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3.22 CIR Vs The Philippine American Accident Insurance Company

The Supreme Court ruled that respondent insurance companies are not subject to the 3% percentage tax imposed on lending investors. While the insurance companies granted mortgage and other loans, this was done as part of their insurance business and to meet legal reserve requirements, not as independent lending investors. Insurance companies have strict regulations around the types and terms of loans they can issue under the Insurance Code. Their lending activities are circumscribed and regulated by the State unlike independent lending investors.

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Jil Mei IV
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293 views1 page

3.22 CIR Vs The Philippine American Accident Insurance Company

The Supreme Court ruled that respondent insurance companies are not subject to the 3% percentage tax imposed on lending investors. While the insurance companies granted mortgage and other loans, this was done as part of their insurance business and to meet legal reserve requirements, not as independent lending investors. Insurance companies have strict regulations around the types and terms of loans they can issue under the Insurance Code. Their lending activities are circumscribed and regulated by the State unlike independent lending investors.

Uploaded by

Jil Mei IV
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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CIR vs The Philippine American Accident Insurance Company, Inc.

Facts: Respondents are domestic corporations licensed to transact insurance business in the country. They paid the Bureau of Internal Revenue under protest the 3% tax imposed on lending in the following amounts: P7,985.25 from Philippine American ("PHILAM") Accident Insurance Company; P7,047.80 from PHILAM Assurance Company; and P14,541.97 from PHILAM General Insurance Company. These amounts represented 3% of each companys interest income from mortgage and other loans. Respondents also paid the taxes required of insurance companies under CA 466. On 31 January 1973, respondents sent a letter-claim to petitioner seeking a refund of the taxes paid under protest. When respondents did not receive a response, each respondent filed on 26 April 1973 a petition for review with the CTA. Issue: WON respondent insurance companies are subject to the 3% percentage tax as lending investors under NIRC. Ruling: The Supreme Court ruled in the negative.

True, respondents granted mortgage and other kinds of loans. However, this was not done independently of respondents insurance business. The granting of certain loans is one of several means of investment allowed to insurance companies. No less than the Insurance Code mandates and regulates this practice. Unlike the practice of lending investors, the lending activities of insurance companies are circumscribed and strictly regulated by the State. Insurance companies cannot freely lend to "themselves or others" as lending investors can, nor can insurance companies grant simply any kind of loan. Even prior to 1978, the Insurance Code prescribed strict rules for the granting of loans by insurance companies. These provisions on mortgage, collateral and policy loans were reiterated in the Insurance Code of 1978 and are still in force today. Insurance companies are required by law to possess and maintain substantial legal reserves to meet their obligations to policyholders. This obviously cannot be accomplished through the collection of premiums alone, as the legal reserves and capital and surplus insurance companies are obligated to maintain run into millions of pesos. As such, the creation of "investment income" has long been held to be generally, if not necessarily, essential to the business of insurance.

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