VAT Ruling No. 068-99

July 14, 1999 VAT RULING NO. 068-99 RMC 11-96 000-00 068-99 July 29, 1999 Insurance & Surety Association of the Philippines (ISAP), Inc . Room 448, Regina Bldg., Escolta, Manila, Philippines Attention: Jose Ma . G . Santos, President & Edwin B . Celino, Vice President Gentlemen : This refers to your letter dated May 25, 1999 concerning your request that non-life insurance companies operating in the Philippines, members of ISAP, Inc., and their intermediaries be especially exempted from the coverage of Revenue Regulation No. 8-99 entitled " Providing penalties for violation of the requirement that Output tax on the sale of goods and services should not be separately indicated in the sales invoice or official receipts ." It is represented that the purpose of your request is to avoid over charging of policy holders/insureds of non-life insurance companies since without the separate billing of the ten percent (10%) VAT in their sales invoices, their respective taxable gross receipts may be overstated because their gross receipts include the cost of Documentary Stamp Taxes, Fire Service Taxes, and taxes paid to Local Government Units which are passed on to their policy holders/insureds. It appears that the real issue in this case is not the prohibition on separate billing of the ten percent VAT but actually involves the interpretation of the taxable gross receipts of non-life insurance companies. In reply, please be informed that the above issue has already been resolved under Revenue Memorandum Circular No. 11-96 dated January 15, 1996, clarifying the issues affecting non-life insurance companies in relation to the expanded VAT Law, as amended by Republic Act No. 7716. Under Question and Answer No. 9 of the said Circular, for VAT purposes the following items shall not form part of the taxable gross receipts of non-life insurance companies: "a. Premiums refunded within six (6) months after payment on account of rejection of risk for other reason to the person insured (return premiums); "b. Premiums on reinsurance of a company that has already paid the tax; "c. Premiums on account of any reinsurance, if the risk insured against covers property located outside of the Philippines; "d. Documentary stamp and local taxes passed on by the insurance company to the insured; and "e. VAT passed on to the insured." Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue