BIR Ruling No. 030-64

May 4, 1964 BIR RULING NO. 030-64 The President Insurance and Surety Association of the Philippines Rm. 450 Regina Building Escolta, Manila S i r : Reference is made to your letter-memorandum, requesting that this Office reconsider its affirmative position on the question of whether or not premiums ceded to a domestic company by a foreign insurance company under a reinsurance agreement perfected abroad on risks covering property of non-residents located outside the Philippines are subject to the premium tax. cdtech In reply thereto, I have the honor to inform you as follows: Section 255 of the National Internal Revenue Code specifically subjects every person, company, or corporation, except purely cooperative companies or associations, doing insurance business of any sort in the Philippines to a tax of three (3%) per centum of the total premiums collected, whether such premiums are paid in money, notes, credits, or any substitute for money. For ready reference, we quote below the pertinent portion thereof: "Sec. 255. Taxes on insurance premiums . There shall be collected from every person, company, or corporation (except purely cooperative companies or associations) doing insurance business of any sort in the Philippines a tax of three per centum of the total premiums collected, whether such premiums are paid in money, notes, credits, or any substitute for money; but premiums refunded within six months after payment on account of rejection of risk or returned for other reason to person insured shall not be included in the taxable receipts; nor shall any tax be paid upon reinsurance by a company that has already paid the tax; nor upon premiums collected or received by any branch of a domestic corporation, firm or association doing business outside the Philippines on account of any life insurance of the insured who is a non-resident, if any percentage tax on such premiums is imposed by the foreign country where the branch is established." (Emphasis supplied). It is clear from the abovequoted provision of Section 255 of the Tax Code, that the tax is imposed on the 'total premiums collected', whether such premiums are paid in money, notes, credits, or any substitute for money. It covers every person, company or corporation doing insurance business of any sort in the Philippines. If the term of the statute are broad enough to include all premiums the tax may be collected on premiums received for business done outside the state as well as for policies written within it (61 C.V., Sec. 302, p. 310). It is well settled principle that 'when the law does not distinguish, there is no justification to make any distinction.' Ubi Lex Non Distingquit, Nec Nos Distinguere Debenus.' It is to be observed that the law excepts only premiums collected or received by any branch of a domestic corporation, firm or association doing business outside the Philippines on account of any life insurance of the insured who is a non-resident, if any percentage tax on such premiums is imposed by the foreign country where the branch is established. Applying the well settled principle of law heretofore cited, it is obvious that any other exception not so expressed cannot be admitted. In support of your negative position, you also contend that 'reinsurance' is not 'Insurance' because under the authorities you cited, the contract of reinsurance is not one of insurance but simple one of indemnity. It would thus appear that you are of the belief that a contract of insurance is not one of indemnity. We cannot subscribed to this position because in actuality both contracts of insurance and reinsurance are contracts of indemnity (Allison v. Fidelity Mutual Fire Ins. Co., 81 Nebs. 494; Young v. Milland, Textile Ins. Co. 30 Phil. 618). Besides, the business of reinsurance is but a modification of ordinary insurance. (Connecticut General Life Ins. Co. v. Johnson, 67 P 2d 675). Thus it was held that reinsurance is an insurance effected by an insurance company against a risk that it has previously assumed in order to indemnity the original insurers against its risk, both policies being in existence at the same time. (Commercial Casualty Ins. Co. v. Columbia Casualty Co., 125 S.W. 2d 490). It will appear, therefore, that the weight of authority is that insurance and reinsurance are similar contracts. In fact, it is by virtue of this similarity that the usual incidents affecting the requisites and validity of a contract of insurance apply with force to the contract of reinsurance. (Delaware Ins. Co. v. Pennsylvania Fire Ins. Co., 555 E. 330) In view of all the foregoing, we believe, as we hereby held, that reinsurance premiums received by a domestic insurance company from abroad is subject to the premium tax prescribed in Section 255 of the Tax Code. Very truly yours, (SGD.) BENJAMIN N. TABIOS Acting Commissioner of Internal Revenue