Eternal Plans, Inc.

February 20, 2009 BIR RULING [DA-(OSL-005) 110-09] R.A. No. 9257; BIR Ruling No. DA-417-07 Eternal Plans, Inc. Dominga Building III 2113 Pasong Tamo corner Dela Rosa Streets Makati City Attention: Ms. Amor B. Masigla AVP-Finance Gentlemen : This refers to your letter requesting for tax exemption on the commissions of your following agents who are senior citizens: aSDHCT 1. Rolando B. Paguio ID# 0990 2. Rolando D. Hizon 0447 3. Socorro B. Hizon 177 4. Felicita C. Chua 2177491 5. Maria Salome B. Mallari 39984 6. Mariano S. Malinao 1557584 7. Magdalena I. Gorospe 2589272 8. Mario C. Macaraeg 82940 9. Carolina L. Ancheta 62560 10. Jorge L. Sarno 20910 11. Eleno G. Dotig 3847 12. Antonio N. Ricafort 2270101 13. Rodolfo E. Reyes 2285705 14. Bienvenido R. Tolentino 2284598 15. Ofelia G. Suazo 18139 16. Leonor S. Daclan 067 17. Corazon D. Flores 008287 18. Julieta L. Santiago 1566990 19. Perfecto O. Dionido 2930 20. Rosalina F. Bello 1896717 21. Linda D. Hechanova 148677 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. 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. AacCHD The current poverty thresholds as provided by the National Statistical Coordination Board are as follows: 2007 Annual Per Capita Poverty Thresholds (in PhP) NCR 2/ 19,345 1st District 2/ 19,907 2nd District 2/ 19,319 3rd District 2/ 18,838 4th District 2/ 19,807 For more information regarding the current poverty thresholds, please go to the website of NSCB at www.nscb.gov.ph and click "poverty" or call telephone no. 896-7981. Accordingly, if the above agents are covered by R.A. No. 9257 and their respective annual taxable income does not exceed the poverty level as determined by the NEDA for the entire year, their commissions are exempt from income tax and consequently, from withholding tax and Eternal Plans, Inc. shall be exempt from the duty to withhold the corresponding tax on their respective commissions. Conversely, if their respective annual taxable income exceeds the poverty level as determined by the NEDA, their commissions are subject to income tax and consequently, to withholding tax and Eternal Plans, Inc. is required by law to withhold the corresponding tax on their commissions. cSaCDT 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