Guidelines for Implementing the Uniform Mode of Payment of the DST by Non-Life Insurance Companies

May 18, 1989 BIR RULING NO. 107-89 200 000-00 107-89 Gentlemen : This refers to your letters dated December 20, 1988 and January 12, 1989, requesting this Office (1) to issue guidelines for implementing the uniform mode of payment of the documentary stamp tax by non-life insurance companies; and (2) to issue a clarificatory ruling reconciling BIR Ruling No. 155-88 dated April 19, 1988 and BIR Ruling No. 186-88 dated May 4, 1988. In reply, please be informed as follows: Re: Implementing Guidelines 1. If the documentary stamp taxes due on taxable documents are less than P10 per document, the tax shall be paid by means of documentary stamps purchased by the insurance company. Said stamps shall be affixed to the taxable document and cancelled in the manner prescribed by Section 200 of the Tax Code. For this purpose, the insurance company is hereby allowed to purchase in lump-sum documentary stamps for a particular month considering the volume of taxable documents e.g. policies issued every month. The stamps purchased shall be recorded in a "Book of Inventories" to be maintained in accordance with Section 13 of Revenue Regulations No. V-1 or the Bookkeeping Regulations. The Head Office of the insurance company shall be responsible in purchasing the documentary stamp requirements not only of said office but also of its branches and agencies and shall maintain in its Books of Inventories a running balance of the documentary stamps inventory as the Head Office assumes the affixture of the documentary stamps on all documents issued by it as well as its branches and agencies. Any excess documentary stamps purchased for any given month shall be automatically carried over and shall be available for use in the succeeding month of operation. With respect to Insurance companies which have already adopted the lump-sum mode of payment prior to December 1, 1988 and have an inventory of unused documentary stamps as of that date, their unused stamps are automatically carried over for use beginning said date. They may not purchase new documentary stamps until a need to replenish the inventory becomes necessary. 2. If the documentary stamp tax due on the taxable document is P10.00 or more, Section 6 of Revenue Regulations No. 9-76 implementing P.D. 1045 which provides: "Sec. 6. Payment of Documentary or science Stamp Taxes with Denomination of P10,000 or above . Payment of documentary or science stamp taxes with denomination of P10.00 or more shall be effected as in the case of other internal revenue taxes by the issuance of the corresponding official receipt by authorized BIR Personnel or the issuance of Bank Official Receipt by Authorized Banks. Upon payment of the required documentary and science stamp taxes due on the taxable document or instrument subject to tax, such document or instrument must bear the following notation on the original and every duplicate copy thereof, if there is any. Amount of documentary stamp tax paid P _____ Amount of science stamp tax paid _____ Under O.R. or C.B. Official Receipt No. _____ dated _____ _________ Payor "If the taxable instrument does not bear the foregoing notation, it shall be presumed that no documentary or science stamp taxes have been paid. "The splitting of the total amount of stamps due through the purchase or affixture of several pieces of stamps lower than the denominations of P10.00 of either science and documentary stamps even if the sum total of the several pieces of stamps will reflect correctly the value of the tax on the document is hereby prohibited." shall be followed. Accordingly, and in line with the last paragraph above-quoted, documentary stamp tax purchased in lump-sum for use in paying the tax which is less than P10.00 per document cannot be utilized in paying the tax of P10.00 or more. Re: BIR Rulings Nos . 155-88 and 186-88 With respect to BIR Ruling No. 155-88 to the effect that VAT applies to reinsurance overriding commission which can be classified as charge for service, this Office, after a re-study, believes that the insurance company deriving said commission is not a seller but a buyer of service. Accordingly, said insurance company cannot be held liable for VAT because VAT applies only to sellers of services. As regards BIR Ruling No. 186-88, the query propounded therein as to whether reinsurance commissions are subject to VAT is answered in the negative for the reason that the insurance company deriving the same is a buyer, not a seller of service. Under the VAT law, the seller of the service is the party subject to VAT. Accordingly, BIR Ruling Nos. 155-88 and 186-88 are modified. Very truly yours, (SGD.) JOSE U. ONG Commissioner