PDIC Not Subject to the 5% Premium Tax Imposed under Sec. 223 of the Tax Code

June 17, 1986 BIR RULING NO. 074-86 223 000-00 074-86 Gentlemen: This refers to your letters dated February 22 and September 30, 1985 requesting a ruling as to whether the Philippine Deposit Insurance Corporation (PDIC) is subject to tax on insurance premium under Section 223 (formerly Section 263) of the Tax Code as amended. It appears that PDIC is a government corporation created under Republic Act No. 3591 designed to promote the stability of the banking system and to provide protection to depositors from loss of the deposits in case of bank closures; that this deposit insurance scheme may be considered as a mutual insurance system supported by the insured banks themselves and supported thru PDIC, a government-controlled corporation; and that each insured bank pays to PDIC an assessment based on the amount of the liability of the bank for deposits which shall not exceed one-twelfth of one per centum per annum . Moreover, under Section 1 of Republic Act No. 3591 that corporation was created to insure the deposits of all banks which are entitled to the benefits of insurance under said Act. In reply, please be informed that the 5% tax on insurance premiums is collected from every person, company or corporation (except purely cooperative companies or associations) doing insurance business of any sort in the Philippines , whether such premiums are paid in money, notes, credits or any substitute for money. (Sec. 223, Tax Code as amended by P.D. No. 1994) It is clear from the foregoing functions and objectives for which the PDIC was created, that it does not come within the purview of "doing an insurance business" considering the fact that the corporation is an instrumentality created by the government for the public welfare and is, therefor, not organized for private profit. In view thereof, this Office is of the opinion as it hereby holds, that the Philippine Deposit Insurance Corporation is not subject to the 5% premium tax imposed under Section 223 of the Tax Code as amended. cdtech Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner