Taxability of a Life Insurance General Agent

July 13, 1988 BIR RULING NO. 318-88 102 (a) 103 (r) 00-00 318-88 Gentlemen : This refers to your letter dated April 13, 1988, in effect requesting a ruling exempting a life insurance general agent from the value-added tax. cdt You contended that despite your being a corporate entity, your functional relationship with Insular Life Assurance Company, Inc. (sic) makes you an extension of the latter and not functionally independent entity; that life policies are designed by Insular Life and the premium which are actuarially computed and approved by Office of the Insurance Commissioner are fixed, with no value added or mark-up whatsoever; that a life insurance general agent is compensated by the principal company in the form of an overwrite (sic) commission on the business sold by the agents of the principal; and that the General Agent is sharing its overwrite commission with its appointed unit managers in order to generate more sales, thus reducing your income substantially. In reply, please be informed that Section 102(a) of the Tax Code as amended by Executive Order No. 273, provides that a value-added tax equivalent to 10% shall be levied, assessed and collected on the gross receipts derived by any person engaged in the sale of services. The phrase "sale of service" means the performance of all kinds of service for others for a fee regardless of whether or not the performance thereof calls for the exercise or use of the physical or mental faculties. There is no question that as a General Agent of Insular Life Assurance Co., Ltd., you are performing services to the latter. Hence, the compensation which you receive from the principal in the form of overwrite commission is subject to 10% value-added tax. You do not fall within the purview of section 103(r) of the Tax Code because your services as a life insurance general agent are not subject to the occupation tax under the Local Tax Code and you are not a registered general professional partnership. cdta Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner