Tax Reduction on Life Insurance Policies

Section 1 further amends Section 123 of the National Internal Revenue Code of 1997 to reduce the tax on life insurance premiums.
Section 3 further amends Section 183 of the National Internal Revenue Code of 1997 to revise the one-time documentary stamp tax on life insurance policies.
Sections 2 and 4 establish how the reduced premium tax rate applies over time, including a future tax exemption on life insurance premiums and a transition for documentary stamp tax.

Republic Act No. 10001 reduces the taxes imposed on life insurance policies by amending the premium tax and the documentary stamp tax treatment under the National Internal Revenue Code of 1997.

Section 1 treats “premiums” broadly to include payments made in money, notes, credits, or any substitute for money.
Section 1 defines cooperative companies or associations as those conducted by members with money collected among themselves, solely for their own protection, and not for profit.
Section 1 excludes certain premium components from taxable receipts, including premiums refunded within six (6) months after rejection of risk or returned for other reason to the insured.

Section 123 as amended imposes a tax on every person, company, or corporation doing life insurance business of any sort in the Philippines, except purely cooperative companies or associations.
Section 123 as amended imposes the premium tax on the total premium collected within the Philippines, subject to the Act’s enumerated exclusions.
Section 123 as amended characterizes the tax as collected at a rate of two percent (2%) on the total premium collected.

Section 123 as amended imposes a two percent (2%) tax on the total premium collected, whether paid in money, notes, credits, or any substitute for money.
Section 123(a) as amended excludes from taxable receipts premiums refunded within six (6) months after payment on account of rejection of risk or returned for other reason to the person insured.
Section 123(a) as amended provides that no tax is paid upon reinsurance by a company that has already paid the tax.
Section 123(a) as amended provides that no tax is paid on premiums collected/received by a branch of a domestic corporation, firm, or association doing business outside the Philippines on account of the life insurance of a nonresident, when the foreign country imposes tax on such premium.
Section 123(a) as amended provides that no tax is paid on premiums collected/received on account of reinsurance when, in personal insurance, the insured resides outside the Philippines, if the foreign country imposes tax on such premiums where the original insurance was issued or perfected.
Section 123(a) as amended provides that no tax is paid on the portion of premiums collected/received by insurance companies on variable contracts in excess of the amounts necessary to insure the lives of the variable contract owners.

Section 2 provides that the new premium tax rate of two percent (2%) applies only to insurance policies issued after the effectivity of Republic Act No. 10001.
Section 2 provides a transition rule: for insurance policies taken out before the Act’s effectivity whose premiums are not yet fully paid, the two percent (2%) rate applies to the remaining balance and for the remaining years.

Section 183(a) as amended imposes a one-time documentary stamp tax on all policies of insurance or other instruments whereby any insurance is made or renewed upon any life or lives.
Section 183(a) as amended sets the stamp tax rates by the amount of insurance:
- If the amount of insurance does not exceed Php 100,000.00, the policy is exempt.
- If the amount of insurance exceeds Php100,000.00 but does not exceed Php300,000.00, the tax is Php10.00.
- If the amount of insurance exceeds Php300,000.00 but does not exceed Php500,000.00, the tax is Php25.00.
- If the amount of insurance exceeds Php500,000.00 but does not exceed Php750,000.00, the tax is Php50.00.
- If the amount of insurance exceeds Php750,000.00 but does not exceed Php1,000,000.00, the tax is Php75.00.
- If the amount of insurance exceeds Php1,000,000.00, the tax is Php100.00.

Section 4 provides that five (5) years after the effectivity of this Code, no tax on life insurance premium shall be collected.
Section 4 provides that on the same date, all policies of insurance or other instruments whereby any insurance is made upon any life or lives are exempt from the documentary stamp tax.

Section 5 requires the Secretary of Finance to promulgate the necessary rules and regulations for effective implementation.
Section 5 requires the Secretary of Finance to act upon recommendation of the Commissioner of Internal Revenue.

Section 6 establishes separability: if any provision of Republic Act No. 10001 is held unconstitutional or invalid, the remaining provisions remain valid.
Section 7 provides a repealing rule: all laws, decrees, executive orders, rules and regulations, or parts thereof inconsistent with Republic Act No. 10001 are repealed, amended, or modified accordingly.