A government or state exercises its taxing power and authority only on taxpayers, income or transactions that fall within its jurisdiction. Thus, the situs, or place, of taxation is critical in determining whether or not a state has the power to tax, especially with respect to nonresident or foreign individuals or corporations that are taxed only on Philippine-sourced income.
The situs of taxation has been defined as the place where an authority has the right to impose and collect taxes. Section 42(A) of our National Internal Revenue Code (Tax Code) embodies a set of situs rules and provides that the following are Philippine-sourced income: