BIR Ruling No. 014-64

March 9, 1964 BIR RULING NO. 014-64 Mr. Cipriano Azada Paredes, Poblador & Nazareno Law Offices 575 Atlanta, Port Area Manila S i r : Reference is made to your letter dated December 19, 1963, requesting a ruling on the taxability of the transaction stated as follows: LLphil "A number of life insurance companies, domestic and foreign, intends to form a Pool to enter into a group policy contract with the Social Security System whereby borrowers from the System would be covered with mortgage redemption insurance. The SSS would collect the insurance from the borrowers and allocate said premiums directly among the member companies in accordance with a formula based roughly on the contribution of each company to the System. Claims will be paid by the member companies upon individual assessment by the SSS based on the same formula. The Pool will not have a juridical personality distinct from that of the members; and its activity will be limited to dealing with the SSS in connection with the group mortgage redemption insurance policy." In a conference held at the Law Division, you further represented that the Pool will not actually be organized as a juridical entity, that the supposed members of the same will not contribute money, property, or industry to a common fund, that the liability of each member from claims arising from its transactions is independent from one another and that its existence will only be for the purpose of convenience for the transaction of business with the Social Security System. LibLex In reply thereto, I have the honor to inform you as follows: (1) Under the above facts, the so-called pool of insurance companies cannot be subject to tax as a corporation under Section 24 of the Tax Code. (2) The group insurance policy to be issued will be considered to constitute of as many insurance contracts as there are SSS-members-borrowers covered by the group policy. In determining, therefore, the amount of documentary stamp tax due on the group insurance policy, the amount of tax that would have been due on each individual policy issued to each SSS-member-borrower had individual insurance contracts been entered into between the Pool and SSS-member-borrower shall first be computed in accordance with Section 220 of the National Internal Revenue Code. The sum total of the tax thus computed corresponding to. (3) No premium tax will be due from the Pool inasmuch as the premiums will be paid directly to the different insurance companies in accordance with a formula based on the contribution of each company to the Social Security System. Each company will be liable for the tax on the total premiums received by them. llcd Very truly yours, (SGD.) BENJAMIN N. TABIOS Acting Commissioner of Internal Revenue