AN ACT REDUCING THE TAXES ON LIFE INSURANCE POLICIES

Case Overview and Summary

Summary of Republic Act No. 10001

Tax on Life Insurance Premiums (Section 1, amending Section 123):
- Imposes a 2% tax on total premiums collected by life insurance companies, except:
  - Premiums refunded within 6 months due to rejection of risk or other reasons
  - Reinsurance premiums paid by companies that have already paid the tax
  - Premiums collected by domestic branches outside the Philippines on non-resident insured if taxed by the foreign country
  - Premiums collected on reinsurance if the insured resides outside the Philippines and taxed by the foreign country
  - Portion of premiums on variable contracts exceeding the amount necessary to insure the lives of variable contract owners
- Defines cooperative companies as those conducted by members for their own protection and not for profit.

Application of New Tax Rate (Section 2):
- The 2% rate applies only to insurance policies issued after the law's effectivity.
- For policies taken out before effectivity but with remaining premiums, the 2% rate applies to the remaining balance and years.

Stamp Tax on Life Insurance Policies (Section 3, amending Section 183):
- Imposes a one-time documentary stamp tax on life insurance policies based on the amount of insurance:
  - Up to PHP 100,000: Exempt
  - PHP 100,000 to PHP 300,000: PHP 10
  - PHP 300,000 to PHP 500,000: PHP 25
  - PHP 500,000 to PHP 750,000: PHP 50
  - PHP 750,000 to PHP 1,000,000: PHP 75
  - Over PHP 1,000,000: PHP 100

Exemption from Taxes (Section 4):
- Five years after the law's effectivity, no tax on life insurance premiums shall be collected.
- On the same date, all life insurance policies shall be exempt from the documentary stamp tax.

Other Provisions:
- The Secretary of Finance shall promulgate rules and regulations for implementation (Section 5).
- Separability clause (Section 6)
- Repealing clause for inconsistent laws (Section 7)
- Effectivity 15 days after publication in the Official Gazette or a newspaper of general circulation (Section 8)