Supreme Court: Tax on non-life insurance still effective

MANILA, Philippines – The Supreme Court (SC) said in a recent resolution that the provisions in the tax code imposing value-added tax (VAT) and documentary stamp tax on non-life insurance companies are still effective and can be enforced.

The SC’s 1st Division reversed a 2015 lower court ruling which earlier stopped the Bureau of Internal Revenue (BIR) from imposing additional tax rates on non-life insurance firms. The 10-page resolution was penned by Chief Justice Lucas Bersamin.

The case stemmed from an earlier complaint of the company Standard Insurance, which sought relief from the Makati City Regional Trial Court (RTC) from the BIR’s assessment that it owed P418.8 million in documentary stamp taxes from 2011 to 2013.

Standard Insurance asked the Makati court to stop the implementation of Sections 108 and 184 of the tax code. Section 108 imposes a 10% VAT on sale or exchange of services, including the use or lease of properties, while Section 108 charges P0.50 documentary stamp tax for each P4 worth of premiums from non-life insurance sales. (READ: BIR scraps tax on health card premiums)

Standard Insurance claimed the provisions violated the equal protection clause because a separate law, Republic Act No. 10001, shielded life insurance firms from higher taxes. In May 2015, the Makati court granted Standard Insurance’s petition and stopped the BIR from implementing Sections 108 and 184 until Congress could address the laws.

In reversing the lower court’s decision, the SC said Standard Insurance had no legal standing to seek declaratory relief from the Makati RTC, and it was premature to seek such. (READ: #AskTheTaxWhiz: What are deductions, exemptions from gross income?)

“The apprehension of the respondent that it could be rendered technically insolvent through the imposition of the iniquitous taxes imposed by Section 108 and Section 184 of the NIRC (National Internal Revenue Code), laws that were valid and binding, did not render the action for declaratory fall within the purview of an actual controversy that was ripe for judicial determination,” the SC said.

The Court added that Standard Insurance was relying on mere “speculation or conjecture, or arguing on probabilities, not actualities.”

“With not all the requisites for the remedy of declaratory relief being present, the respondent’s petition for declaratory relief had not legal support and should have been dismissed by the RTC,” the SC ruled. – Rappler.com