BIR Ruling

October 11, 1973 Mr. Antonio Rodriguez Bautista 4th Floor, Philippine Bank of Commerce Bldg. 377 Plaza Sta. Cruz, Manila S i r : This refers to your letter dated August 10, 1973 requesting a ruling on a query stated as follows: "We are holders of life insurance policies which contain a participating feature whereby dividends are credited to us annually. Several options are available to a policy-holder as to how he may avail of the dividends, but in my case I had opted that my dividends be credited against my accruing premiums, and in the case of my wife she had opted that her dividends be accumulated by the insurance company at interest. Considering that we are policyholders merely, and not really stockholders of the insurance company, and considering further that these dividends take the form of rebates on the premiums, we would like to know whether such dividends should be declared in our income tax return as part of our gross income." In reply thereto, I have the honor to inform you that gross income includes, in general, compensation for personal and professional services, business income, profits from sales of and dealings in property, interest, rent, dividends, and gains, profits, and income derived from any source whatever, unless exempt from tax by law. (Section 39, Income Tax Regulations) A taxable distribution made by a corporation to individual stockholders or members shall be included in the gross income of the distributees where the cash or other property is unqualifiedly made subject to their demand. Dividends, in cash or other property received by an individual, are subject to tax in his hand in the same manner as other income. (Section 250, Income Tax Regulation) Accordingly, the dividends which is credited against your accruing premiums, and in the case of your wife, accumulated by the insurance company at interest is considered as part of your gross income which should be declared in your income tax return. cdtech 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."