Business Tax and Documentary Stamp Tax (DST) for Life Insurance Companies
- Premiums received by life insurance companies are subject to a 5% premium tax on direct writings, under Section 123 of the Tax Code, with certain exemptions (e.g., premiums refunded within six months, reinsurance premiums already taxed).
- Premiums on Health and Accident Insurance are taxed as life insurance premiums, not subject to VAT.
- Income from management fees, rental income, or services independent of insurance business are subject to VAT or percentage tax, not premium tax.
- Fees like re-issuance, reinstatement, renewal, and penalties are considered income for services and subject to VAT or percentage tax.
- Investment income from funds pooled from policyholders used for investment is considered income from quasi-banking activities and subject to gross receipts tax under Section 121 of the Tax Code.
- Investment income must be apportioned to distinguish between exempt income and income subject to gross receipts tax.
- Life insurance policies are subject to documentary stamp tax at P0.50 for each P200 or fractional part of premium collected under Section 183.
- Certificates issued under group insurance policies are subject to documentary stamp tax of P15 each under Section 188.
- Health and accident insurance policies follow the documentary stamp tax rules for life insurance.
Taxability of Other Financial Products by Life Insurance Companies
- Variable Unit Link (VUL) certificates, which resemble deeds of trust, are not subject to documentary stamp tax under Section 195, as premiums on variable contracts have already been taxed under Section 183.
Business Tax and Documentary Stamp Tax for Non-Life Insurance Companies
- Premiums collected by non-life insurance companies (excluding crop insurance) are subject to VAT under Section 108 of the Tax Code.
- Premiums from health and accident insurance contracts by non-life insurers are subject to 5% premium tax under Section 123, as they are akin to life insurance.
- Insurance policies (other than health and accident) are subject to documentary stamp tax at P0.50 for every P4 premium charged under Section 184, regardless of policy effectiveness.
- Reinsurance contracts are exempt from documentary stamp tax.
- Health and accident insurance policies issued by non-life insurers follow the documentary stamp tax rules of life insurance.
- Certificates of cover (COC) for motor vehicle insurance are subject to the documentary stamp tax of P15 under Section 188.
Implementation and Compliance
- All inconsistent rulings and issuances are revoked, amended, or modified accordingly.
- Internal Revenue Officers are enjoined to widely disseminate the Circular.
- Effective from August 23, 2008.