BIR Ruling

April 24, 1975 Messrs. Tabaquero, Guzman & Africa Attorneys-At-Law Valgosons Bldg., 2228 Pasong Tamo St. Makati, Rizal Attention: Mr . Leopoldo L . Africa Gentlemen : This refers to your letter dated April 7, 1975 stating that your client, Delta Insurance, Inc. is a duly licensed insurance agent engaged in the solicitation, procurement, undertaking, writing and/or underwriting non-life insurance contracts in behalf of specific insurance companies as its principal; that out of its efforts, it derives compensation fixed at 30% of all premiums actually paid by insured persons on account of insurance contracts solicited, procured, undertaken, written and/or underwritten by it in behalf of its principals; and that the latter assumes responsibility for the payment of the corresponding premium (not sales) tax on insurance sales solicited, procured, undertaken, written or underwritten by your client in behalf of its principals. casia Under the foregoing facts our opinion is being sought on the following: 1. Whether your client is still liable to pay a percentage (not sales) tax on the commission it receives from its principals; or should such commission be simply treated as ordinary income not subject to any percentage (not sales) tax, considering that all (sales) taxes due have already been paid for by your client's principals. 2. If payments of percentage (not sales) taxes have previously been made by your client on the commissions it had been receiving from its principals as aforesaid, is your client entitled to refund of such payments? In reply, I have the honor to inform you that your client, Delta Insurance Agency, Inc. for engaging in the business as insurance agent is an independent contractor. As such contractor, it is subject to the P50.00 annual fixed tax prescribed in Section 182(A)(1) of the Tax Code and its gross receipts consisting of the commissions it receives from its principals is subject to the 3% contractor's tax prescribed in Section 191 of the same Code. The 3% tax on insurance premiums paid by your client's principals in accordance with Section 255 of the Tax Code is different and distinct from the 3% contractor's tax for which your client is liable as insurance agent. If your client has paid the contractor's percentage tax, it is not entitled to the refund thereof as the collection of said tax is in accordance with law. cd Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN-1601-593-5 "TAXPAYERS SHOULD INDICATE THEIR TAN IN ALL COMMUNICATIONS TO THE BIR."