Question & AnswerQ&A (Republic Act No. 1855)
Republic Act No. 1855 is an act to place life insurance companies on a new income tax basis by amending Sections 24 and 32 of the National Internal Revenue Code, as amended.
The tax rate is 20% on the amount of total net income not exceeding PHP 100,000 and 28% on the amount exceeding PHP 100,000 for corporations organized in or existing under Philippine laws.
No, domestic and foreign life insurance companies are excluded from the general corporate income tax rates and are instead taxed based on their total investment income under a special provision.
A tax of 6.5% is levied annually on the total investment income received by domestic and foreign life insurance companies authorized to do business in the Philippines.
It is the gross investment income from rents, dividends, and interest less deductions for real estate expenses, depreciation, interest paid on indebtedness (except if used to purchase tax-exempt obligations), and ordinary and necessary investment expenses.
Only 25% of such dividends are returnable for tax purposes under Section 24(A).
No, Building and Loan Associations pay a 12% tax on their total net income, and private educational institutions pay a 10% tax on their net income.
They may deduct net additions required by law to be made to reserve funds within the year and sums paid within the year on policies and annuity contracts, excluding dividends.
They do not return as income the premium deposits returned to policyholders but must include as taxable income all income from other sources plus any premium deposits retained for purposes other than losses, expenses, or re-insurance reserves.
The actual deposit of sums with Philippine government officers as additions to guarantee or reserve funds is treated as payments required by law to reserve funds and deductible accordingly.