Withholding by the Premium Payor of the 5% Tax on Gross Premium Payment to the Insurance Company

June 7, 1994 BIR RULING NO. 111-94 121 000-00 111-94 Canada-Philippines Development Counterpart Fund Secretariat National Economic and Development Authority 2nd Floor, Philcotton Building 31 Shaw Boulevard, Pasig Metro Manila Attention: Ms . Roslynn A . Reyes Project Manager Gentlemen : This refers to your letter dated November 11, 1993, in effect, requesting for clarification as to whether under Revenue Regulations No. 4-88, you are required to withhold the 5% premium tax from your premium payment to the insurance company for a comprehensive car insurance policy coverage of one (1) unit, Toyota Corolla GLi, 1992 Model. cdta It is represented that the Development Fund (DF) Secretariat is a government project being administered by the National Economic & Development Authority (NEDA). In reply, please be informed that under Section 121 of the Tax Code, a tax of 5% is imposed on the total premium collected by any person, company or corporation (except purely cooperative companies or associations) doing insurance business of any sort in the Philippines. If the premium payor is a government agency or Office, the 5% tax shall be deducted and withheld in accordance with Republic Act No. 1051 as implemented by Revenue Regulations No. 4-89, pertinent portion of which is quoted hereunder as follows: "Sec. 1. Officers Required to Deduct and Withhold. All bureaus, offices and instrumentalities of the government, including government-owned or controlled corporations, as well as their subsidiaries; provinces, cities and municipalities shall, before making any money payment to private individuals, corporations, partnerships and/or associations, deduct and withhold the taxes due from the said payees on account of such money payments." xxx xxx xxx "Sec. 2. Internal Revenue Taxes Required to be withheld . xxx xxx xxx "(e) Persons doing insurance business, five (5%) per centum on the total premiums collected except on reinsurance premiums." As a government office, you are required to withhold the 5% tax on your gross premium payment to the insurance company. This is a mandatory obligation on your part as the premium payor and is not inconsistent with the cited BIR Ruling No. 121-000-00-040-93 dated February 8, 1993 to the effect that the separate billing of the 5% premium tax to the insured is permissible as long as the same is paid to the Bureau of Internal Revenue (BIR), although there is no showing in this case that the said 5% premium tax had been separately billed to you, as the insured, and your payment thereon subsequently remitted/paid to the BIR. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue