The Philippines Bureau of Internal Revenue (BIR) issued clarifications regarding the income tax deductibility of insurance contributions, and to the applicability of value-added tax (VAT) following takeovers and mergers. According to that, only the mandatory monthly contributions to various institutions providing life and health insurance, retirement and pension funds, and mutual savings for housing, are income tax deductible. Amounts paid voluntarily above those mandatory contributions will be considered as ‘investments’, and taxable as part of gross income. This is contrary to previous BIR rulings issued in 1999, 2004 and 2006.
On the other hand, the BIR has issued a clarification that the exchange of goods and properties for a shareholding in a company, whether involving control or not, will be subject to VAT. It has also confirmed that neither a change in the trade or corporate name of a company, nor its merger, consolidation or takeover by another company will have VAT consequences unless it involves transfer of assets.
