Ms. Matea M. Acosta

July 27, 2007 BIR RULING [DA-417-07] R.A. No. 9257; BIR Ruling No. 058-97 & DA-249-02 Ms. Matea M. Acosta 2171-A Angel Linao St. Malate, Manila M a d a m : This refers to your letter dated June 25, 2007 requesting for tax exemption as a senior citizen. As represented, you are eighty (80) years old and an insurance agent of Caritas Health Shield, Inc. ("Caritas" for brevity) since October 8, 1998 selling pre-need plans. For the period January 1, 2006 to December 31, 2006, you have earned commissions in the total amount of PhP42,079.63. In reply, please be informed that pursuant to Section 2.57.2 (G) of Revenue Regulations (RR) No. 2-98 as amended by RR No. 6-2001, as amended, gross payments to insurance agents are subject to the 10% withholding tax. The basis for computing the said withholding tax shall be the whole commission received by the insurance agent excluding insurance premiums which are payments due the insurance company. The insurance company is constituted as the withholding agent of the government required under penalty of law to withhold the corresponding withholding tax on the commission paid to the insurance agent. However, Section 4 of Republic Act (R.A.) No. 9257, otherwise known as "An Act Granting Additional Benefits and Privileges to Senior Citizens" amending R.A. No. 7432, as implemented by Section 3 (a) of Revenue Regulations (RR) No. 4-2006 provides that senior citizens are entitled to exemption from the payment of individual income tax and consequently, from the withholding tax provided that their annual taxable income does not exceed the poverty level as determined by the National Economic and Development Authority (NEDA) for that year. AScHCD Pursuant to Section 4 of RR No. 4-2006, the senior citizen's exemption shall be determined by the Revenue District Officer (RDO) having jurisdiction over the place where the senior citizen resides by submitting a certified true copy of his Senior Citizen Identification Card (OSCA ID) issued by the Office for Senior Citizens Affairs (OSCA) of the city or municipality where he resides. He must file an Annual Information Return (in lieu of the Income Tax Return) indicating that his annual taxable income does not exceed the poverty level as determined by the NEDA thru the National Statistical Coordinating Board (NSCB) through a formal written document sent to the Commissioner of Internal Revenue for this year and every year thereafter. If qualified, his name shall be recorded by the RDO in his Master List of Tax Exempt Senior Citizens for that particular year, which the RDO is mandatorily required to keep. Accordingly, if you are covered by R.A. No. 9257 and your annual taxable income does not exceed the poverty level as determined by the NEDA for the entire year, your commissions are exempt from income tax and consequently, from withholding tax and Caritas shall be exempt from the duty to withhold the corresponding tax on your commissions. Conversely, if your annual taxable income exceeds the poverty level as determined by the NEDA, your commissions are subject to income tax and consequently, to withholding tax and Caritas is required by law to withhold the corresponding tax on your commissions. 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 as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service