Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

Eighteenth Congress

First Regular Session

House Bill No. 6058

Introduced by: Hon. Jericho Jonas B. Nograles

Explanatory Note

This proposed measure seeks to rationalize the taxes imposed on the non-life
insurance industry.

Prior to the enactment of Republic Act No. 10001 last February 2010, the
Percentage tax on premiums for both life and non-life coverage was five percent (5%).
However, RA 10001 reduced the tax rate for lfe insurance premiums to two percent (2%),
while non-life insurance transactions are now subject to twelve percent (12%) value
added tax. Section 28 (1), Article VI of the Constitution provides; “The rule of taxation
shall be uniform and equitable. The Congress shall evolve a progressive system of
taxation." The term” uniformity” requires that all subjects or objects of taxation, similarly
situated, are to be treated alike or put on equal footing. Equality and uniformity in taxation
Means that all taxable articles or kind of property of the same class shall be taxed at the
same rate. Since both life and non-life (property) insurance are similarly situated, they
should be treated alike as far as taxation is concemed. Otherwise, the uniformity
requirement of the Constitution will be violated. Thus, this bill seeks the equal tax
treatment of the life and non-life insurance industry.

The significance of procuring insurance on property is no longer subject of debate.
It has often been underscored that insurance is considered a risk-distributing device that
stimulates business enterprise and efficiency. The coverage in insurance has made
Possible in sustaining the present-day commercial and industrial organization. In addition,
insurance enables these organizations to utilize their capital and resources in the
advancement and progress of their business, thus attaining financial security against
Perils and risk. With diminished threat, these entrepreneurs can concentrate on the
expansion of their trade and venture into other worth-while endeavors. Further, insurance


is employed as a basis of credit. Extension of credit is considered one of the important
Segment of modern business practice and is factored in by practically all forms of
insurance, In the case of a mortgage on a real estate, no mortgagee, whether a financial
Institution, or private entity, is willing to offer a loan of money without said entity having
knowledge that the property is protected from fire or any other forms of destruction.

Non-life insurance, lends us a steady hand, so to speak, in avoiding a probable
loss in the value of one’s assets owing to the incidence of fre, flood, earthquake, lightning
and the like. It is considered an indispensable part of financial planning that assists
organizations in maintaining a peaceful and undisturbed control of one's ownership of
assets,

At present, non-life insurance policies are leveled an array of taxes, including a
12% value-added tax (VAT), 12.5% documentary stamp tax, 2% fire service tax and
between 0.15-0.75% local government tax.

{tis to be noted that the “Philippines non-life insurers shoulder a 26.5% tax burden
on premiums. In comparison, Singapore charges only a 7% VAT every policy, while
Thailand charges only 3.9% for personal accident policies and 7.4% for all other types,
Indonesia charges 0.4%".

|n view of the foregoing, approval of this measure is earnestly requested.

ila

JERICHO JONAS B. NOGRALES


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City
Eighteenth Congress

First Regular Session

058
House Bill No.

Introduced by: Hon. Jericho Jonas B. Nograles

AN ACT
RATIONALIZING THE TAXES IMPOSED ON NON-LIFE INSURANCE POLICIES,
AMENDING FOR THIS PURPOSE SECTION 108, 123, 184, AND 185 OF THE
NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED

Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled:

SECTION 1. Section 108 of the National Internal Revenue Code of 1997, as amended,
is hereby amended to read as follows:

“Sec. 108. Value-Added Tax on Sales of Services and Use or Lease of
Properties. -

(A) Rate and Base of tax. — xxx

The phrase “sale or exchange of services” means the performance of all kinds of
services in the Philippines for others for a fee, remuneration or consideration,
including those performed or rendered by construction and service contractors;
stock, real estate, commercial, customs and immigration brokers; lessor of
property, whether personal or real; warehousing services; lessor or distributors of
cinematographic films person engaged in milling processing, manufacturing or
repacking goods for others; proprietors, operators or keepers of hotels, motels,
rest houses, pension houses, inn, resorts; proprietors or operators of restaurants,
refreshment parlors, café and other eating places, including clubs and caterers;
dealers in securities; lending investors; transportation contractors on their
transport of goods and cargoes; including persons who trarisport goods or cargoes
for hire and other domestic common carriers by land relative to their transport of
passenger, goods or cargoes from one place in the Philippines to another place in
the Philippines; sales of electricity by generation companies, transmission, and


distribution companies; service of franchise grantees of electric utilities, telephone
and telegraph, radio and television broadcasting and all other franchise grantees
except those under Section 119 of this Code; services of banks, non-bank financial
intermediaries and finance companies; [and non-life insurance companies (except
their crop insurance), including surety, fidelity, indemnity and bonding companies;
and similar services regardless of whether or not the performance thereof calls for
the exercise or use of the physical or mental faculties. xxx.”

SECTION 2. Section 123 of the National Internal Revenue Code of 1997, as amended,
is hereby further amended to read as follows:

“Sec. 123. Tax on [Life] Insurance Premiums. — There shall be collected
from every person, company or corporation (except purely cooperative companies
or associations) doing [life] insurance business of any sort in the Philippines a tax
of two percent (2%) of the total premium collected, whether such premiums are
paid in money, notes credits or any substitute for money; but premiums refunded
within six (6) months after payment on account on rejection of risk or returned for
other reason to a person insured shall not be included in the taxable receipts; nor
shall any tax be paid upon reinsurance by a company that has already paid the
tax; nor upon premiums collected or received by any branch of a domestic
corporation, firm or association doing business outside the Philippines on account
of any [life] insurance of the insured who is a nonresident, if any tax on such
premium is imposed by the foreign country where the branch is established nor
upon premiums collected or received on account of any reinsurance, if the RISK
INSURED AGAINST COVERS PROPERTY LOCATED OUTSIDE THE
PHILIPPINES OR THE insured, in case of personal insurance, resides outside the
Philippines, if any tax such premiums is imposed by the foreign country where the
original insurance has been issued or perfected; nor upon that portion of the
premiums collected or received by the insurance companies on variable contracts,
in excess of the amounts necessary to insure the lives of the variable contract
workers.

SECTION 3. Section 184 of the National Internal Revenue Code of 1997, as amended,
is hereby further amended to read as follows:

“SEC. 184, Stamp Tax on Policies of Insurance Upon Property. — On all
policies of insurance or other instruments by whatever name the same may be
called, by which insurance shall be made or renewed upon property of any
description, including rent or profits, against peril by sea or inland waters, or by fire
or lightning there shall be collected a documentary stamp tax [of Fifty centavos
(P0.50) on each Four pesos (P4.00), or of fractional part thereof, of the amount
premium charged:] AT THE FOLLOWING RATES:

IF THE AMOUNT OF INSURANCE DOES
NOT EXCEED PHP 100,000.00 - EXEMPT


IF THE AMOUNT OF INSURANCE EXCEEDS
PHP 100,000.00 BUT DOES NOT EXCEED
PHP 300,000.00 - PHP 10.00

IF THE AMOUNT OF INSURANCE EXCEEDS.
PHP 300,000.00 BUT DOES NOT EXCEED
PHP 500,000.00 - PHP 25.00

IF THE AMOUNT OF INSURANCE EXCEEDS
PHP 500,00.00 BUT DOES NOT EXCEED
PHP 750,000.00 - PHP 50.00

IF THE AMOUNT OF INSURANCE EXCEEDS
PHP 750,000.00 BUT DOES NOT EXCEED
PHP 1,000,000.00 - PHP 75.00

IF THE AMOUNT OF INSURANCE EXCEEDS
PHP 1,000,000.00 - PHP 100.00

Provider, however, That no documentary stamp tax shall be collected on
reinsurance contracts or any instrument by which cession or acceptance of
insurance risks under any reinsurance agreement is effected or recorded.”

SECTION 4. Section 185 of the National Internal Revenue Code of 1997, as amended,
is hereby amended further to read as follows:

“Sec. 185. Stamp on Fidelity Bonds and Other Insurance Poli On
all policies of insurance or bonds or obligations of the nature of indemnity for loss,
damages or liability made or renewed by any person, association, company or
corporation transacting the business of accident, fidelity, employer's liability, plate,
glass, steam boiler, burglar, elevator, automatic sprinkler, or other branch of
insurance (except life marine, inland and fire insurance), and all bonds,
undertakings, or recognizances, conditioned for the performance of the duties of
any office or position, for the doing or not doing of anything therein specified, and
on all obligations guaranteeing the validity or legality of any bond or other
obligation issued by any province, city, municipality or other public body or
organization, and on all obligations guaranteeing the title to any real estate or
guaranteeing any mercantile credits which may be made or renewed by any such
person, company, or corporation, there shall be collected a documentary stamp
tax [of Fifty centavos (P0.50)on Four pesos (P4.00), or fractional part thereof, of
the premium charged.] AT THE FOLLOWING RATES:



IF THE AMOUNT OF INSURANCE DOES
NOT EXCEED PHP 100,000.00 - EXEMPT

IF THE AMOUNT OF INSURANCE EXCEEDS
PHP 100,000.00 BUT DOES NOT EXCEED
PHP 300,000.00 - PHP 10.00

IF THE AMOUNT OF INSURANCE EXCEEDS
PHP 300,000.00 BUT DOES NOT EXCEED
PHP 500,000.00 - PHP 25.00

IF THE AMOUNT OF INSURANCE EXCEEDS
PHP 500,00.00 BUT DOES NOT EXCEED
PHP 750,000.00 - PHP 50.00

IF THE AMOUNT OF INSURANCE EXCEEDS
PHP 750,000.00 BUT DOES NOT EXCEED
PHP 1,000,000.00 - PHP 75.00

IF THE AMOUNT OF INSURANCE EXCEEDS
PHP 1,000,000.00 - PHP 100.00”

SECTION 5. Rules and Regulations. - The Secretary of Finance shall, upon
recommendation of the Commissioner of Internal Revenue, promulgate the necessary
rules and regulations for the effective implementation of the provisions of this Act.

SECTION 6. Separability Clause. — If any provision of this Act is held unconstitutional or
invalid, all other provisions not affected thereby shall remain valid.

SECTION 7. Repealing Clause. - All laws, decrees, executive orders, rules and
regulations, or part thereof which is inconsistent with this Act are hereby repealed,
amended, or modified accordingly.

SECTION 8. Effectivity. - This Act shall take effect fifteen (15) days following the
completion of its publication in the Official Gazette or in a newspaper of general circulation
in the Philippines.

Approved.