Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City
Nineteenth Congress
Second Regular Session
•      HouseBillNo.
Introduced by Representative JOEY SARTE SALCEDA
EXPLANATORY NOTE
This  proposed  legislation  aims  to  rationalize  the  non-life  insurance  industry's  tax
burden,  consistent  with  the  overall  direction  of  the  government  towards  capital  market
efficiency.
Non-life insurance, particularly property and catastrophe insurance in the country, has
among the highest tax burdens anywhere in the world, at almost 27.5% of the premium. This
is policy suicide in a country that is considered the most exposed to natural risks, as indicated
in the 2022 World Risk Index.
According to the World Bank, some estimations "place 600/o of its land area and 74%
of its  population  as  exposed  to  numerous  hazards,  including  floods,  cyclones,  droughts,
earthquakes,  tsunamis  and  landslides."  The  same  estimates  suggest  that  the  country,  on
average, suffers USD 767 million in property damage from natural disasters annually.
As a result, Atlas Magazine estimates that the non-life insurance penetration rate in the
Philippines is just 0.50%, compared to the 2.1 % penetration rate in the rest of the Asia-Pacific
Region.
Apart from a severe disincentive to  good behavior, which is to ensure property in a
high-risk nation, taxing premiums is also bad practice in accounting for risks.
The International Monetary Fund says that "the difficulty with taxing premiums is that
it does not take into account the different risks and income associated with different types of
life insurance products[ ." As such, a premium-based tax, as is the case in the Tax Code, appears
to be contrary to the Constitution's requirement that taxation should be progressive.
Instead, taxing insurance based on the coverage presupposes risk calculations of the
private  sector,  and  thus  allows  for some  equalization based  on risks  and  income.  Because
1 Taxing the Financial Sector. (2004). INTERNATIONAL MONETARY FUND.
https://doi.org/10.5089/9781589063167.071
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coverage  is  already  the  "equivalent  unit"  among  differing  insurance  products,  using  the
insurance coverage as the base for taxation also ensures progressivity in taxation.
In view of the foregoing, the approval of this measure is urgently sought.
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Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City
Nineteenth Congress
Second Regular Session
`    HouseBillNo.    9289
Introduced by Representative JOEY SARTE SALCEDA
AN ACT
RATIONALIZING THE TAXES IMPOSED ON NON-LIFE INSURANCE
POLICIES, AMENDING FOR THIS PURPOSE SECTION 108, 123, 184, AND 185 0F
THH NATIONAL INTERNAL REVENUE CODE OF 1997, AS ARENDED
Be it enacted by the Senate and the 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,  cafe  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 transport 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;I and similar services regardless of whether or not the performance
thereof calls for the exercise or use of the physical or mental faculties. xxx."
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SEC.  2.  Section  123  of the National Internal Revenue Code of 1997, as amended2, is
hereby further amended to read as follows:
"Sec.  123. Tax on NON-LIFE AND Life Insurance Premiums. -There shall
be collected from every person,  company or corporation (except purely cooperative
companies or associations) doing NON-LIFE AND 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 nouresident, 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  PIIILIPPINES
OR, 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  premiums  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  associations  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.  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   ONE-Tnffl   documentary   stamp   tax   AT   THE
FOLLOWING RATES: [of Fifty centavos (PO.50) on each Four pesos (P4.00), or of
fractional part thereof, of the amount premium charged:]
IF THE AMOUNT OF INSURANCE DOES
NOT EXCEED PHP 100,000.00
EXEMPT-
IF THE AMOUNT 0F INSURANCE EXCEEDS
PHP 100,000.00 BUT DOES NOT EXCEED
PHP 300'000.00
2 As amended by R.A. No.10001
PHP 20.00
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IF THE AMOUNT OF INSURANCE EXCEEDS
PHP 300,000.00 BUT DOES NOT EXCEED
PHP 500,000.00
IF THE AMOUNT OF INSURANCE EXCEEDS
PHP 500,00.00 BUT DOES NOT HXCEED
750'000.00
100.00
IF THE AMOUNT 0F INSURANCE EXCEEDS
PHP 750,000.00 BUT DOES NOT EXCEED
150.00
IF THE AMOUNT 0F INSURANCE EXCEEDS
PHP I,000,000
200.00]
PHP 50.00
PHP
PHP
PHP
Provz.der,   feowever,  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."
SHCTI0N 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 Policies.  -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 perfomance 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 ONE-TIME documentary stamp tax AT THE FOLLOWING RATES:
[of Fifty  centavos  (PO.50)  on  Four pesos  (P4.00),  or  fractional  part  thereof,  of the
premium charged.]
IF THE AMOUNT OF INSURANCH DOES
NOT EXCEED PHP 100,000.00
IF THE AMOUNT 0F INSURANCE EXCEEDS
PHP 100,000.00 BUT DOES NOT EXCEED
PHP 300'000.00
IF THE AMOUNT OF INSURANCE EXCEEDS
PHP 300,000.00 BUT DOES NOT EXCEED
EXErmT
PHP 20.00
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PHP 500,000.00
IF THE AMOUNT 0F INSURANCE EXCEEDS
PHP 500,000. BUT DOES NOT EXCEED
750'000.00
IF THE AMOUNT OF INSURANCE EXCEEDS
PHP 750,000.00 BUT DOES NOT EXCEED
PHP 1'000'000.00
IF THE AMOUNT 0F INSURANCE EXCEEDS
P1,000'000.00
PHP 50.00
PHP 100.00
PHP 150.00
P200.00
SEC. 5. Rules and Regulations. -The Secretary of Finance shall, upon recommendation
of the Commissioner of Intemal Revenue, promulgate the necessary rules and regulations for
the effective implementation of the provisions of this Act.
SEC. 6. Separability Clause. -If any provision of this Act is held unconstitutional or
invalid, all other provisions not affected thereby shall remain valid.
SEC. 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.
SEC.  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,
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