G.R. No. 158085 . October 14, 2005.
Republic of the Philippines, Represented by the Commissioner of Internal Revenue, Petitioner, vs. Sunlife Assurance Company of Canada, Respondent.

FACTS

Sun Life Assurance Company of Canada, a mutual life insurance company organized under Canadian laws and authorized to operate in the Philippines, paid premium tax and documentary stamp tax (DST) for specific periods in 1997. Subsequently, relying on the precedent set in CIR v. Insular Life Assurance Company, Ltd., which held that mutual life insurance companies are purely cooperative and thus tax-exempt, Sun Life filed an administrative claim for tax credit/refund with the Bureau of Internal Revenue. The claim was not acted upon, prompting Sun Life to file a petition for review with the Court of Tax Appeals.
The Commissioner of Internal Revenue opposed the claim, arguing that Sun Life failed to prove it qualified for the exemption under the Tax Code for cooperative companies. The CIR specifically contended that Sun Life was required to register with the Cooperative Development Authority to avail of the exemption and that it had not substantiated that its ownership and management were truly vested in its member-policyholders. The CTA ruled in favor of Sun Life, a decision affirmed by the Court of Appeals.

ISSUE

Whether Sun Life, as a mutual life insurance company, is exempt from paying insurance premium tax and documentary stamp tax as a purely cooperative company or association under the National Internal Revenue Code, without need of registration with the Cooperative Development Authority.

RULING

The Supreme Court denied the petition and affirmed the rulings of the lower courts, holding that Sun Life is exempt from the taxes in question. The legal logic is clear: a mutual life insurance company, by its fundamental nature, operates as a cooperative. Its member-policyholders own the company, contribute its capital through premiums, and manage its affairs for their mutual protection, not for the profit of external shareholders. This inherent cooperative character qualifies it as a “purely cooperative company or association” under Section 121 (now Section 123) of the Tax Code, which grants exemption from the premium tax on life insurance, and Section 199, which exempts such cooperatives from DST.
The Court explicitly rejected the CIR’s argument that registration with the Cooperative Development Authority is a prerequisite for the tax exemption. The exemption is conferred by the Tax Code itself based on the entity’s cooperative nature, not by a separate regulatory statute. Neither the Tax Code nor the Insurance Code mandates CDA registration as a condition for the exemption. To impose such a requirement would be to add a condition not found in the law. Since Sun Life satisfactorily proved its mutual, cooperative character through its structure and operations, it is entitled to the tax exemptions as a matter of statutory right.