Tax Exemption Granted to Corporation Registered With the BOI

January 13, 1987 BIR RULING NO. 002-87 186 164-86 002-87 Gentlemen : In reply to your letter dated September 29, 1986, please be informed that as a corporation registered with the Board of Investments under R.A. No. 5186, you are exempted from all internal revenue taxes, except income tax on a graduated basis to the following extent: 100% Up to December 31, 1984 75% Up to December 31, 1986 50% Up to December 31, 1988 25% Up to December 31, 1989 However, the above exemption privilege which includes exemption from documentary stamp tax cover only your liabilities as may be imposed in connection with the operation of your registered pioneer project and shall exclude such taxes as may be transferred or passed on to you either by business practice or mere contractual arrangement. (Rule XV, Sec. 6, Rules and Regulations implementing P.D. 1789). Accordingly, since under Section 186 of the Tax Code, as amended, the documentary stamp tax on insurance policy is the direct liability of the insurance company which issued the said document and the said tax was passed on to you either by business practice or mere contractual arrangement, you cannot claim exemption from the payment of the documentary stamp tax on the insurance policy. (BIR Ruling No. 175-83). Moreover, pursuant to Section 186 of the Tax Code, as amended by P.D. 1994, documentary stamp taxes on documents, etc. are payable "by the person making, signing, issuing, accepting, or transferring the same, and at the same time such act is done or transaction had: Provided, that whenever one party to the taxable document enjoys exemption from the tax herein imposed, the other party thereto who is not exempt shall be the one directly liable for the tax." In a contract of insurance known as the insurance policy, the parties to the contract are the insurer and the insured. Assuming arguendo , that, you as the insured are exempt from the payment of the documentary stamp tax, then the insurer (the insurance company) which does not enjoy tax exemption is the party directly liable for the payment of the full amount of documentary stamp tax due from the insurance policies. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner