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Republic of the Philippines YY Receives
HOUSE OF REPRESENTATIVES FA RECEIVE!
Quezon City one ZO

SEVENTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 4092

Introduced by HONORABLE ROMERO “MIRO” S. QUIMBO

EXPLANATORY NOTE

The insurance industry has grown to serve as a foundation of society — it
offers protection for business and individuals on the one hand, while giving
them the unbridled freedom to venture on different opportunities with
minimum risks, on the other. Non-life insurance, in particular, serve as
socicty’s security in the face of calamities, accidents, and natural disasters,
among others.

‘The significance of the non-life insurance industry in the country goes
deeper when seen in light of the country’s vulnerability to calamities and
natural disasters. In a study conducted by United Nations and the Centre
on the Epidemiology of Disasters (CRED), it was observed that “over the past
two decades, the Philippines endured a total of 274 natural calamities,
making it the fourth most disaster-prone country in the world.” With
constant losses duc to calamities, Filipinos are in need of viable protection
like insurance, to help alleviate their financial vulnerability.

Apart from insulating properties of an individual, non-life insurance also
plays a role in facilitating economic growth. It encourages credit
transactions, which in turn assures financial institutions to grant more
loans. Thus, with more capital available to an individual or corporation, it
acquires more room for investments and business activities, thereby
stimulating the economy.

Although the non-life insurance industry in the Philippines has grown
stronger in the past years’, policy measures to protect the same have been
insufficient, The Philippine Insurers and Reinsurers Association has

* Santos, Elmor P. “Philippines among world’s most disaster prone countries.” CNN Philippines, January 22,
2016. <http://cnnphilippines.com/news/2015/11/25/philippines-fourth-most-disaster-prone-country. htm
accessed October 10, 2016>

* Torres, Ted P. “VEARENDER: Insurance industry ends 2015 strong.” Philippine Star, January 4, 2016,
<http://www_philstar.com/business/2016/01/04/1538902/yearender-insuranc
accessed October 10, 2016.>

Ag SEPRESED
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identified that the Philippines has the highest total taxes of 27.2% on non.
life insurance premium among Southeast Asian Countries, compared to
Singapore’s 7%, Thailand’s 11.3% and Vietnam's 12%*. The 27.2% total
taxes for non-life insurance premium are composed of the following: 12%
value added tax (VAT); 12.15% documentary stamp tax; 2% fire service tax
and 0,5-0,7% local government taxes.’ This hinders the full potential of this
sector, thereby also hampering the extension of its benefits to those who do
not have the capacity to afford it

‘Yo correct this situation, this bill seeks to amend several sections of the
National Internal Revenue Code to lower the VAT imposed on non-life
insurance premiums from 12% to 2%. It also proposes a reduction of the
Documentary Stamp Tax by providing a lower and standard rate on a given
amount of insurance. With the enactment of this bill, total taxes imposed on

non-life insurance premium is expected to drop to at least 5%.

Given the role that this industry plays in the economy, stronger policies
must be put in place to further strengthen these institutions. With lower
taxes, non-life insurance products will become more affordable and
accessible to all Filipinos, thus promoting financial security in the country.

In view of the foregoing, the passage of this bill is carnestly sought.

nooanl “MIRO” S. QUIMBO

Représentative
Second District Marikina City

* Binaday, Gabrielle H. “Non-life insurers to push lower tax bill.” Manila Standard, June 27, 2016.
<httpi//www.thestandard.com,ph/business/209265/non-life-insurers-to-push-lower-taxcbill.html, accessed
October 10, 2016>

“Ibid.


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

4092

HOUSE BILL NO.

Introduced by HONORABLE ROMERO "MIRO" S. QUIMBO

AN ACT EMENDING SECTIONS 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.

ion 108 of the National Internal Revenue Code of 1997, as
amended, is hereby further amended to read as follows:

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“SEC. 108. Value-added Tax on Sale 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 service

es in the Philippines for others for a fee,

remuneration or consideration, including  thos\

© performed. or

rendered by construction and service contr stock, real

estate, commercial, customs and immigration brokers; lessors of

property, whether personal or real; warehousing servic

s; lessors
or distributors of cinematographic films; persons engaged in
milling, processing, manufacturing or repacking goods for others;

proprietors, operators or keepers of hotels, motels, resthouses,

pension hous

‘s, inns, rts; proprietors or operators of

restaurants, refreshment parlors, cafes and other eating plac


1 including clubs and caterers; dealers in securities; lending
2 investors; transportation contractors on their transport of goods or

cargoes, including persons who transport goods or cargoes for hire

4 and other domestic common carriers by land relative to their
5 transport of goods or cargoes; common carriers by air and sea
6 relative to their transport of passengers, goods or cargoes from one
7 place in the Philippines to another place in the Philippines; sales of
8 electricity by generation companies, transmission and distribution
9 companies; services of franchise grantees of electric utilities,
10 telephone and telegraph, radio and television broadcasting and all
u other franchise grantees except those under Section 119 of this
2 Code; services of banks, non-bank financial intermediaries and
B finance companies; [and non-life insurance companies (except
44 their crop insurances), including surety, fidelity, indemnity and
15 bonding companies;] and similar services regardless of whether or
16 not the performance thereof calls for the exercise or use of the
v physical or mental faculties. xxx”

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19 SEC. 2. Section 123 of the National Internal Revenue Code of 1997,

20 amended is hereby further amended to read as follows:

2

22 “SEC. 123. Tax on [Life] Insurance Premiums. - There
23 shall be collected from every person, company or corporation
24 {except purely cooperative companies or associations) doing [life]
25 insurance business of any sort in the Philippines a tax of two
26 percent (2%) of the total premium collected, whether such
27 premiums are paid in money, notes, credits or any substitute for
28 money; but premiums refunded within six (6) months after
29 payment on account of rejection of risk or returned for other
30 reason to a person insured shall not be included in the taxable
31 receipts; nor shall any tax be paid upon reinsurance by a company
32 that has already paid the tax; nor upon premiums collected or

33 received by any branch of a domestic corporation, firm or


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2B
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association doing business outside the Philippir

es on account of

any [life] insurance of the insured who is a nonresident, if any tax

on such premium is imposed by the foreign c

branch is established nor upon premiums collec

ountry where the

ted or received on

account of any reinsurance, of the RISK INSURED AGAINST

COVERS PROPERTY LOCATED OUTSIDE THE

THE insured, in case of personal insurance, re:

Philippines, if tax on such premiums is impos‘
country where the original insurance has been is

nor upon that portion of the premiums collected

insurance companies on variable contracts,

amounts necessary to insure the lives of the

workers

Xxx’

PHILIPPINES OR

ides outside the
ed by the foreign
led or perfected;

or received by the
in excess of the

variable contract

SEC. 3. Section 184 of the National Internal Revenue Code of 1997,

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 des

rents or profits, against peril by sea or on inland waters

cription, including

, or by fire

or lightning, there shall be collected a documentary stamp tax [of

Fifty centavos (PO.50) on each Four pesos (P4.00), or of fractional

part thereof, of the amount of premium charged:]| AT THE

FOLLOWING RATES:

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

IF THE AMOUNT OF INSURANCE

EXEMPT

PHP 10.00

as


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EXCEEDS PHP 100,000.00 BUT

DOES NOT EXCEED PHP

300,000.00

IF THE AMOUNT OF INSURANCE PHP 25.00
EXCEEDS PHP 300,000.00 BUT

DOES NOT EXCEED PHP

500,000.00

IF THE AMOUNT OF INSURANCE PHP 50.00
EXCEEDS PHP 500,000.00 BUT

DOES NOT EXCEED PHP

750,000.00

IF THE AMOUNT OF INSURANCE PHP 75.00
EXCEEDS PHP 750,000.00 BUT

DOES NOT EXCEED PHP

1,000,000.00

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

Provided, however, That no documentary stamp tax shall be

sted on reinsurance contracts or on any instrument by which

ion or ¢

tance of insurance risks under any reinsurance

agreement is effected or recorded.”

SEC. 4. Section 185 of the National Internal Revenue Code of 1997,

amended is hereby further amended to read as follows:

“SEC. 185. Stamp Tax on Fidelity Bonds and Other

Insurance Policies. - On all policies of insurance or bonds or

obligations of the nature of indemnity for loss, damage or liability

made or rer

by any person, association, company or

corporation transacting the business of accident, _fideli

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 obligations 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 each 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 EXEMPT
100,000.00

IF THE AMOUNT OF INSURANCE

EXCEEDS PHP 100,000.00 BUT

PHP 10.00
DOES NOT EXCEED PHP
300,000.00
IF THE AMOUNT OF INSURANCE
EXCEEDS PHP 300,000.00 BUT
PHP 25.00
DOES NOT EXCEED PHP
500,000.00
IF THE AMOUNT OF INSURANCE
EXCEEDS PHP 500,000.00 BUT
PHP 50.00
DOES NOT EXCEED PHP
750,000.00
IF THE AMOUNT OF INSURANCE
EXCEEDS PHP 750,000.00 BUT
PHP 75.00

DOES NOT EXCEED PHP
1,000,000.00
IF THE AMOUNT OF INSURANCE PHP 100.00


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EXCEEDS PHP 1,000,000.00

Section 5. Implementing 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

ulars, rules

lances, ¢!

Section 6. Repealing Clause. ~ All laws, orders, i

and regulations or parts thereof, which are inconsistent with the provisions

of this Act are hereby repealed or modified accordingly.
Section 7. Scparability Clause. ~ If any provision of this Act is declared
unconstitutional or invalid, other parts or provisions hereof not affected

thereby shall continue to be in full force and effect.

Section 8. Effectivity. - This Act shall take effect fifteen (15) days following

its publication in at least two (2) newspapers of general circulation.

Approved,