BIR Ruling [DA-201-00]

April 4, 2000 BIR RULING [DA-201-00] Revenue Regulations No. 2-98 Mr. Ramon M. Veluz Managing Director R.M. Veluz Accounting Firm Suite 404, Tempus Place Condominium 21-A Matalino Road, Diliman Quezon City S i r : This refers to your letter dated August 5, 1999 stating that your client, WORLD MARKETING ALLIANCE PHILIPPINES INSURANCE AGENCY CO. LTD. ( WMA for brevity), a partnership organized under Philippines laws, has been appointed by Aegon Life Insurance (Philippines), Inc. (AEGON) as its General Agent in the Philippines; that in accordance with the approved General Agency Agreement between the parties, WMA will receive as consideration commissions from AEGON on all policies solicited and approved by the latter; and that in the process of the payment of commissions, AEGON is presently withholding 10% tax on all commissions paid to WMA and the latter is likewise withholding 10% tax on commissions paid to its sub-agents. cdlex Based on the foregoing, you are requesting for a ruling on the following: 1. Is it right to withhold a 10% tax on commission payments to a juridical entity like World Marketing Alliance Philippines Insurance Agency Co. Ltd. (A partnership)? 2. If the WMA is not subject to 10% withholding tax, can WMA request for the refund of the excess withholding tax directly from the withholding agent or claim for a tax credit/refund from the commission? In reply, please be informed that pursuant to Sec. 2.57.2(A)(5) of Revenue Regulations No. 2-98, a creditable income 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 Sec. 2.57.2 (B), in relation to Sec. 2.57.2(A)(5), both of Revenue Regulations No. 2-98. Accordingly, the income payments to WMA by AEGON, which are both juridical persons, are subject only to 5% creditable withholding tax. In answer to Question No. 2, you are informed that if the 10% tax withheld from WMA has been remitted by AEGON to the Bureau of Internal Revenue, the former can claim for refund/tax credit of the excess 5% creditable tax withheld from it provided the claim is filed within two (2) years after the payment of the tax or penalty, pursuant to Section 204(C) of the Tax Code of 1997. However, if the tax so withheld has not yet been remitted to this Office, then WMA is entitled to get a reimbursement from AEGON. It shall be understood that if the tax withheld has already been credited against income tax, the same can no longer be further credited or refunded. Please be guided accordingly. Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)