BIR Ruling

July 7, 1972 Mr. Carlito B. Dimarucut Certified Public Accountant 165-B Dr. Alejos Street Quezon City S i r : This refers to your letter dated May 8, 1972 requesting clarification of BIR Ruling No. 72-002, dated February 22, 1972 wherein it was held that a corporation which is acting as the insurance general agent of an insurance company is considered an independent contractor subject to the annual fixed tax of P50.00 and to the 3% tax on its gross receipts in accordance with Sections 182(A)(1) and 191 of the Tax Code. Particularly, you would like to know the answer to the following questions: "1. Suppose the general agent is a natural person, is he still considered an independent contractor subject to the tax stated above? "2. If the answer is yes, what will be the basis of the 3% tax in the following case: Mr. A, general agent of XYZ Insurance Company is authorized to issue policies and make collections for and in behalf of XYZ Insurance Company. Suppose Mr. A was able to issue the following policies in March 1972? Doc. & No. Kind of Insurance Premium Science Total Stamps 001 Fire Insurance P1,400.00 P40.00 P1,440.00 002 Personal accident 3,300.00 100.00 3,400.00 003 Workmens Compensation 3,300.00 100.00 3,400 00 P8,000.00 240.00 P8,240.00 Mr. A is entitled to 30% commission on the premium in his capacity as general agent. Since, Mr. A. is also authorized to make collections the amount of P8,000.00. Question: What will be the basis of the 3% tax? "3. Will your answer be different if the general agent is a corporation? "4. Will your answer be different if the amount of P8,240.00 was paid directly to XYZ Insurance Company?" In reply to questions 1. and 2. above, I have the honor to inform you that a natural person who acts as insurance agent is subject to the P75.00 occupation tax imposed in Section 182(B)(1)(a) of the Tax Code, and not to the independent contractor's fixed and percentage taxes prescribed in Sections 182(A)(1) and 191 of the same Code. aisadc However, an individual acting as general agent issuing policies and collecting premiums for his principal is not a mere insurance agent. As such general agent, he is considered an independent contractor subject to the fixed and percentage taxes prescribed by Sections 182(A)(1) and 191 of the Tax Code. The taxable gross receipts of the general agent, be he an individual or a corporation, shall be the same, that is their total compensation under the agency. The liability of the general agent to the 3% tax remains even if the premiums and other charges are paid direct to the principal. Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue