BIR clarifies taxability of insurance companies

Volume 10 No. 8 BIR PRIORITIES * Exceed BIR revenue target of P 845 Billion for 2008 * Improve taxpayer satisfaction and compliance * Improve taxpayer and taxfiler base BIR clarifies taxability of insurance companies By Aileen Marquez THE BIR HAS clarified the taxability of insurance companies with respect to the proper computation of their Minimum Corporate Income Tax (MCIT), Business Tax and Documentary Stamp Tax (DST). The clarification was initially made through the issuance of Revenue Memorandum Circular (RMC) No. 30-2008 last April 1. The Circular was subsequently amended by RMC No. 59-2008 last August 23 as a result of the dialogues and consultations held by top BIR officials with representatives of the insurance industry. The said Circulars were issued to help insurance companies understand the taxability of their various business undertakings that have evolved and expanded through the years from generation of premiums from insurance contracts to conduct of other ancillary services. For purposes of computing the gross income on the sale of services, which shall be the basis of the 2% MCIT of life and non-life insurance companies, the gross revenue shall include direct premium and reinsurance assumed (net of returns and cancellations); miscellaneous income; investment income not subject to final tax; released reserve; and all other items treated as gross income under Section 32 of the Tax Code, as amended. The costs of services or direct cost and identifiable direct revenue-related deductions of insurance companies Aspe takes oath as full-fledged Deputy Commissioner shall refer to those incurred costs which are exclusively related or otherwise considered indispensable to the creation of the revenue from their business activity as an insurance company, including the generation of investment income not subject to final taxes. The said direct costs and revenuerelated deductions shall be limited to the following: salaries, wages and other employee benefits of personnel directly engaged in underwriting, claims and BIR clarifies... to p. 2 BIR adopts new procedures to stop spurious input tax claims By Eleonor Capili OATH TAKING. DCIR Nelson M. Aspe (middle) takes his oath as full-fledged BIR Deputy Commissioner before Finance Secretary Margarito B. Teves and Commissioner Lilian B. Hefti last August 28 at the BIR Executive Conference Room. By Raul Agcaoili AFTER MORE THAN a year of performing in an Officer-In-Charge capacity, DCIR Nelson M. Aspe finally took his oath as full-fledged Deputy Commissioner for the BIR Operations Group. The oath taking ceremony was administered by Finance Secretary Margarito B. Teves last August 28 at the BIR Executive Conference Room before the start of the monthly executive meeting with the Secretary. The ceremony was witnessed by Commissioner Lilian B. Hefti, the Deputy Commissioners and other top revenue officials. DCIR Aspe is a CPA-lawyer who Aspe takes... to p. 2 IN ORDER TO stop the illegal use of Official Receipts/Sales Invoices (OR/SI) of dissolved business establishments in claiming input taxes, the BIR issued Revenue Memorandum Circular (RMC) No. 56-2008 last August 20 to clarify the procedures on the processing of application for cancellation of business registration. Pursuant to the Circular, upon filing of the duly accomplished Notice of Closure or Cessation of Business, the taxpayer shall submit to the BIR, for evaluation, the establishment s list of inventory of goods, supplies and capital goods; list of unused ORs, SIs and other accounting forms; and list of certificates, permits, notices, etc. issued to the taxpayer by the BIR. Upon effectivity of the closure or cessation of business, the taxpayer shall submit and/or surrender to the BIR (through the Revenue District Office BIR adopts... to p. 2

2 NATIONAL BIR clarifies...from p. 1 benefits, actuary and policy owner services; commissions on direct writings/ reinsurance; cost of facilities directly utilized in providing the service such as depreciation or rental of equipment used and cost of supplies; inspection and medical fees; claims, losses, maturities and benefits net of reinsurance recoveries; additions required by law to reserve fund; and reinsurance ceded. Investment expenses shall not form part of the direct cost nor a deductible expense in the determination of the net taxable income. However, investment expenses relating to investment income that has not been subjected to final tax, although not forming part of the direct cost, shall be allowed as deduction to arrive at the taxable income. The taxability of the various Aspe takes...from p. 1 joined the BIR in 1989 as Revenue Examiner at the Value-Added Tax Division. Because of his competence and dedication to the revenue service, he rose from the ranks and assumed various important positions in the Bureau. Prior to his designation as OIC- Deputy Commissioner, Atty. Aspe business activities of life insurance companies for business tax (whether premium tax, Value-Added Tax [VAT] or Gross Receipts Tax [GRT]) and DST was clarified, particularly those pertaining to the following types of income: direct writings/premiums; management fees, rental income, or other income/fees; and investment income realized from the investment of premium earned and those realized from the investment of funds obtained from others. The manner of apportionment of investment income to determine which portion is exempt and which portion is subject to the GRT was also clarified. In RMC No. 59-2008, it was emphasized that premium on Health and Accident Insurance, whether received by a life or non-life insurance company, shall be considered as premium served as Chief of Staff at the Office of the DCIR, Operations Group for five years and as Regional Director of RR 8- Makati for almost a year. DCIR Aspe was a member of the VAT Review Committee and has been actively involved in the drafting of various important Revenue Regulations issued by the BIR, as well as in the on life insurance subject to Premium Tax and not VAT. The said RMC also clarified that the re-issuance fees, renewal fees as well as penalties paid to the life insurance company are likewise considered as income of the life insurance company for services rendered to customers and, therefore, subject to VAT or Percentage Tax, whichever is applicable. The RMCs likewise clarified the taxability of other financial services/ products sold by the life insurance companies, namely: the Variable Unit Link and the Premium Deposit Fund, as well as the taxability of non-life insurance companies insofar as the business taxes and DST are concerned. (For more details, see full text of RMC Nos. 30-2008 and 59-2008 at www.bir.gov.ph) conduct of campaign for the implementation of the Expanded VAT Law. DCIR Aspe also serves as the Director of the Philippine Institute of Certified Public Accountants (PICPA), Eastern Metro Manila Council; Director of the CPA-Lawyers Association of the Philippines; and Director of the BIR CPA-Lawyers Society. BIR adopts...from p. 1 where the taxpayer s head office is registered) all unused ORs, SIs and other accounting forms, for destruction. Likewise, all BIR-issued Notices, Permits, Certificate of Registration, etc. shall also be surrendered, for cancellation. Commissioner Lilian B. Hefti directed taxpayers to properly dispose the destroyed/cancelled documents and warned them that they shall be held liable if the said documents are subsequently used as a source of spurious input taxes. The BIR will issue another RMC to circularize the names of taxpayers who have ceased business operations. (For more details, see full text of RMC No. 56-2008 at www.bir.gov.ph) 128 Bacolod...from p. 3 skills and customer assistance skills to training program for the Collection further improve their delivery of service Group and Assessment Group, respectively, which both started last The GCRO topnotchers who were to taxpayers. February. recognized during the graduation The pool of lecturers, led by ceremony are Arlen Amarador, Gene Regional Director Rodita Galanto and Rose Gallo and Ma. Riza Ramos (for the Assistant Regional Director Aynie Collection Group); and Ma. Anna Liza Mandajoyan, discussed various Valencia, Grace Rikelle Lapu-os and topics in taxation, such as collection Monina Mata (for the Assessment and audit procedures for Income Tax, Group). Percentage Tax, Value-Added Tax, Assistant Commissioner Leonor Transfer Tax, Excise Tax and Documentary Stamp Tax. Human Resource Development Service Villalon-Rogers from the Bureau s The participants were also trained graced the graduation ceremony as on how to improve their communication guest speaker. (By Lizelda Lofranco) BIR searches...from p. 5 Search. Said revenuers were nominated based on their outstanding performance/ contribution to the revenue service; behavioral performance (i.e. commitment to public service, professionalism, justness and sincerity, responsiveness to public and simple living); reliability and consistency of performance, and other similar circumstances or considerations in favor of the nominee. From the 16 official nominees, the top eight (8) nominees shall be determined by the Preliminary Board of Judges consisting of the Commissioner, Deputy Commissioners of Operations Group and Resource Management Group and other officials authorized by the Commissioner. The 8 finalists shall then be referred to the Final Board of Judges (FBJ) to be constituted by TMAP. The FBJ shall select 1 winner, which shall be announced and awarded on October 21.

REGIONAL 3 Bacolod region recognizes top taxpayers and withholding agents By Lizelda Lofranco RR 12, BACOLOD CITY The Regional Office recognized its top taxpayers and withholding agents during the regional celebration of the BIR 104 th founding anniversary held last August 8 at the Provincial Multi-Purpose Gymnasium in Bacolod City. The awardees are top taxpayers of the four Revenue District Offices (RDOs) of RR 12, namely: RDO Nos. 76 Victorias City, 77 Bacolod City, 78 Binalbagan and 79 Dumaguete City. The taxpayer-awardees were selected because of their correct and timely payment of taxes and/or remittance of withholding taxes, which contributed significantly to the region s good collection performance in CY 2007. Awarded as Top Individual Taxpayers were Isidoro Be; Ramon and Yolando Kilayko; Benjamin Jalandoni; and Sylvia Uy. The Top Corporate Taxpayers were Sagay Central, Inc.; Vallacar Transit, Inc.; Ganet Management Corporation; and ACM Commodities, Inc. The Top Withholding Agents in the private sector were VCM Rural Electric Service Cooperative, Inc.; Mandalagan Commodities, Inc.; Negros Occidental Electric Co.; and Siliman University. The Top Withholding Agents in the government sector were City Government of Sagay; Department of Education - Negros Occidental; Cebu region participates in job fair By Judith Mondigo RR 13, CEBU CITY The region participated in the Career and Entrepreneurship Fair organized by JobsDB Philippines, Inc. Cebu last July 10 and 11 at SM City Cebu. The said Fair aimed to provide job opportunities for the unemployed and to encourage more people to enter into entrepreneurship to spur the establishment of small- and medium-scale businesses in the region. Revenue officials and employees from the Taxpayer Service Section of Revenue District Office Nos. 80 Mandaue City, 81 Cebu City North, 82 Cebu City South and 83 Bulacao, Talisay City manned a booth where jobseekers and entrepreneurs submitted their applications for Taxpayer Identification Number (TIN) and registration requirements for business. During the Fair, revenuers also TOP TAXPAYER: Ramon E. Kilayko ( 3 rd from left) receives the Plaque of Recognition from BIR officials (L-R) Revenue District Officer (RDO) Jonah Ruth Alonte, Asst. Commissioner Leonor Villalon-Rogers, OIC-Regional Director Rodita Galanto, OIC-Asst. Regional Director Aynie Mandajoyan and OIC-Asst. RDO Lily Lopez. JOB FAIR. Manning the BIR booth during the Career and Entrepreneurship Fair held last July 10 and 11 at SM City- Cebu are (L-R) Amelia Montero, Alan Bayawa, Samuel Capada and Marivic Meñoso. distributed flyers on the Bureau s Premyo Sa Resibo (PSR) raffle promo and other tax information materials as part of their tax campaign activities for the year. Regional Director Jose Tan and Asst. Regional Director Teresita Dizon expressed optimism that through the BIR s participation in the Fair, the region will be able to expand its taxpayer base as well as reach out to more taxpayers, which will eventually lead to increased tax collections. Province of Negros Occidental; Department of Public Works and Highways, 4 th Engineering District; and Department of Education - Negros Oriental. Regional Director Rodita Galanto led the awarding ceremony, together with Assistant Commissioner Leonor Villalon-Rogers, Asst. Regional Director Aynie Mandajoyan and the four Revenue District Officers of the region. 128 Bacolod revenuers finish General Course for ROs RR 12, BACOLOD CITY The region culminated its conduct of the General Course for Revenue Officers (GCRO) with a graduation ceremony held last August 7. A total of one hundred twenty-eight (128) revenuers composed of 73 Collection and Seizure Agents and 55 Revenue Officers from the Assessment Division, Special Investigation Division and Revenue District Offices of Victorias, Bacolod, Binalbagan and Dumaguete City attended the course. The GCRO is a training package being conducted to hone the collection and audit skills of revenuers assigned in tax assessment and collection positions. It is an 87-hour and 178-hour 128 Bacolod... to p. 2

4 RR No. 8-2008 Clarifies that the transactions of Bangko Sentral ng Pilipinas entered into in the exercise of its governmental/regulatory authority are outside of the coverage of the Gross Receipts Tax RMO No. 28-2008 Prescribes the policies, guidelines and procedures in the reporting, recording, and monitoring of attendance of revenue officials and employees RMC No. 43-2008 Authorizes the manual filing of tax returns of taxpayers enrolled in Electronic Filing and Payment System (efps) due to technical problems encountered RMC No. 44-2008 Circularizes the full text of Department Order No. 9-08 relative to the implementing rules and regulations on the accessibility of taxpayer information between the BIR and the LGUs for tax collection purposes RMC No. 45-2008 Circularizes the list Vouchers for tax refunds issued for the month of May 2008 RMC No. 46-2008 Clarifies issues concerning common carriers by air and their agents relative to the revenue and receipt from transport of passengers, goods/cargoes and mail and from excess baggage RMC No. 47-2008 Prescribes the procedures in handling taxpayers request for transfer of registration RMC No. 48-2008 Circularizes the list Vouchers for tax refunds issued for the month of June 2008 RMC No. 49-2008 Clarifies the composition of the National Evaluation Board RMC No. 50-2008 Notifies the loss of triplicate copy from one set of unused BIR Form No. 2320 Tax Credit Certificate with Serial No. 012832 FEATURES New Revenue Issuances RMC No. 51-2008 Circularizes CSC Memorandum Circular No. 03, s. 2001 entitled Revised Policies on Merit Promotion Plan RMC No. 52-2008 Circularizes Memorandum Circular No. 04, s. 2005 entitled Amendment to Policy No. 12 of CSC MC No. 3, s. 2001 and Clarification of the Functions and Responsibilities of the Personnel Selection Board RMC No. 53-2008 Notifies the loss of 1 pad of unused Accountable Form No. 51 (AF51) RMC No. 54-2008 Circularizes the list Vouchers for tax refunds issued for the month of July 2008 RMC No. 55-2008 Provides the deadline of corporate taxpayers for the filing of 2nd Quarter Income Tax return and clarifies the procedure in the filing of tax returns, among others RMC No. 56-2008 Clarifies the procedure on the handling of taxpayer s application for cancellation of business registration and issues warning on the use of Official Receipts/Sales Invoices of dissolved businesses for purposes of claiming input taxes Happy Birthday Chief Pedro D. Ramos Aug. 01 RDO Cynthia T. Cabuguas Aug. 01 Chief Ruth C. Bagaloyos Aug. 02 OIC-Chief Simeon D. Abella Jr. Aug. 02 Asst. Chief Oswaldo C. Adornado Aug. 04 ARDO Carlos G. Tambal Aug. 04 Chief Nona P. Gatbonton Aug. 05 OIC-RDC Head Victor O. Baylon Aug. 05 OIC-Asst. Chief Rhoda A. Virganio Aug. 05 OIC-Chief Bobby U. Labajo Aug. 06 OIC-Asst. Chief Nicanor S. Ventura Aug. 06 OIC-Asst. Chief Bernardo D. Gomez Aug. 06 OIC-Chief Cynthia A. Fuentes Aug. 08 RDO Gerry O. Dumayas Aug. 10 ARDO Ester M. Campos Aug. 10 OIC-Reg. Dir. Ma. Nieva A. Guerrero Aug. 12 OIC-ARDO Benjamin B. Virtucio Aug. 12 Chief Claire F. Corpus Aug. 13 RDO Ramer D. Narvaez Aug. 13 Chief Marcelina P. Tawanna Aug. 14 Asst. Reg. Dir. Mamapok G. Diro Aug. 15 Chief Asuncion E. Bernades Aug. 15 RMC No. 57-2008 Notifies the loss of 2 sets of unused BIR Form No. 2524 Revenue Official Receipt RMC No. 58-2008 Clarifies the time within which to reckon the redemption period on foreclosed asset and the period within which to pay Capital Gains Tax or Creditable Withholding Tax and Documentary Stamp Tax on the foreclosure of real estate mortgage by those governed by the General Banking Law of 2000, as well as the venue for the payment of these taxes RMC No. 59-2008 Amends certain portions of RMC No. 30-2008 on the taxability of insurance companies for Minimum Corporate Income Tax, Business Tax and Documentary Stamp Tax purposes RMC No. 60-2008 Notifies the loss of several Revenue Official Receipts-BIR Form No. 2524 RMC No. 61-2008 Encourages participation to the celebration of the 19th National Statistics Month in October 2008 RMC No. 62-2008 Notifies the loss of 4 sets of unused BIR Form No. 1954 - Certificate Authorizing Registration RDO Isidro T. Casals, Jr. Aug. 15 RDO Nerissa C. Agraam Aug. 15 OIC-Chief Renato L. Ruiz Aug. 15 OIC-RDO Evangeline S. Abanilla Aug. 15 RDO Ramon T. King Jr. Aug. 17 Chief Nelly S. Ibo Aug. 18 OIC-RDO Roberto S. Bucoy Aug. 18 Asst. Chief Gregoria A. Pacho Aug. 19 OIC-Chief Alice SA Gonzales Aug. 20 Chief Evelyn M. Albano Aug. 21 Asst. Chief Yolanda C. Magsumbol Aug. 22 Chief Oscar R. Mañalac Aug. 24 OIC-Chief Erotida M. Sibal Aug. 24 ARDO Danilo G. Lino Aug. 24 OIC-RDO Maria Thelma F. Pulhin Aug. 25 OIC-RDO Noel B. Gonzales Aug. 27 OIC-Asst. Chief Lizabel M. Valderama Aug. 28 ARDO Roger G. Cadavas Aug. 29 OIC-Asst. Reg. Dir. Teresita M. Dizon Aug. 30 OIC-ACIR Jaime B. Santiago Aug. 31 Asst. Chief Ariel M. Calabia Aug. 31 Asst. Chief Neil U. Cordero Aug. 31

BIR searches for Exemplary Revenue Employee By Beverly Samia THE BIR, in partnership with the Tax Management Association of the Philippines (TM-AP) launched last June 26 the Search for Exemplary Revenue Employee of 2008 to recognize BIR employees who have displayed outstanding work performance and dedication to duty. The Search is open to all BIR employees, excluding those who are holding Division Chief/Revenue District Officer positions and above. However, in the initial conduct of the Search, it shall cover only the Revenue Regions and Revenue District Offices within Metro Manila, including the BIR National Office and the Large Taxpayers Service (excluding LTDO-Cebu). Subsequently, the Search shall cover the areas outside Metro Manila. To qualify for the Search, the nominee must be an employee of the BIR for at least seven (7) years at the time of nomination; must be rated Very Satisfactory under the PMS for the immediately preceding six consecutive performance rating periods prior to their nomination conducted during the last three years; must not have been charged under a criminal information pending in court or must not have any pending criminal and/or administrative case/charge; and must not have been adjudged guilty/liable in any administrative or criminal case. Based on the nominations received by the Search Committee, sixteen (16) revenuers were officially nominated to the BIR searches... to p.2 Rowena G. Altura Editor-in-Chief Silverio C. Sante Managing Editor Eleonor F. Capili News Editor Mary Aileen F. Marquez Writer Beverly C. Samia Brando Ador C. Bautista Layout Artists The BIR Monitor is the official newsletter of the Bureau of Internal Revenue published by the Corporate Communications Division, under the supervision of the Policy and Planning Service. Editorial Office: Room 903, BIR National Office, Agham Road, Diliman, Quezon City Tel/Fax No. 426-2190