Question & AnswerQ&A (BIR REVENUE MEMORANDUM CIRCULAR NO. 30-2008)
The primary and predominant business activity of an insurance company under PD 612 is the writing of insurance or reinsuring risks underwritten by insurance companies.
PD 612 defines "doing an insurance business" as making or proposing to make any insurance contract, surety contracts as a vocation, reinsurance business, or any equivalent business in a manner to evade the code's provisions.
Gross income includes direct premiums and reinsurance assumed (net of returns/cancellations), miscellaneous income, investment income not subject to final tax, released reserve, and other gross income items under Section 32 of the Tax Code.
These include claims, losses, maturities, benefits net of reinsurance recoveries; legally required additions to reserve funds; and reinsurance ceded.
A 5% premium tax is imposed on total premiums collected on direct writings/premiums as provided under Section 123 of the Tax Code.
No, these incomes from unrelated services are subject to VAT or percentage tax depending on the nature of the service, not the 5% premium tax.
Investment income from premiums is exempt from further business tax because the premiums were already subject to the 5% premium tax.
Such income is considered from a quasi-banking function and is subject to the gross receipts tax under Section 121 of the Tax Code.
A documentary stamp tax of fifty centavos (₱0.50) on each two hundred pesos (₱200) or fractional part thereof of the premium collected is imposed under Section 183 of the Tax Code.
Premiums are subject to 5% premium tax and DST; management fees charged by the insurer are subject to VAT or percentage tax; certificates issued are subject to DST under Section 195; and gains by policyholders on redemption are subject to income tax.
Interest earned by policyholders from the PDF is subject to a 20% final withholding tax as it resembles a bank deposit.
Gross receipts, including total premiums received (except crop insurance), are subject to VAT under Section 108 of the Tax Code.
No, premiums refunded within six months after payment due to rejection of risk or other reasons are excluded from taxable receipts.
A documentary stamp tax of fifty centavos (₱0.50) on each four pesos (₱4.00) or fractional part of the premium charged is imposed under Section 184 of the Tax Code.