RMC No. 30-2008: Clarifies the taxability of Insurance Companies for Minimum Corporate Income Tax, Business Tax, and Documentary Stamp Tax purposes

Key points

1. MCIT base for insurers. For the 2% MCIT under Sections 27(E) and 28(A)(2), gross revenue of life and non-life insurers includes direct premiums and reinsurance assumed, miscellaneous income, investment income not subject to final tax, and released reserve. Cost of services is limited to claims, losses, maturities and benefits net of reinsurance recoveries, additions required by law to reserve fund, and reinsurance ceded.
2. Life insurers: premium tax and investment income. Direct premiums are subject to 5% premium tax under Section 123, as are reinsurance, reinstatement and renewal fees and penalties. Investment income from owned funds (premiums earned) is exempt from further business tax. Income from funds pooled from policyholders and booked as liabilities is subject to gross receipts tax under Section 121, and monthly investment income is allocated between the two.
3. Life insurers: other income. Management fees, rental and other income from services that can be pursued independently of the insurance business are subject to VAT under Section 108 or Percentage Tax under Section 116, as the case may be.
4. VUL and Premium Deposit Fund. Variable Unit Link: management fees are subject to VAT or Percentage Tax, fund certificates to DST under Section 195, and policyholder redemption gains must be reported for income tax. Premium Deposit Fund: investment income is subject to gross receipts tax under Section 121, the instrument to DST under Section 179 at P 1.00 on each P 200, and policyholder interest to 20% final withholding tax.
5. Non-life insurers: VAT. The gross receipts of non-life insurers, except crop insurance, are subject to VAT under Section 108, including health and accident premiums. The listed non-life insurer types are covered from January 1, 1996, and gross receipts exclude items such as return premiums refunded within six (6) months and VAT passed on to the insured.
6. Documentary Stamp Tax. Life insurance policies bear DST of P 0.50 on each P 200 of premium (Section 183). Non-life policies bear P 0.50 on each P 4.00 of premium (Sections 184 and 185), and certificates bear P 15.00 under Section 188, including individual certificates under group policies and Certificates of Cover for motor vehicle insurance.

Who is affected

• Life insurance companies
• Non-life insurance companies
• Policyholders with VUL or Premium Deposit Fund

Deadlines and effectivity

• Non-life insurers subject to VAT on gross premium received beginning January 1, 1996