SC lets BIR impose higher taxes on non-life insurance firms

The Supreme Court has allowed the Bureau of Internal Revenue (BIR) to push through with the implementation of tax provisions that imposes higher tax rates to be paid by non-life insurance companies compared to life insurance firms.

In a 10-page ruling written by Chief Justice Lucas Bersamin, the high court’s First Division reversed the decision of the Makati City Regional Trial Court in 2015.

The Makati RTC decision granted the petition filed by Standard Insurance Co. Inc., a nonlife insurance firm that offers motorcar, cellular phone, property, marine, accident and comprehensive general liability insurance services.

Standard Insurance was contesting the assessed tax liability issued by the BIR against it arising from a deficiency in the payment of documentary stamp taxes for the taxable years 2011 to 2013 amounting to P418.8 million, including interest and compromise penalty.

The firm sought the issuance of an injunction against the implementation of Section 108 and Section 184 of the National Internal Revenue Code (NIRC) with respect to the taxes to be paid by non-life insurance companies.

The Makati RTC granted the petition and permanently stopped the BIR from implementing Section 108 and Section 184 of the NIRC.

Section 108 imposes a 10 percent value-added tax on gross receipts derived from the sale or exchange of services, including the use or lease of properties while Section 184 imposes the collection of a documentary stamp tax of P0.50 on each P4 or fractional part thereof, of the amount of premium charged on policies of insurance upon properties.

The BIR then took the case to the Supreme Court, arguing that a petition for declaratory relief was not applicable to contest tax assessments and that the Makati RTC erred in declaring that Section 108 and 184 violate the equal protection clause of the Constitution.

In granting the BIR petition, the high court held that the Makati RTC “grossly erred” in granting Standard Insurance’ petition for declaratory relief and subsequently enjoined the BIR from implementing the assailed NIRC provisions permanently.

It said the RTC failed to comply with the requisites under Section 1, Rule 63 of the Rules of Court covering an action for declaratory relief.

“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, 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 respondent was thereby engaging in speculation or conjecture, or arguing on probabilities, not actualities. Therein lay the prematurity of its action, for a justiciable controversy refers to an existing case or controversy that is appropriate or ripe for judicial determination, not one that is conjectural or merely anticipator,” it added.

Thus, the Supreme Court said the petition of Standard Insurance for declaratory relief should have been dismissed by the Makati RTC instantly.

“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 Supreme Court ruled. /atm