Summary
RMC No. 49-2010 further amends portions of RMC No. 30-2008, as amended by RMC No. 59-2008, on the taxability of insurance companies for Minimum Corporate Income Tax, Business Tax and Documentary Stamp Tax (DST) purposes.
Key points
- Premiums and premium tax. Premiums received by life insurance companies are subject to 5% premium tax under Section 123 of the Tax Code, as amended. Premiums on Health and Accident Insurance, whether received by a life or non-life company, count as life insurance premiums and are subject to Premium Tax, not VAT.
- Independent income and fees. Management fees, rental income and other income from services that can be pursued independently of the insurance business are not subject to the 5% Premium Tax. They are subject to VAT under Section 108 or Percentage Tax under Section 116, as the case may be. Re-issuance, reinstatement and renewal fees and penalties tied to policies are akin to premiums and bear the 5% Premium Tax on the gross amount.
- Investment income. Investment income from investing premiums in marketable securities, bonds and other instruments is exempt from further business tax, since the premiums were already subject to the 5% Premium Tax. Where the Insurance Commission has allowed and approved the investment activities, they are incidental activities subject to the 5% Premium Tax.
- Group insurance and DST. Premiums on group insurance policies are subject to Section 183 of the Tax Code. Individual certificates issued to each covered employee are separate and distinct from the group policy, so DST applies under Section 188.
- Premium Deposit Fund. For the quasi-banking activity of the Premium Deposit Fund, life insurance companies are subject to gross receipts tax under Section 121 on income earned from investing these deposits. The instrument evidencing the deposits is exempt from DST because it has no fixed term and the deposits can be withdrawn anytime at the policyholder’s option.
- Policyholder interest. Interest earned by the policyholder from the Premium Deposit Fund is not subject to the 20% final Withholding Tax, as it has already been subjected to final tax as part of investment.
Who is affected
- Life insurance companies
- Non-life insurance companies (health and accident premiums)
- Policyholders of Premium Deposit Fund products
Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.
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