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APR 22 P4 :22 
FOURTEENTH CONGRESS OF THE 
Second Regular Session 
REPUBLIC OF THE PHILIPPINES 
) 
Introduced by Senator EDGARDO J. ANGARA 
EXPLANATORY NOTE 
This bill seeks to remove the documentary stamp tax and tax on the premiums for 
life insurance. 
The underlying principle behind this proposed legislation is that life insurance is 
practically a savings vehicle for an individual and, the imposition of a tax on this type of 
insurance serves to increase the cost of savings thereby diminishing its attractiveness as 
an economic method for long-term saving accumulation. 
The premium paid on a life insurance policy consists of two major components: 
(1) the insurance component or the amount necessary to cover the cost of pure insurance 
protection; (2) the investment component or the amount that is added to the policy 
reserve which the insurer invests. The latter represents the accumulated savings in the 
form of cash values to be returned to the policyholder upon maturity of the policy or at 
the time it is surrendered for cash. Hence, the higher the number of the policy holders or 
the amount of insurance coverage, the higher the amount of savings that can be 
accumulated by the insurance industry. Higher savings mean more investments that 
translate to higher economic growth. 
From the equity point of view, the savings portion of the insurance policy is 
inevitably taxed since the premium tax is applied on gross premiums. This places savings 
in the form of insurance policies at a disadvantage compared to other forms of savings 
particularly those generated by the banking industry. It is to be pointed out that in case of 
bank deposits, only the interest income on the amount deposited is taxed. 
Any tax policy should preferably be neutral. This means that a tax policy should 
not cause anyone industry or product to have undue economic gain over the other. The 
present tax treatment of life insurance makes the banking system a more attractive option 
for placement of savings. 
Likewise, heavy taxes serve as a disincentive to buy life insurance products. 
Comparatively speaking, the Philippines is the only country in the Southeast Asia which 
charges a five-percent (5%) tax on the yearly premium for life insurance policies. This is 
over and above the additional taxes imposed on the earnings of the policyholder's long- 
term savings with the insurance company, such as a 20% tax on interest income. 
Thus, by removing the premium tax on the life insurance policies and annuities, 
this measure will strengthen the life insurance industry, promote its ability to generate 
long-term funds for the economy and as a consequence, it would also address the unequal 
tax treatment of the various forms of savings. 


On the other hand, the current method of imposition of the documentary stamp tax 
on life insurance requires a fixed percentage of premium every time premiums are paid 
which effectively is an add-on premium tax. 
It may well be that the practice of other jurisdictions and several ASEAN 
countries like Singapore, Indonesia and Malaysia be adopted where a one-time fixed but 
nominal tax is imposed regardless of the value of the insurance policy. 
In view of the foregoing, the passage of this bill is earnestly sought. 
Senator 


FOURTEENTH CONGRESS OF 
) 
THE REPUBLIC OF THE PHILIPPINES 
) 
SECOND REGULAR SESSION 
1 
SENATE BILL NO. 
Introduced by SENATOR EDGARDO J. ANGARA 
AN ACT GRANTING TAX RELIEF TO THE LIFE INSURANCE 
INDUSTRY BY ABOLISHING THE DOCUMENTARY STAMP 
TAX AND PREMIUM TAX ON LIFE INSURANCE, REPEALING 
FOR THIS PURPOSE SECTIONS 123 AND 183 AND AMENDING 
FURTHER SECTION 199 OF THE NATIONAL INTERNAL 
REVENUE CODE, AS AMENDED. 
Be it enacted by the Senate and the House OfRepresentatives of the Philippines in 
Congress assembled: 
Section 1. 
Section One Hundred Twenty Three (123) of the National 
Internal Revenue Code as amended, otherwise known as the Tax Reform Act, is hereby 
repealed. 
Sec. 2. 
No tax on life insurance premiums shall be collected after the 
effectivity of this Act. Premiums that shall be paid and collected from previously issued 
policies by insurance companies after the effectivity of this act shall no longer be subject 
to the premium tax. 
Sec. 3. 
Section One Hundred Eighty Three (183) of the National Internal 
Revenue Code, as amended by Republic Act No. 9243, is hereby repealed. 
Sec. 4. 
Section One Hundred Ninety-Nine (199) of the National Internal 
Revenue Code, as amended by Republic Act No. 9243, is hereby further amended to read 
as follows: 
“SEC. 199 Documents and Papers Not Subject to Stamp Tax. - 
The provisions of Section 173 to the contrary notwithstanding, the 
following instruments, documents and papers shall be exempt from the 
documentary stamp tax: 
xxx 
(0) 
On all policies of insurance or other instruments by 
whatever name the same may be called, whereby any insurance shall be 
made or renewed upon any life or lives.” 
1 


Sec. 5. Rules and Regulations. The Secretary of Finance, upon recommendation 
of the Commissioner of Internal Revenue, shall promulgate the necessary rules and 
regulations for the effective implementation of the provision of this Act. 
Sec. 6. 
Repealing Clause. All laws, decrees, executive orders, letters of 
instructions, rules and regulations or parts thereof which are inconsistent with this Act are 
hereby repealed, amended or modified accordingly. 
Sec. 7. 
Effectivity. This Act shall take effect fifteen days following the 
completion of its publication in the Official Gazette or in a newspaper of general 
circulation in the Philippines. 
Approved 
2