BIR Ruling [DA-052-05]

February 7, 2005 BIR RULING [DA-052-05] Mr. Salvador L. Lacson Managing Partner 15th Floor Burgundy Corporate Tower 252 Sen. Gil Puyat Avenue Makati City S i r : This refers to your letter dated December 8, 2004 requesting for confirmation of your opinion to the effect that if the insurance broker requires you to pay service fee then your payment shall be subject only to the 10% withholding tax; however, if the insurance broker merely collects the premium payments in behalf of the insurance company and does not charge service fee, then your payment is subject to the 2% withholding tax. In reply thereto, please be informed that the said letter of Assistant Commissioner Trinidad sought to reconcile the obligation to withhold on the part of Ortigas & Company on the one hand as a top 10,000 corporation, and this concerns the 2% EWT, and on the other, as an ordinary withholding agent, and this concerns the 10% EWT on the commission of, among others, insurance brokers. The situation in question appears to be one in which an insurance brokers collects the premium from an insured on behalf of the insurance company. As pointed out by Assistant Commissioner Trinidad, if the insurance broker charges service fee, together with the premium, then the insured must withhold only the 10% EWT on the service fee pursuant to Section 3 (G) of Revenue Regulations No. 6-2001, as amended by Revenue Regulations No. 17-2003. If the insurance broker collects only the premiums without any service fee, then the insured which is also a top 10,000 corporation will withhold only the 2% EWT pursuant to Section 3 (M) of Revenue Regulations No. 17-2003, and issue the corresponding certificate (BIR Form No. 2307) in the name of the insurance company. Thus, a double withholding tax is avoided. Presumably, in the latter instance, the insurance company pays the service fee or commission of the insurance broker, in which case, it is the one which withholds the 10% EWT. HEDCAS This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group