Withholding Tax on the Reinsurance Premiums

February 24, 1959 BIR RULING NO. 095-59 Messrs. Sycip, Gorres, Velayo & Co. Certified Public Accountants P. O. Box 539, Manila Gentlemen : Reference is made to your letter of the 19th instant, requesting confirmation of your opinion that, under the following circumstances, your clients are not subject to the 24% withholding tax on the reinsurance premiums paid to them by local insurance companies. "Our clients, Union Insurance Society of Canton, Ltd. and British Traders Insurance Co., Ltd., are foreign insurance companies authorized to do insurance business in the Philippines with branch office at the Hongkong Bank Building, Manila. The head offices of these two companies have re-insurance contracts with Philippine insurance companies. These contracts are either directly made between the Head Office and the local company or through insurance brokers abroad. Our clients, in preparing their Philippine income tax returns, have always included the reinsurance premiums ceded by local insurance companies as part of their gross income from sources within the Philippines, whether such reinsurances are accepted directly by the Head Office or any other branch abroad." In answer thereto, I have the honor to inform you that, as the withholding provisions of Section 54 of the Tax Code applies only in the case of foreign corporations not engaged in trade or business within the Philippines and not having an office or place of business therein, and considering that, as represented, you said clients are engaged in insurance business in this country with branch office at the Hongkong Bank Building, Manila, reinsurance premiums ceded to them by Philippine insurance companies are not subject to the withholding requirements under Section 54, in relation to Section 53(b) of the Tax Code. Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue