BIR Ruling [DA-171-02]

September 18, 2002 BIR RULING [DA-171-02] DA 201-00 dated April 4, 2000 Mr. Edito F. Quejada Lot 25 Block 2, Matthew Street Sushila Village, Kaligayahan Novaliches, Quezon City S i r : This refers to your letter dated January 2, 2002 requesting on behalf of your client, Goldwings Insurance Agency, Inc. for a ruling as to whether or not commission payments made by an Insurance Company to Goldwings Insurance Agency, Inc., a juridical person, is subject to the 10% creditable withholding tax as prescribed in Revenue Regulations No. 2-98, as amended. It appears that Goldwings Insurance Agency, Inc. is an authorized insurance agency licensed by the Office of the Insurance Commission dealing in non-life insurance as well as fidelity bonds; that its income i.e., commissions earned given by insurance companies are based on approved insurance coverage; that once the insurance policies are fully paid, the insurance company is duty bound to pay the insurance agency the commissions due to the insurance agency net of withholding tax; that Goldwings Insurance Agency, Inc. had been paying the 5% creditable withholding tax before this has increased to 10%; and that it had been paying the 5% creditable withholding tax on the theory that the business is not one of those mentioned in Revenue Regulations No. 2-98, as amended. In reply thereto, please be informed that pursuant to Section 2.57.2(A)(5) of Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 6-2001, as further amended by Revenue Regulations No. 12-2001, a creditable withholding tax at the rate of 10% shall be withheld on the gross professional and talent fees or any form of remuneration for the services of insurance agents and insurance adjusters. However, if the services are performed by juridical persons, the rate of tax to be withheld is 5%, pursuant to said Section 2.57.2(B), in relation to Section 2.57.2(A)(5), both of Revenue Regulations No. 2-98, as amended. Accordingly, the income payments to Goldwings Insurance Agency, Inc., a juridical person, is subject only to 5% creditable withholding tax. ( BIR Ruling No. DA201-00 dated April 4, 2000 ) 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. EcHaAC Very truly yours, (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal & Inspection Group