G.R. No. 158085 – REPUBLIC OF THE PHILIPPINES, Represented by the COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. SUNLIFE ASSURANCE COMPANY OF CANADA, respondent.
PANGANIBAN, J.
Rule Synopsis
Mutual life insurance companies that are bona fide cooperatives are entitled to exemption from the payment of taxes on life insurance premiums and documentary stamps.
Facts
Sun Life is a mutual life insurance company organized under the laws of Canada. It is registered and authorized by the SEC and the Insurance Commission to engage in the business in the Philippines as a mutual life insurance company. It made payments to the Commissioner of Internal Revenue (CIR) P31.49M and P30M as premium tax and DST, respectively.
However, Sunlife subsequently filed an administrative claim for tax credits with the CIR on ground of alleged erroneous payment. This is on the strength of the ruling of the SC in the case of CIR v. Insular Life holding that mutual life insurance companies are purely cooperative companies and are exempt from the payment of premium tax and DST.
The CIR, among others, raised the following defenses: 1) failure of Sunlife to register with the Cooperative Development Authority (CDA), 2) failure to prove that its ownership was vested to its member; 3) claimed that mutual life insurance companies earn profits on account of it being subjected to regular corporated income tax under the 1997 Tax Code.
The CIR failed to act of the claim. The CTA ruled in favor of Sunlife. The CA upheld CTA’s ruling. The SC affirmed.
Issues
- Is Sunlife a Cooperative?
- Is Sunlife’s registration with the CDA a sine qua non requirement to be entitled to tax exemption?
- Is Sunlife exempted from payment of tax on life insurance premiums and documentary stamp tax?
Ruling and Discussion
- Yes. Sunlife is a Cooperative.
The Tax Code defines a Cooperative as an association “conducted by the members thereof with the money collected from among themselves and solely for their own protection and not for profit. The SC held that Sulife squarely falls within this definition.
First, it is managed by its members.
Sunlife has been mutualized or converted from a stock life insurance company to a non-stock mutual life insurance corporation, in conformance with existing laws. Under its bylaws, ownership has been vested in its member-policyholders who are entitled to vote. They also elect the board of trustees, the governing body of a non-stock corporation.
Second, it is operated with money collected from its members.
Sunlife is composed entirely of members, all premiums obviously came from them. The member-policyholders were both the “insurers” and the “insured” who contribute via premiums to create a fund for the payment of the said members’ indemnity and benefit claims.
Third, it is licensed for the mutual protection of its members, not for the profit of anyone. - No. Sunlife’s registration with the CDA is not a sine qua non requirement to be entitled to tax exemption.
First, the Tax Code does not require registration with the CDA.
The Tax Code does not require a mutual life insurance company to register with the CDA to enjoy exemption from both percentage and documentary stamp taxes. A provision in Sec. of of Revenue Memorandum Circular (RMC) No. 48-91 requiring the submission of the Certificate of Registration with the CDA cannot prevail over such lack of requirement — 1) the said RMC does not apply to Sunlife, and 2) it is a mere issuance directing all internal revenue officers to publicize a new tax legislation.
Second, the provisions of the Cooperative Code of the Philippines do not apply.
The Cooperative Code was an offshoot of the old law on cooperatives, PD No. 175 signed into law by Pres. Marcos. This law, provides for the registration, regulation and supervision only of the following cooperatives: 1) barrio associations involved in the issuance of certificates of land transfer; 2) local or primary cooperatives composed of natural persons and/or barrio associations; 3) federations composed of cooperatives that may or may not perform business activities; and 4) unions of cooperatives that did not perform any business activities. Sunlife does not fall within any of the above.
Under the Cooperative Code, cooperatives registered under PD No. 175 were deemed registered with CDA. As Sunlife was not required to register under the former, it followed that it was not required to register under the latter.
Furthermore, only cooperatives to be formed or organized under the Cooperative Code needed registration with the CDA. Sulife already existed before the passage of the new law on cooperatives. It was not even required to organize under the Cooperative Code as it did not operate to serve the same objectives under the new law—particularly on productivity, marketing and credit extension.
The distinguishing feature of a cooperative enterprise is the mutuality of cooperation among its member-policyholders united for that purpose. So long as Sunlife meets this essential feature, it does not even have to use and carry the name of a cooperative to operate its mutual life insurance business.
Even assuming that it is required to register, such non-registration cannot deprive it of its tax exemption privilege. Exemption when granted cannot prevail over administrative convenience.
Third, not even the Insurance Code requires registration with the CDA.
The Cooperative Code does not apply to Sunlife, which already existed as a cooperative company engaged in mutual life insurance prior to its passage. The statutes prevailing at the time of Sunlife’s organization and mutualization were the Insurance Code and the Corporation Code, which imposed no registration requirement with the CDA. - Yes. Sunlife is exempted from payment of tax on life insurance premiums and documentary stamp tax.
Having determined that Sunlilfe is a cooperative that does not have to be registered with the CDA, the SC held that it is entitled to exemption from both premium taxes and DST.
Section 121 of the Tax Code exempts cooperative companies from the 5 percent percentage tax on insurance premiums. Section 199 also exempts from the DST, policies of insurance or annuities made or granted by cooperative companies.
Dispositive
Petition denied, assailed decision and resolution affirmed.