Guzman Cruzat & Ramirez

March 14, 2007 BIR RULING [DA-153-07] 108 (A); VAT Ruling Nos. 283-88; 220-90; 036-99 Guzman Cruzat & Ramirez Unit 7L, Vernida I Condominium Amorsolo St., Legaspi Village Makati City Attention: Atty. Michael C. Ramirez Counsel Gentlemen : This refers to your letter dated February 15, 2007 requesting on behalf of your client, Permanent Plans, Inc. for confirmation of your opinion that as a company engaged in the business of selling and marketing of pre-need plan products as broker, it is liable to pay the value-added tax based on the commission income only and not on the basis of the whole amount of the pre-need plan products. It is represented that Permanent Plans, Inc. is a company engaged primarily in the broker business of selling and marketing of pre-need plan products, which sometimes includes insurance riders which are attached to the main policy of the pre-need plan products; that it also sells and offers to various clientele, other products such as life insurance, health insurance, hospitalization benefits, accidental benefits, total and permanent disability benefits; that in the business arrangement with the insurance companies, Permanent Plans, Inc. issues official receipts to cover the premiums on the pre-need plan products and insurance benefit riders; and that it accepts the premium payments in behalf of the insurance provider but subsequently remits the amount of the premium payments in favor of the respective insurance providers. TDCAHE In reply, please be informed that in the foregoing transactions, only the fee or income received by Permanent Plans, Inc. from its clientele representing commission from services rendered, i.e. , selling and marketing of pre-need plan products, life insurance, health insurance, hospitalization benefits, accidental benefits, total and permanent disability benefits, shall be subject to the 12% VAT. It is not proper to impose the VAT based on the whole amount of the premium payments covering the pre-need plans, life insurance, health insurance, hospitalization benefits, accidental benefits, total and permanent disability benefits sold since Permanent Plans, Inc. is not the insurance company or provider itself in the said transactions, but merely acts as a broker for the insurance companies or providers. IHEAcC It shall be understood, however, that after remitting the whole amount of premiums collected to the insurance company or provider by Permanent Plans, Inc., the insurance company or provider shall in turn issue its invoice/receipt in favor of Permanent Plans, Inc. corresponding to the amount of the premium collected and the latter will issue its invoice/receipt in favor of the insurance company/service provider corresponding to the amount of the brokerage fee it received from the insurance company or provider. In this manner, Permanent Plans, Inc. can already substantiate that it acts as a broker and receives only commission from the said sale of pre-need plans, life insurance, health insurance, hospitalization benefits, accidental benefits, total and permanent disability benefits. 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service