is in relation to
Section 79 (A) (B) and 81 of the Tax Code on Withholding on Wages.
(A) Requirement of Withholding. –
Except in the case of a minimum wage earner as defined in Section

22(HH) of this code, every employer making payment of wages shall
deduct and withhold upon such wages a tax determined in accordance
with the rules and regulations to be prescribed by the Secretary of
Finance, upon recommendation of the Commissioner.
(B) Tax Paid by Recipient. –
If the employer, in violation of the provisions of this Chapter, fails to

deduct and withhold the tax as required under this Chapter, and
thereafter the tax against which such tax may be credited is paid, the
tax so required to be deducted and withheld shall not be collected from
the employer; but this Subsection shall in no case relieve the employer
from liability for any penalty or addition to the tax otherwise applicable
in respect of such failure to deduct and withhold.
Section 81. Filing of Return and Payment of Taxes Withheld. –
Except as the Commissioner otherwise permits, taxes deducted and

withheld by the employer on wages of employees shall be covered by a
return and paid to an authorized agent bank, Collection Agent, or the
duly authorized Treasurer of the city or municipality where the
employer has his legal residence or principal place of business, or in
case the employer is a corporation, where the principal office is located.
The return shall be filed and the payment made within twenty-five (25)
days from the close of each calendar quarter: Provided, however, That
the Commissioner may, with the approval of the Secretary of Finance,
require the employers to pay or deposit the taxes deducted and
withheld at more frequent intervals, in cases where such requirement is
deemed necessary to protect the interest of the Government.
The taxes deducted and withheld by employers shall be held in a

special fund in trust for the Government until the same are paid to the
said collecting officers.
Form No. 2316 is a certificate that must be accomplished and issued

yearly by the Payor or Employer to each employee whose income is subjected to
Final Tax declaration. The employer must indicate the total amount that was
Page | 44
paid to the employee and the corresponding taxes withheld during the calendar
year. This is needed to be attached to a Compensation Income Earner who
earned other income from other employers during the taxable year, which with
that fact, an annual tax return is needed to be filed.
Should there no other income from other employers, there will be no

need for to file an income tax return. The BIR Form 2316 is enough proof that
the compensation income has already been subjected to income tax. This is
called substituted filing, wherein the employer files the income tax returns for
the employee. Another relevance of this form is that it is normally requested as
part of pre-employment requirements for the new employer to make sure that
the correct deductions have been made by the previous employer.
Item No. 55 – Tax Paid in Return Previously Filed, if Amended Return
The purpose and relevance of this item is to determine the amount paid
for the original income tax return filed, if this current return to be filed is an
amended return. This item is also relevant to determine the date the amended
return filed for purposes of reckoning period of the 2-year period within which
to avail of the remedy to recover the tax he paid on the original return filed
when he realize that he it is excessive or wrongfully collected upon filing an
amended return.
Section 229. Recovery of Tax Erroneously or Illegally Collected. –
No suit or proceeding shall be maintained in any court for the recovery

of any national internal revenue tax hereafter alleged to have been
erroneously or illegally assessed or collected, or of any penalty claimed
to have been collected without authority, or of any sum alleged to have
been excessively or in any manner wrongfully collected without
authority, or of any sum alleged to have been excessively or in any
manner wrongfully collected, until a claim for refund or credit has been
duly filed with the Commissioner; but such suit or proceeding may be
maintained, whether or not such tax, penalty, or sum has been paid
under protest or duress.
In any case, no such suit or proceeding shall be filed after the expiration
of two (2) years from the date of payment of the tax or penalty
regardless of any supervening cause that may arise after payment:
Provided, however, That the Commissioner may, even without a written

claim therefor, refund or credit any tax, where on the face of the return
upon which payment was made, such payment appears clearly to have
been erroneously paid.
Item No. 56 – Foreign Tax Credits, if applicable
Page | 45
The purpose and relevance of this item is for the individual taxpayer to
indicate the desire to avail of foreign tax credits for taxes paid in a foreign
country under Section 34 (C) (3) and indicate the amount of Foreign Tax
Credits which will be deducted.
However, this deduction is not available to them because of Section 34 of

the Tax Code as amended by the TRAIN Law which stated that compensation
income earners are not allowed to avail the deductions as well as for NRANETB
because they are taxed at gross at the rate of 25 % and as expressly stated in
the last paragraph of Section 34 (C) (3)

income: x x x x
xxxx
(3) Credit Against Tax for Taxes of Foreign Countries. – If the

taxpayer signifies in his return his desire to have the benefits of this
paragraph, the tax imposed by this Title shall be credited with:
xxxx

this paragraph.
Item No. 57 – Other Tax Credits/Payments
The purpose and relevance of this item is for the CIE individual taxpayer
to indicate other tax credits or tax payments paid before the filing of the return
for purposes of deducting such from the amount tax due of the CIE.
An example of which is a Creditable Withholding Tax paid by the CIE on

certain transactions.
Item No. 58 – Total Tax Credits/Payments
The purpose and relevance of this item is to indicate the sum of the Total
Tax Credits or Payments made by the CIE individual taxpayer either as a RC,
NRC, RA or NRANETB from items 54 to 58.
Page | 46
Item No. 59 – Net Tax Payable / (Overpayment)
The purpose and relevance of this item is to indicate the amount after
deducting the total tax credits/payment by the CIE taxpayer from the Tax Due
either as RC, NRC or RA or NRAETB, which is in item no. 47 or as NRANETB,
which is reflected in item no. 53.
The importance in this item is that the amount is also reflected in item
28 on Part III on the Total Tax Payable computation.
PART VI – SCHEDULE
Schedule 1 to 5A and 5B – Gross Compensation Income and Tax Withheld
The purpose and relevance of this item is that it substantiates the

matters referred to item no. 54 on the Tax Withheld under Form 2316, on the
Certificate of Compensation Payment and Tax Withheld in arriving at the Total
Tax Credits or Payments in computing the income tax liability. This item
indicates the names of the employers and the corresponding Total Gross
Compensation and Total Tax Withheld of the CIE taxpayer from all his
employers. This is in relation to Section 79 (A) of the Tax Code on the
requirement of employers to withhold income at source.
(A) Requirement of Withholding. – Except in the case of a minimum

wage earner as defined in Section 22 of this code, every employer
making payment of wages shall deduct and withhold upon such wages
a tax determined in accordance with the rules and regulations to be
prescribed by the Secretary of Finance, upon recommendation of the
Commissioner:
This item also shows that the CIE taxpayer has more than one (1)
employer on which compensation income are earned which in effect requires
the filing of an Income Tax Return under Section 51 (2) (b) of the Tax Code. If,
however, he has more only one (1) employer, substituted filing under Section
51-A will govern:
(2) The following individuals shall not be required to file an income tax
return
(b) An individual with respect to pure compensation income, as defined

in Section 32(A)(1), derived from sources within the Philippines, the
income tax on which has been correctly withheld under the provisions
of Section 79 of this Code: Provided, That an individual deriving
Page | 47
compensation concurrently from two or more employers at any time
during the taxable year shall file an income tax return;
xxxx
Section 51–A. Substituted Filing of Income Tax Returns by

Employees Receiving Purely Compensation Income. –
Individual taxpayers receiving purely compensation income, regardless

of amount, from only one employer in the Philippines for the calendar
year, the income tax of which has been withheld correctly by the said
employer (tax due equals tax withheld) shall not be required to file an
annual income tax return. The certificate of withholding filed by the
respective employers, duly stamped ‘received’ by the BIR, shall be
tantamount to the substituted filing of income tax returns by said
employees.
Should there no other income from other employers, there will be no

need for to file an income tax return. The BIR Form 2316 is enough proof that
the compensation income has already been subjected to income tax. This is
called substituted filing, wherein the employer files the income tax returns for
the employee.
As Form No. 2316 is important because it must be accomplished and

issued yearly by the Payor or Employer to each employee whose income is
subjected to final tax declaration. The employer must indicate the total amount
that was paid to the employee and the corresponding taxes withheld during the
calendar year. This is needed to be attached to a Compensation Income Earner
who earned other income from other employers during the taxable year, which
with that fact, an annual tax return is needed to be filed.
This item indicates the names of the employers and the corresponding
Total Gross Compensation and Total Tax Withheld of the CIE taxpayer from all
his employers and if applicable, with the spouse, if jointly filed the current tax
return, whether they have the same or different employers. This is for correct
amount of deductions on tax credits to be applied in the computation of the tax
due of the CIE.
Another purpose and relevance of this item is for the indication of the tax
withheld related to the Certificate of Compensation Payment or Tax Withheld
filed by the employers, to the current income tax return to be filed by the
Compensation Income Earner, if he separately filed his return from the spouse.
Page | 48

Item No. 1 - Taxable Period: 1. Purely Compensation Income Earner BIR Annual Income Tax Return (ITR) Form No. 1700

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1.

PURELY COMPENSATION INCOME EARNER

Item No. 1 – Taxable Period

Under the National Internal Revenue Code (NIRC), rules and

Section 22. Definitions. When used in this Title:

For individual taxpayers, whether engaged in trade or business or not,

Item No.2 – If the current ITR is an Amended Return

The purpose and relevance of this item is that if the Self-Employed

Any return, statement of declaration filed in any office authorized to

Section 74. Declaration of Income Tax for Individuals. –

(A) In General. - Except as otherwise provided in this Section, every

Except as provided in Section 222, internal revenue taxes shall be

Section 229. Recovery of Tax Erroneously or Illegally Collected. –

No suit or proceeding shall be maintained in any court for the recovery

Provided, however, That the Commissioner may, even without a written

Item No. 3 – Alphanumeric Tax Code

PART I – BACKGROUND INFORMATION ON TAXPAYER/FILER

Item No. 4 – Taxpayer’s Identification No. (TIN No.)

Section 236. Registration Requirements

x x x x In cases where a registered taxpayer dies, the administrator or

In the case of a non-resident decedent, the executor or administrator of

Only one Taxpayer Identification Number (TIN) shall be assigned to a

This is the Code as designated by the BIR which corresponds to the

Section. 51. Individual Returns

(B) Where to File. - Except in cases where the Commissioner otherwise

Item No. 6 – Taxpayer Type (Employee or NRANETB)

Section 22 defined who are Non-Resident Citizens:

(1) A citizen of the Philippines who establishes to the satisfaction of the

(4) A citizen who has been previously considered as nonresident citizen

Section 24. Income Tax Rates

(A) (2) (c):

(1) All Income from Compensation – The rates prescribed under

However, for the Compensation Income of the NRANETB, Section 25

Section 25. Tax on Non-Resident Alien Individual

(B) Non-resident Alien Individual Not Engaged in Trade or Business

This is the purpose and relevance of this item on Taxpayer Type on

Item No. 7 – Taxpayer’s Name

The purpose and relevance of this item is to determine the present

Section 51. Individual Return. –

(a) Personal profile and information;

Item No. 8A – Zip Code

Section 51. Individual Return. –

(a) Personal profile and information;

Item No. 10 – Email Address

Section 51. Individual Return. –

(a) Personal profile and information;

Item No. 11 – Citizenship

The purpose and relevance of this item is in relation to item no. 6 to

Item No. 12 – Claiming Foreign Tax Credits

The purpose and relevance of this item is the desire of Compensation

However, it not is allowed as a deduction from gross income of a

(a) Citizen and Domestic Corporation. – In the case of a citizen of the

Item No. 13 – Foreign Tax Number

This purpose of this is in relation to item no. 12 in claiming foreign tax

Item No. 14 – Contact Number

The purpose and relevance of this item is to inform BIR of contact

Section 51. Individual Return. –

(a) Personal profile and information;

Item No. 15 – Civil Status