Situs of taxation

Situs of taxation literally means place of taxation. The general rule is that the taxing power cannot go beyond the territorial limits of the taxing authority. Basically, the state where the subject to be taxed has a situs may rightfully levy and collect the tax.

SOURCE: Gargoles (2011). Situs of taxation. Let’s Talk Tax -- By Nelson S. Gargoles. Jul 19, 2011.

In the Philippines, there are different factors in determining the situs of taxation: residence; nationality; citizenship; nature of tax; subject matter; object of the tax; and source. Depending on the tax law involved, two (2) or three (3) of these factors may apply.

For example, in income tax law, nationality, source and residence are factors. Whether or not a person is a national of the Philippines and whether or not he is a resident are factors as important as the source of the income: whether from within or outside the Philippines.

In property tax, it matters whether the property is real (immovable) or personal (movable). The general rule is realty taxation is "location of the property." On the other hand, the general rule in personalty taxation considers the "domicile of the owner" because personal property follows the owner. In short, the situs of personal property is the domicile of the owner but said property may acquire a business situs or the law may provide a different rule.

In excise, donor's and estate tax laws, nationality, residence and source are also important.

In business tax, the place where the business is performed or the occupation is engaged in is a factor. In sale of realty, the place where the property is located is the situs. In sale of personal property, there are three (3) rules:

[1] There are incomes deemed sourced partly without and partly within the Philippines if the place of production and sale are different.
[2] There are incomes deemed entirely sourced from the place of sale even if the place of purchase and the place of sale are different.
[3] There are also incomes for which place of sale is not a factor. An example of this is shares of stock in a domestic corporation.