Title
Inter-Agency Tax Payment for Insurance Firms
Law
Ic Circular Letter No. 14-98
Decision Date
Aug 11, 1998
The Department of Finance establishes an Inter-Agency Committee on Insurance Companies to streamline tax payment processes, requiring all insurance firms to pay their taxes at a designated bank and submit detailed financial reports to enhance monitoring and compliance.
administrative law
insurance law
tax compliance

Purpose and inter-agency committee

  • Finance Department Order No. 54-98 creates the Inter-Agency Committee to oversee and monitor the Memorandum of Agreement between the Insurance Commission (IC) and the Bureau of Internal Revenue (BIR) regarding the tax payments of insurance companies.
  • The committee is mandated to recommend policies and procedures as necessary for monitoring insurance companies’ tax payments.
  • The committee’s monitoring is aimed at simplifying and strengthening oversight of taxes due from insurance companies.

Policy: one bank and no direct payment

  • Finance Department Order No. 54-98 establishes two core policies:
    • Taxes due from all insurance companies must be paid at an IC-chosen bank; and
    • Insurance companies, as large taxpayers, must no longer pay their tax liabilities directly to the Large Taxpayers' Division.
  • The IC must ensure that the inter-agency implementation follows these two policies for insurance company tax payments.

Taxes and tax instruments covered

  • Insurance companies must file and pay the following taxes with the Land Bank of the Philippines, U.N. Avenue Branch:
    • Premium tax
    • VAT on non-life policies (except for crop insurance)
    • DST
    • Income tax
  • The circular letter directs that insurance companies use the IC-chosen bank for these tax payments, and it identifies Land Bank of the Philippines, U.N. Avenue Branch with a servicing arrangement.
  • By special arrangement, an extension bank teller will service taxpayers at the 2nd Floor of the Insurance Commission Building, 1071 U.N. Avenue, Manila.

Correction to the income item instruction

  • Finance Department Order No. 54-98 requires that the item instruction for life insurance be read as:
    • “Premium income on direct business in the case of life insurance”
  • The circular letter specifically requires replacing the prior wording “Premium income (net of ceded business) in the case of life insurance” with “Premium income on direct business in the case of life insurance” for purposes of the referenced item.

IC responsibilities for reporting and transmittals

  • The Insurance Commission (IC) must choose one bank to accept tax payments of all insurance companies, located at or near the IC.
  • The IC must require insurance companies to file and pay premium tax, VAT (non-life insurance, except crop insurance), DST, and income tax with the IC-chosen bank.
  • The IC must require the IC-chosen bank to provide additional BIR data as the need arises.
  • The IC must require insurance companies to submit:
    • Annual statements; and
    • Additional monthly and quarterly reports
    • in diskettes or other electronic media in addition to hard copies.
  • The IC must require insurance companies to submit/provide the IC with a clear photocopy of the official receipt of payment.
  • The IC must require the IC-chosen bank to transmit to the IC hard copies of:
    • premium tax returns, VAT returns, and quarterly and annual income tax returns on the fifth (5th) day following the last day of filing of those returns.
  • The IC must require the IC-chosen bank to transmit to the IC hard copies of DST returns on the fifteenth (15th) day following the month of DST transactions.
  • For reporting to BIR, the IC (through the committee framework) requires submission of specified reports in diskettes or other electronic media plus hard copies, including:
    • Annual Statements of insurance companies.
    • Monthly report containing information for:
      • Premium Tax-Quarterly:
        • Gross premiums (net of returns and cancellation) on direct business of health and accident issued by non-life insurance companies; and
        • Premium income (net of ceded business) in the case of life insurance.
      • Value-Added Tax-monthly/Quarterly:
        • Gross receipts or collections of premiums except premium on health and accident by non-life insurance companies as basis for output tax;
        • Summary of input taxes incurred by non-life insurance companies.
      • Documentary Stamp Tax-Monthly:
        • Gross premiums (net of returns and cancellation) received for the month by non-life insurance companies in all line of business; and
        • Total sum insured of all policies issued by all life insurance companies for the month.

BIR responsibilities for monitoring and collection

  • The BIR must implement the project through the Collection Service.
  • The BIR must monitor the premium taxes, VAT, documentary stamp taxes, and income taxes due from insurance companies.
  • The BIR must delist insurance companies identified as large taxpayers from paying directly to the Large Taxpayers' Division.
  • The BIR must receive the electronic data of payments from the IC-chosen bank through the National Office Data Center.
  • The BIR must collect the hard copies of tax returns from the IC on the fifth (5th) day following the last day these returns were transmitted to the IC-chosen bank.
  • Under the circular letter’s implementation guidance, insurance companies must submit to the IC clean photocopies of official receipts of all taxes paid from January 1998 to the present, to enable effective implementation.

Committee composition

  • The Department of Finance (DOF) is represented by:
    • Technical Assistant to the Office of the DOF Secretary.
  • The Insurance Commission (IC) is represented by:
    • Technical Assistant to the Office of the Insurance Commissioner
    • Chief-Examination Division I
    • Chief-Examination Division II
    • Chief-Financial Analysis Division
    • Chief-Budget and Management Division
  • The BIR is represented by:
    • Technical Assistant to the Office of the Commissioner
    • Technical Assistant, Deputy Commissioner for Operations
    • Technical Assistant, Deputy Commissioner for Information Systems
    • Asst. Commissioner, Collection Service
    • Asst. Commissioner, Information Systems Operations Service
    • Asst. Commissioner, Information Systems Development Service
    • Asst. Commissioner, Information Planning & Quality Service
    • Representative, Legal Service.

Effect of conflicting rules and compliance

  • Finance Department Order No. 54-98 provides that it takes effect immediately.
  • Finance Department Order No. 54-98 requires that all circulars, regulations, and orders contrary to or inconsistent with it are revoked or modified accordingly.
  • The circular letter mandates strict compliance with these requirements by insurance companies in filing and paying taxes and in submitting required documentation for monitoring.

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