Insular Life declared exempt from DST

Posted on June 23, 2014

LOCAL insurer Insular Life Assurance Co. Ltd. has won a P93-million tax case, with the Supreme Court upholding an earlier decision exempting cooperatives from paying documentary stamp taxes (DST) to the government.

The high court’s first division said Insular Life, as a stock life insurance corporation which converted its corporate structure to a non-stock mutual life insurance, is exempted from paying DSTs regardless if the insurer has registered with the Cooperative Development Agency (CDA) or not.

Insular Life completed its mutualization in 1987, which effectively made its policyholders part owners of the company.

“[U]nder the tax code although respondent is a cooperative, registration with the CDA is not necessary in order for it to be exempt from the payment of both percentage taxes on insurance premiums...and documentary stamp taxes on policies of insurance or annuities it grants,” Associate Justice Bienvenido L. Reyes wrote in a 10-page decision.

The high court made the verdict after the Bureau of Internal Revenue (BIR) questioned an appeals court ruling that favored Insular Life.

The BIR had argued Insular Life could not be granted exemptions from DSTs since it is not registered with the CDA. The high court, however, declared Insular Life to have been in the right over non-payment of the DST.

Citing a related case involving another insurance company, the high court said the country’s tax code does not require CDA registration to obtain preferential tax treatments for cooperatives.

The high court added the Insurance Code does not require registration of cooperatives with the CDA, either.

Chief Justice Maria Lourdes P.A. Sereno and three other justices concurred with the ruling. -- Mikhail Franz E. Flores