BIR Ruling

February 25, 1976 The President Gemini Associates, Inc. Rm. 318 Bank of P.I. Bldg. Plaza Cervantes, Manila S i r : This refers to your letter dated October 6, 1975 requesting clarification on the imposition of the 3% tax on your gross receipts as an insurance agent. In reply, I have the honor to inform you that a corporation which acts as an insurance agent is considered an independent contractor subject to the P50.00 annual fixed tax prescribed in Section 182 (A) (1) of the Tax Code and its gross receipts is subject to the 3% tax prescribed in Section 191 of the same Code. An independent contractor is defined in Section 191 of the Tax Code in this manner: "The term independent contractors include persons (juridical or natural) not enumerated above (but not including individuals subject to the occupation tax under Section 182(B) of this Code) whose activity consists essentially of the sale of all kinds of services for a fee regardless of whether or not the performance of the service calls for the exercise or use of the physical or mental faculties of such contractors or their employees." Although insurance agents and sub-agents are subject to the occupation tax under Section 12 of Presidential Decree No. 231 (formerly Section 182 (b) of the Tax Code), otherwise known as the Local Tax Code, as amended, nevertheless, the occupation tax thereunder imposed is payable by natural persons engaged in the exercise of the professions or occupations subject to the said tax but not including corporations. In your case, it is that firm that renders the service of soliciting insurance applicants. Although the individual insurance agents employed by that firm do the solicitations, procurement, and underwriting services, nevertheless, they actually render the work for your firm and not for the insurance company which your firm represents. On the other hand, it is your firm which undertakes the work for your principal. Under the circumstances, it cannot be said that the work comes under the category of professional services. For while it is true that the work of an insurance agent constitute professional practice on the part of the individual insurance agents, however, on the part of your firm the solicitation and underwriting work is certainly a non-professional service contemplated within the purview of the term independent contractor as hereinabove defined. Very truly yours, EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-1456-040-3 "TAXPAYERS SHOULD INDICATE THEIR TAN IN ALL COMMUNICATIONS TO THE BIR."