FOURTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
) 
S E N A T E  
S. B. No. 
596 
Introduced by Senator JINGGOY EJERCITO ESTRADA 
EXPLANATORY NOTE 
A major factor that gives impetus to the development of the life insurance 
industry is the reduction of the premium tax on life insurance. In the US, for 
instance, where our tax laws are basically patterned, the premium tax, which is a 
state imposition, is pegged at two percent (2%) and the proceeds thereof are 
used by the regulatory body to strengthen the industry. 
The proposed reduction in premium tax would bring down the cost of 
insurance protection which can be passed on to the policy holders in the form of 
lower premium or higher insurance coverage with the same amount of premium. 
Lower rates, in turn, encourage new or additional insurance coverage. 
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 policy 
holder 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. The reduction of the premium tax would somehow mitigate 
the unequal tax treatment of the various forms of savings. The proposed 
reduction of the premium tax from five percent (5%) to two percent (2%) would 
still ensure a steady source of revenue for the government. 
In view of the foregoing, passage of the bill is earnestly sought 
AGG& 
EJ~RCITO 
ESTRADA 


FOURTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
1 
S E N A T E  
S. B. No. 
596 
Introduced by Senator JINGGOY EJERCITO ESTRADA 
AN ACT 
REDUCING THE TAX INSURANCE PREMIUM UNDER CERTAIN 
CONDITIONS, AMENDING FOR THIS PURPOSE SECTION 123 OF THE 
NATIONAL INTERNAL REVENUE CODE, AS AMENDED 
Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled: 
SECT10N 1. - Section 123 of the National Internal Revenue Code, 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 [five percent (5%)] 
TWO PERCENT (2%) of the total premium collected, whether such 
premiums refunded within (6) months after payment of account of 
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 non-resident, 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 insured, 
in case of personal insurance, resides outside the Philippines, if 
any tax on such premiums is imposed by the foreign country where 
the original insurance has been issued or perfected; nor upon that 
portion of the premium collected or received by the insurance 
companies on variable contracts (as defined in Section 232 (2) of 
Presidential Decree No. 612), in excess of the amounts necessary 
to insure the lives of the variable contract workers. 
“Cooperative companies or association are such as are conducted by the 
members thereof with the money collected from among themselves and 
solely for their own protection and not for profit.” 


SEC. 2. The new rate of two percent (2%) shall apply only to insurance 
policies that will be issued after the effectivity of this Act. Premiums that shall be 
paid and collected from previously issued policies by insurance companies shall 
continue to be imposed a tax of five percent (5%) on gross premiums collected. 
Sec. 3. Rules and Regulafions. - 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. 4. 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 5. 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,