RA 8424: Title II, Chapter I – Definitions

CHAPTER I

Definitions

SECTION 22. Definitions. – When used in this Title:

(A) The term ‘person‘ means an individual, a trust, estate, or corporation.

(B) The term ‘corporation’ shall include one person corporation, partnerships, no matter how created or organized, joint-stock companies, joint accounts (cuentas en participación), associations, or insurance companies, but does not include general professional partnerships and a joint venture or consortium formed for the purpose of undertaking construction projects or engaging in petroleum, coal, geothermal and other energy operations pursuant to an operating or consortium agreement under a service contract with the Government. ‘General professional partnerships’ are partnerships formed by persons for the sole purpose of exercising their common profession, no part of the income of which is derived from engaging in any trade or business. (As amended by RA 11534 CREATE, March 26, 2021)

(C) The term ‘domestic,’ when applied to a corporation, means a corporation, means created or organized in the Philippines or under its laws.

(D) The term ‘foreign,’ when applied to a corporation, means a corporation which is not domestic.

(E) The term ‘nonresident citizen’ means:

• (1) A citizen of the Philippines who establishes to the satisfaction of the Commissioner the face 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 aboard, 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.
• (5) The taxpayer shall submit proof to the Commissioner to show his intention of leaving the Philippines to reside permanently abroad or to return to and reside in the Philippines as the case may be for purposes of this Section.

(F) The term ‘resident alien‘ means an individual whose residence is within the Philippines and who is not a citizen thereof.

(G) The term ‘nonresident alien’ means an individual whose residence is not within the Philippines and who is not a citizen thereof.

(H) The term ‘resident foreign corporation’ applies to a foreign corporation engaged in trade or business within the Philippines.

(I) The term ‘nonresident foreign corporation’ applies to a foreign corporation not engaged in trade or business within the Philippines.

(J) The term ‘fiduciary’ means a guardian, trustee, executor, administrator, receiver, conservator or any person acting in any fiduciary capacity for any person.

(K) The term ‘withholding agent’ means any person required to deduct and withhold any tax under the provisions of Section 57.

(L) The term ‘shares of stock’ shall include shares of stock of a corporation, warrants and/or options to purchase shares of stock, as well as units of participation in a partnership (except general professional partnerships), joint stock companies, joint accounts, joint ventures taxable as corporations, associations,and recreation or amusement clubs (such as golf, polo or similar clubs), and mutual fund certificates.

(M) The term ‘shareholder’ shall include holders of a share/s of stock, warrant/s and/or option/s to purchase shares of stock of a corporation, as well as a holder of a unit of participation in a partnership (except general professional partnerships) in a joint stock company, a joint account, a taxable joint venture, a member of an association, recreation or amusement club (such as golf, polo, or similar clubs) and a holder of a mutual fund certificate, a member in an association, joint-stock company, or insurance company.

(N) The term ‘taxpayer‘ means any person subject to tax imposed by this Title.

(O) The terms ‘including’ and ‘includes’, when used in a definition contained in this Title, shall not be deemed to exclude other things otherwise within the meaning of the term defined.

(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.

(Q) The term ‘fiscal year’ means an accounting period of twelve (12) months ending on the last day of any month other than December.

(R) The terms ‘paid or incurred’ and ‘paid or accrued’ shall be construed according to the method of accounting upon the basis of which the net income is computed under this Title.

(S) The term ‘trade or business’ includes the performance of the functions of a public office.

(T) The term ‘securities’ means shares of stock in a corporation and rights to subscribe for or to receive such shares. The term includes bonds, debentures, notes, or certificates, or other evidence of indebtedness, issued by any corporation, including those issued by a government or political subdivision thereof, with interest coupons or in registered form.

(U) The term ‘dealer in securities’ means a merchant of stocks or securities, whether an individual, partnership or corporation, with an established place of business, regularly engaged in the purchase of securities and the resale thereof to customers; that is, one who, as a merchant, buys securities and re-sells them to customers with a view to the gains and profits that may be derived therefrom.

(V) The term ‘bank’ means every banking institution, as defined in Section 2 of Republic Act No. 337, as amended, otherwise known as the General Banking Act. A bank may either be a commercial bank, a thrift bank, a development bank, a rural bank or a specialized government bank.

(W) The term ‘non-bank financial intermediary’ means a financial intermediary, as defined in Section 2(D)(c) of Republic Act No. 337, as amended, otherwise known as the General Banking Act, authorized by the Bangko Sentral ng Pilipinas (BSP) to perform quasi-banking activities.

(X) The term ‘quasi-banking activities’ means borrowing funds from twenty (20) or more personal or corporate lenders at any one time, through the issuance, endorsement, or acceptance of debt instruments of any kind other than deposits for the borrower’s own account, or through the issuance of certificates of assignment or similar instruments, with recourse, or of repurchase agreements for purposes of relending or purchasing receivables and other similar obligations: Provided, however, That commercial, industrial and other non-financial companies, which borrow funds through any of these means for the limited purpose of financing their own needs or the needs of their agents or dealers, shall not be considered as performing quasi-banking functions.

(Y) The term ‘deposit substitutes’ shall mean an alternative form of obtaining funds from the public (the term ‘public’ means borrowing from twenty (20) or more individual or corporate lenders at any one time), other than deposits, through the issuance, endorsement, or acceptance of debt instruments for the borrower’s own account, for the purpose of relending or purchasing of receivables and other obligations, or financing their own needs or the needs of their agent or dealer. These instruments may include, but need not be limited to bankers’ acceptances, promissory notes, repurchase agreements, including reverse repurchase agreements entered into by and between the Bangko Sentral ng Pilipinas (BSP) and any authorized agent bank, certificates of assignment or participation and similar instruments with recourse: Provided, however, That debt instruments issued for interbank call loans with maturity of not more than five (5) days to cover deficiency in reserves against deposit liabilities, including those between or among banks and quasi-banks, shall not be considered as deposit substitute debt instruments.

(Z) The term ‘ordinary income’ includes any gain from the sale or exchange of property which is not a capital asset or property described in Section 39(A)(1). Any gain from the sale or exchange of property which is treated or considered, under other provisions of this Title, as ‘ordinary income’ shall be treated as gain from the sale or exchange of property which is not a capital asset as defined in Section 39(A)(1). The term ‘ordinary loss’ includes any loss from the sale or exchange of property which is not a capital asset. Any loss from the sale or exchange of property which is treated or considered, under other provisions of this Title, as ‘ordinary loss’ shall be treated as loss from the sale or exchange of property which is not a capital asset.

(AA) The term ‘rank and file employees’ shall mean all employees who are holding neither managerial nor supervisory position as defined under existing provisions of the Labor Code of the Philippines, as amended.

(BB) The term ‘mutual fund company’ shall mean an open-end and close-end investment company as defined under the Investment Company Act.

(CC) The term ‘trade, business or profession’ shall not include performance of services by the taxpayer as an employee.

(DD) The term ‘regional or area headquarters’ shall mean a branch established in the Philippines by multinational companies and which headquarters do not earn or derive income from the Philippines and which act as supervisory, communications and coordinating center for their affiliates, subsidiaries, or branches in the Asia-Pacific Region and other foreign markets.

(EE) The term ‘regional operating headquarters’ shall mean a branch established in the Philippines by multinational companies which are engaged in any of the following services: general administration and planning; business planning and coordination; sourcing and procurement of raw materials and components; corporate finance advisory services; marketing control and sales promotion; training and personnel management; logistic services; research and development services and product development; technical support and maintenance; data processing and communication; and business development.

(FF) The term ‘long-term deposit or investment certificate‘ shall refer to certificate of time deposit or investment in the form of savings, common or individual trust funds, deposit substitutes, investment management accounts and other investments with a maturity period of not less than five (5) years, the form of which shall be prescribed by the Bangko Sentral ng Pilipinas (BSP) and issued by banks only (not by nonbank financial intermediaries and finance companies) to individuals in denominations of Ten thousand pesos (P10,000) and other denominations as may be prescribed by the BSP.

(GG) The term ‘statutory minimum wage‘ shall refer to the rate fixed by the Regional Tripartite Wage and Productivity Board, as defined by the Bureau of Labor and Employment Statistics (BLES) of the Department of Labor and Employment (DOLE).

(HH) The term ‘minimum wage earner’ shall refer to a worker in the private sector paid the statutory minimum wage, or to an employee in the public sector with compensation income of not more than the statutory minimum wage in the non-agricultural sector where he/she is assigned. (As amended by RA No. 9504 (June 17, 2008)).

(II) The term ‘offshore gaming licensee’ shall refer to the offshore gaming operator, whether organized abroad or in the Philippines, duly licensed and authorized, through a gaming licensed, by the Philippine Amusement and Gaming Corporation or any special economic zone authority or freeport authority to conduct offshore customers, as provided for on their respective charters.

“Notwithstanding any law to the contrary, no offshore gaming license shall hereinafter be issued by the Aurora Pacific Economic Zone and Freeport Authority. All offshore licenses whose license was issued by the Aurora Pacific Economic Zone and Freeport Authority shall be transferred, regulated and monitored by the Philippine Amusement and Gaming Corporation.
“For purpose of this Section, an offshore gaming licensee shall be considered in doing business in the Philippines.

(JJ) The term ‘offshore gaming licensee-gaming agent’ shall refer to the representative in the Philippines of an offshore-based operator who shall act as a resident agent for the mere purpose of receiving summons, notices and other legal processes for the offshore gaming licensee and to comply with disclosure requirements if the Securities and Exchange Commission. The offshore gaming licensee gaming agent shall not be involved with the business operations of the offshore gaming licensee and shall derive no income therefrom.”

(KK) the term ‘filing of return’ shall refer to the act of accomplishing and submitting the prescribed tax return, electronically or manually, to the Bureau of Internal Revenue, or through any authorized tax software provider, as required under this Code or as prescribed under existing rules and regulations.

(LL) the term ‘payment of tax’ or ‘remittance of tax’ shall refer to the act of delivering the amount of tax due or withheld either electronically or manually, to the Bureau of Internal Revenue, or through any authorized agent bank or authorized tax software provider, as required under this Code or as prescribed under existing rules and regulations.”

(Manual encoding credits: Jacky Margaret Adriano)