39621rmc 30-2008 - REVENUE MEMORANDUM CIRCULAR NO. 30-2008...

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REVENUE MEMORANDUM CIRCULAR NO. 30-2008 issued on April 8, 2008 clarifies the taxability of insurance companies for Minimum Corporate Income Tax (MCIT), business tax and Documentary Stamp Tax purposes For purposes of computing the gross income on the sale of services which shall be the basis of the 2% MCIT imposed under Section 27(E) and Section 28(A)(2) of the 1997 National Internal Revenue Code (Tax Code), as amended, of life and non- life insurance companies, their gross revenue shall include direct premium and reinsurance assumed (net of returns, 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. Their costs of services or direct cost and identifiable direct revenue-related deductions 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, and shall be limited to the following: a. Claims, losses, maturities and benefits net of reinsurance recoveries; b. Additions required by law to reserve fund; and c. Reinsurance ceded. Generally, for the premiums received by a life insurance company in undertaking its insurance activities, the same are subject to premium tax at the rate of five percent (5%) on its direct writings/premiums pursuant to Section 123 of the Tax Code. Re-insurance fees, reinstatement fees, renewal fees as well as penalties paid to the life insurance company, which are incidental to or in connection with the insurance policy contracts issued, are considered akin to premiums, thus, such types of income are also covered by the provision in Section 123, subject to the five percent (5%) premium tax for the gross amount received on such fees and/or penalties. Management fees, rental income, or any other income earned by the life insurance company from services whic h can be pursued independently of the insurance business activity are not subject to the five percent (5%) premium tax imposed under Section 123 but, rather , the same are treated as income for services that are subject to the imposition of Value-Added Tax (VAT) pursuant to Section 108 of the Tax Code, as amended, or to the Percentage Tax imposed under Section 116 of the same Code, as the case may be. Income realized from investment activities utilizing the premiums earned by the life insurance company from its policyholders is considered merely a part of, incidental to and is necessary to its main business of contracting insurance services. Such investment income is considered exempt from the further imposition of business
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This note was uploaded on 12/07/2011 for the course TAXATION 101 taught by Professor Atty.phua during the Spring '11 term at University of the Philippines Diliman.

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39621rmc 30-2008 - REVENUE MEMORANDUM CIRCULAR NO. 30-2008...

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