5% Premium Tax Subject of Insurance Firms

January 20, 1993 BIR RULING NO. 040-93 5% PREMIUM TAX SUBJECT OF INSURANCE FIRMS 121 000-00 040-93 PIRA, Inc. Room 450 Regina Building Escolta, Manila Attention: Mr . Santiago Gascon General Manager This refers to your letters dated April 21, December 15 and December 22, 1992, all bearing on your request for a ruling to the effect that the premium tax is an indirect tax which can be passed on to the insured and that the basis thereof is the pure premium (or premium proper) exclusive of the premium tax, documentary stamp tax and fire service tax. cdta It is represented that insurance companies customarily bill their clients 1% out of the 5% premium tax and the remaining 4% tax is factored in the premium rate so much so that in computing 5% premium tax, the insurance companies used as basis the premium proper plus the 4% tax shouldered by them; and that under your proposals, the 4% premium tax presently built in the tariff rates be factored out, after which the insurance companies will charge separately the 5% premium tax to the insured. In reply, please be informed that the 5% premium tax payable by every person, company or corporation (except purely cooperative companies or associations) doing insurance business of any sort in the Philippines, is based on the total premium collected pursuant to Section 121 of the Tax Code, as amended. There is no law which prohibits the insurance companies to bill the 5% premium tax to the insured. Hence, we will not interpose any objection if the insurance companies will charge separately the premium tax to the insured as long as the same is paid to the Bureau of Internal Revenue. JOSE U. ONG Commissioner of Internal Revenue