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eDST implementation and other DST clarifications

eDST implementation and other DST clarifications

No further  extension or deferment of the implementation of the eDST should  be expected from the BIR. Thus, covered taxpayers who fail to enroll in eDST before June 30, 2010 and utilize the eDST system beginning July 01, 2010 shall be subject to compromise penalty under RMO 19-2007 and shall be an automatic candidate for a tax audit.

Under RR 07-09, the following taxpayers are mandated to use the web-based eDST System:

     a)    Bank, quasi-bank or non-bank financial intermediary, finance company, or insurance, surety, fidelity, or annuity company;
     b)    Shipping and airline companies;
     c)    Pre-need company on sale of pre-need plans, as provided under Section 186 of the Tax Code;
     d)    Educational institution, in respect to the issuance of taxable certificates such as Diploma, Transcript of Records, and other documents taxable as certificates under Section 188 of the Tax Code; and    
     e)    Such other industries as may be notified by the Commissioner to use the "web-based eDST System"

The RMC also issued clarification regarding the new DST rates on insurance policies enacted under RA 10001, as follows:

     1.    Effectivity - Insurance companies should already use the new DST rates under  RA 10001  beginning April 01, 2010 which is the date of effectivity of the law  without need to wait for issuance of  implementing rules by the BIR.   Any overpayment may be applied for refund/credit with RDO having jurisdiction over its business within 2 years from the payment of the tax

     2.    DST on insurance cooperatives - Insurance cooperatives transacting with both members and non-members, with accumulated reserves and undivided net savings of less than P10 million shall be subject eDST only on policies issued to non-members.  If accumulated reserves and undivided net savings exceed P10 million, all policies shall be to DST.  

     3. DST for accident and health insurance –
      a) Personal accident insurance shall also be subject to graduated rates under Section 183 of the Tax Code.  In case of  group insurance policies, the DST on group master insurance policy (Section 183) shall be separate and distinct from the DST on the individual certificates issued to each covered employee. (Section 188)

Separate rules are provided in case of changes in the number of employees covered and/or amount of insurance coverage.

      b) Accident and health insurance policies issued by non-life insurance companies are also covered by the graduated rates under Section 183.
For other clarifications on the use of eDST system, please see attached copy of RMC 24-2011.