Under the National Internal Revenue Code of 1997 (NIRC), as amended by R.A. No. 10963 (the Tax Reform for Acceleration and Inclusion or TRAIN Law) and further modified by R.A. No. 11976 (the Ease of Paying Taxes Act), there are distinct classifications and rules regarding income tax, especially concerning the different types of taxpayers. The following is an exhaustive and meticulous explanation of these classifications and their respective income tax implications.

I. Taxpayer Classifications under the NIRC

The NIRC identifies the following classifications of taxpayers for income tax purposes:

Individuals
Corporations
Trusts
Estates

Each category of taxpayer is subject to distinct income tax provisions, rates, and compliance requirements.

II. Individuals

A. Nature and Types of Individual Taxpayers

The NIRC, as amended by the TRAIN Law, further categorizes individual taxpayers based on residency, citizenship, and type of income earned.

Resident Citizens
- Subject to tax on income derived from both within and outside the Philippines.
- Liable for progressive tax rates under the TRAIN Law, which established new tax brackets effective January 1, 2018.
Non-resident Citizens
- Taxed only on income derived from Philippine sources.
- Non-residency applies if the citizen has physically left the Philippines with the intent to reside abroad permanently, has been abroad for over 183 days, or is considered an Overseas Filipino Worker (OFW) who meets the conditions under the law.
Resident Aliens
- Subject to tax only on income derived from Philippine sources.
- Residency is determined by the presence and duration of stay within the Philippines (typically defined as over 180 days of stay).
Non-resident Aliens
- Engaged in Trade or Business: Taxed on income derived from Philippine sources at graduated rates (similar to resident aliens).
- Not Engaged in Trade or Business: Subject to a final withholding tax of 25% on gross income from Philippine sources.

B. Tax Rates for Individuals

The TRAIN Law introduced new income tax rates for individuals effective January 1, 2018, applicable to both resident citizens and resident aliens:

Graduated Tax Rates:
- Income up to PHP 250,000 is exempt from tax.
- Tax rates range from 20% to 35% for income exceeding PHP 250,000, with different rates applying to various income brackets.
- After December 31, 2022, adjusted income brackets apply under the TRAIN Law, which further fine-tuned the rates.
Final Taxes on Certain Types of Income:
- Interest, royalties, and dividends may be subject to final withholding taxes.
- Non-resident aliens not engaged in trade or business pay a final withholding tax rate of 25% on their gross income.

III. Corporations

A. Classification of Corporations

Domestic Corporations
- Corporations established or organized under Philippine laws are subject to tax on all income, both from within and outside the Philippines.
Resident Foreign Corporations
- Corporations organized under foreign laws but engaged in trade or business within the Philippines.
- Taxed on income derived solely from Philippine sources.
Non-resident Foreign Corporations
- Corporations organized under foreign laws and not engaged in trade or business within the Philippines.
- Subject to final withholding tax rates on certain types of passive income from Philippine sources.

B. Tax Rates for Corporations (as modified by the TRAIN Law and subsequent laws)

Domestic and Resident Foreign Corporations:
- The Corporate Income Tax (CIT) rate is 25% on net taxable income, with a reduced rate of 20% applicable to domestic corporations with net taxable income not exceeding PHP 5 million and total assets not exceeding PHP 100 million.
Minimum Corporate Income Tax (MCIT):
- Imposed at a rate of 1% of gross income, effective from July 1, 2020, until June 30, 2023, under the CREATE Act.
Non-resident Foreign Corporations:
- Subject to a 25% final withholding tax on gross income derived from Philippine sources (e.g., dividends, interests, royalties).

IV. Trusts and Estates

A. Tax Treatment of Trusts

Definition and Scope:
- A trust is a legal arrangement where a trustee holds and manages assets for the benefit of beneficiaries.
- Trusts are treated as separate taxpayers under the NIRC, and income generated within a trust is subject to taxation.
Income Tax Rates:
- Trusts are subject to the same graduated income tax rates applicable to individual taxpayers.
- The income tax applies to the income retained within the trust; distributed income to beneficiaries may be subject to taxation at the beneficiaries' level.

B. Tax Treatment of Estates

Definition:
- An estate is the total property or assets left by a deceased person, which is subject to taxation until transferred to legal heirs.
Income Tax Rates:
- Estates are also subject to the graduated income tax rates applicable to individual taxpayers.
- The income earned by an estate during the period of administration or settlement is taxable, and the rates are computed similarly to those applicable to individuals.

V. Special Provisions and Simplifications under the Ease of Paying Taxes Act (R.A. No. 11976)

The Ease of Paying Taxes Act introduced reforms aimed at simplifying tax compliance requirements, which apply to all types of taxpayers.

Simplified Filing and Payment Procedures:
- Streamlined and more user-friendly tax filing processes, particularly for individual taxpayers and small businesses.
Single-Tier Filing System:
- Simplified filing procedures that consolidate certain tax returns, reducing compliance burdens for corporations and trusts.
Administrative and Procedural Reforms:
- Enhanced taxpayer services, expanded digitalization of tax compliance processes, and clarified tax rulings to assist all types of taxpayers, from individuals to corporations.

Summary

The NIRC, as amended by the TRAIN Law and the Ease of Paying Taxes Act, provides a clear categorization of taxpayers, each with distinct income tax obligations. Individual taxpayers are subject to progressive tax rates, while corporations face a corporate income tax with specific rates for domestic, resident foreign, and non-resident foreign corporations. Trusts and estates, treated similarly to individuals, must comply with graduated tax rates. The recent Ease of Paying Taxes Act enhances tax compliance through streamlined processes, particularly benefiting individual taxpayers and small businesses.