Question & AnswerQ&A (BIR REVENUE MEMORANDUM CIRCULAR NO. 49-2010)
The principal business activity of life insurance companies is underwriting life insurance contracts from which it generates premiums.
The premium tax on life insurance premiums is imposed at the rate of five percent (5%) pursuant to Section 123 of the Tax Code, as amended.
Premiums on health and accident insurance, whether received by a life or non-life insurance company, are considered premiums on life insurance and are subject to premium tax and not value-added tax.
Management fees, rental income, and commission income earned by life insurance companies from services pursued independently of the insurance business are subject to VAT under Section 108 of the Tax Code or percentage tax under Section 116, and are not subject to the 5% premium tax.
Yes, re-issuance fees, renewal fees, reinstatement fees, and penalties incidental to life insurance policy contracts are considered akin to premiums and are subject to the 5% premium tax.
Investment income earned from the investment of premiums that have already been subjected to the 5% premium tax is exempt from further imposition of business tax.
Investment income from funds obtained from others, allowed and approved by the Insurance Commission, are considered incidental activities and subject to the 5% premium tax under Section 123 of the Tax Code.
Income earned from the PDF, being a quasi-banking activity authorized and approved by the Insurance Commission, is subject to the 5% premium tax imposed under Section 123 of the Tax Code.
No, since the PDF deposits can be withdrawn anytime by the policyholder, the instrument evidencing such deposits is exempt from documentary stamp tax.