April 11, 2005

BIR RULING [DA-139-05]

V.C. Mamalateo & Associates

Unit 6C, 20 Lansbergh Place
170 T. Morato Avenue, cor. Castor Street
Quezon City

Attention: Atty. Vic C. Mamalateo

Tax Partner

Gentlemen :

This refers to your letter dated March 10, 2005 stating that your client,
Philippine American Life and General Insurance Company (PHILAMLIFE), is a
corporation organized under the laws of the Philippines; that it has been the
premier life insurance organization in the Philippines for over five decades
now; that it sells, among others, Group Permanent Plans (the Plan) to private
companies; that the Plan is composed of individual life insurance policies for
the eligible employees, both managerial and rank-and-file employees, of a
private company, specifically a Philippine Economic Zone Authority (PEZA)-
registered enterprise, availing of the Plan; and that the private company
makes contributions as and by way of premium payments for its eligible
employees availing of the Plan to PHILAMLIFE.
Based on the foregoing representations, you now request for an
opinion that the life insurance premium payments of corporate employers do
not form part of the gross income of their employees (rank-and-file and
managerial) hence, not subject to withholding tax on compensation nor
fringe benefit tax.
In reply thereto, please be informed that Section 33(B) of the Tax Code
of 1997, as implemented by Revenue Regulations No. 3-98, as amended
provides that the term fringe benefit means any good, service, or other
benefit furnished or granted by an employer in cash or in kind, in addition to
basic salaries, to an individual employee (except rank and file employee as
defined in these regulations). DCSTAH

Likewise, Section 33(C), supra, provides that —

(C) Fringe Benefits Not Subject to Fringe Benefit Tax — In
general, the fringe benefits tax shall not be imposed on the following
fringe benefits:
(1) Fringe benefits which are authorized and exempted from
income tax under the Code or under any special law;
(2) Contributions of the employer for the benefit of the
employee to retirement, insurance and hospitalization benefit plans;
(3) Benefits given to the rank and file, whether granted under a
collective bargaining agreement or not;
CD Technologies Asia, Inc. © 2021 cdasiaonline.com
 (4) De minimis benefits as defined in these Regulations;
(5) If the grant of fringe benefits to the employee is required by
the nature of, or necessary to the trade, business or profession of the
employer; or
(6) If the grant of the fringe benefit is for the convenience of the
employer.
In addition, Section 2.33(B)(10)(b) of Revenue Regulations No. 3-98, as
amended, provides that the cost of life or health insurance and other non-life
insurance premiums borne by the employer for his employee shall be
treated as taxable fringe benefit, except the following: (a) contributions of
the employer for the benefit of the employee, pursuant to the provisions of
existing law, such as under the Social Security System (SSS), (R.A. No. 8292,
as amended) or under the Government Service Insurance System (GSIS)
(R.A. No. 8291), or similar contributions arising from the provisions of any
other existing law; and (b) the cost of premiums borne by the employer for
the group insurance of his employees.
Accordingly, the premium payments made by the corporate employers
for the benefit of its eligible employees (managerial and rank-and-file) are
not subject to withholding tax on compensation nor to fringe benefits tax.
Thus, this Office had already occasion to rule on the matter when it
said in BIR Ruling No. 014-01 dated March 26, 2001 that —
"Therefore, the premium payments to be made by the
employees on GE Life's Group Plan constitute non-taxable fringe
benefits."
WHEREFORE, in view of the foregoing, this Office holds that premium
payments made by a client of PHILAMLIFE relating to a group insurance for
its eligible employees (managerial and rank-and-file) are not subject to
withholding tax on compensation nor to fringe benefits tax.
This ruling is being issued on the basis of the foregoing facts as
represented. However, if upon investigation, it will be disclosed that the
facts are different, then this ruling shall be considered null and void.

Very truly yours,

(SGD.) JOSE MARIO C. BUÑAG

Deputy Commissioner
Legal & Inspection Group

CD Technologies Asia, Inc. © 2021 cdasiaonline.com