Taxable income of a non-resident Filipino citizen

Dear PAO,

My aunt, Shiela, has been a Filipino immigrant living in the United States of America for over 10 years. She is now retired and receives a monthly pension of $2,000. Occasionally, she returns to the Philippines for short stays. Using her pension, she purchased three condominium units in Quezon City, which she is renting out for P25,000.00/month each unit. Can you enlighten me if she is taxable for the P75,000.00 income that she earns every month? Aunt Shiela believes she is exempt from paying taxes because the money used in buying the said units was sourced outside the Philippines.

Ronalyn

Dear Ronalyn,

Income tax is defined as a tax on all yearly profits arising from property, professions, trades, or offices, or as a tax on the person's income, emoluments, profits, and the like. It is a tax on income, whether gross or net, realized in one taxable year. (Commissioner of Internal Revenue v. Comelec, et al., GR 244155, May 11, 2021, Associate Justice Mario Lopez)

A non-resident Filipino citizen is someone who holds Filipino citizenship but resides outside the Philippines for the majority of the year. This could include individuals working abroad, studying overseas, or living abroad for personal reasons. The taxation of non-resident Filipino citizens is anchored in the National Internal Revenue Code (NIRC) of the Philippines, as amended, particularly under Section 23(B). This section specifies that income received by non-resident citizens from sources within the Philippines is subject to Philippine income tax.

«Sec. 23. General Principles of Income Taxation in the Philippines. Except when otherwise provided in this Code:

»(A) A resident citizen of the Philippines is taxable on all income derived from sources within and without the Philippines;

"(B) A nonresident citizen is taxable only on income derived from sources within the Philippines;

"© An individual citizen of the Philippines who is working and deriving income from abroad as an overseas contract worker is taxable only on income derived from sources within the Philippines: Provided, That a seaman shall be treated as an overseas contract worker if he (1) is a citizen of the Philippines, and