Commissions Earned by Sub-agents of a Licensed Insurance Agent are Not Subject to the 10% Expanded Withholding Tax

December 11, 1991 BIR RULING NO. 265-91 50 (b) 000-00 265-91 Gentlemen : This refers to your letter dated August 15, 1991, requesting an opinion as to whether the commissions earned by sub-agents of a licensed Insurance Agent are subject to the expanded withholding tax. cdtech It is represented that your client, Mr. Reynaldo R. Bocalbos, is a licensed insurance agent; that his commissions are subjected to a 10% withholding tax by the Insurance Company; that Mr. Bocalbos has some sub-agents who are paid commissions (amounting to 40-80% of his own commissions) which are already subject to the 10% withholding tax by the Insurance Company; that he does not withhold any tax on his payments to his sub-agents but reports them in the annual BIR Form No. 1701-B alphabetical list. In reply, please be informed that only those persons who are enumerated in Revenue Regulations No. 13-78 as amended by Revenue Regulations No. 6-85 otherwise known as the Revised Expanded Withholding Tax Regulations are subject to the expanded withholding tax. Sec. 1 (a) (5) of Revenue Regulations Nos. 6-85 provides as follows: "Sec. 1. Income payments subject to creditable withholding tax and rates prescribed thereon except as herein otherwise provided, there shall be withheld a creditable income tax at the rate herein specified for each class of payee from the following items of income payments to persons residing in the Philippines: (a) Professional fees, talent fees, etc. paid to individuals On the gross professional, promotional and talent fees or any other form of remuneration paid to the following individuals ten per centum (10%): xxx xxx xxx "5. Insurance agents and insurance adjusters." Accordingly, considering that sub-agents of insurance agents are not specifically mentioned in the said Regulations; and that, as represented, the insurance commissions of Mr. Bocalbos are already being subjected to the 10% expanded withholding tax, this Office is of the opinion as it hereby holds that amount paid by Mr. Bocalbos out of his said commissions to his individual sub-agents (40-80%) are no longer subject to the 10% expanded withholding tax. However, such sub-agents are subject to income tax on their commissions income paid Mr. Bocalbos at the rates prescribed under Section 21 (a) of the Tax Code, as amended. Very truly yours, (SGD.) VICTOR A. DEOFERIO, JR. Deputy Commissioner & (Officer-in-Charge)