Which statement about taxation of income in the Philippines is true?

• A. Non-resident citizens are taxable on all income sources worldwide.
• B. Resident Filipino citizens are taxable on all income sources within and outside of the country.
• C. Non-resident citizens are taxable only on income derived from sources within the country.
• D. Resident aliens are taxable on all income sources within and outside the country.

Answer: (B)

The main idea tested is how taxation depends on a person’s residency status. In the Philippines, resident Filipino citizens are taxed on income from all sources, both inside and outside the country. This worldwide taxation means foreign earnings are also subject to Philippine income tax, though foreign tax credits may reduce double taxation. That’s why the statement about resident Filipino citizens being taxable on all income sources within and outside the country is true.

Non-resident citizens are taxed only on income from Philippine sources, not on foreign income, which is why statements claiming worldwide taxation for non-resident citizens are incorrect.