Question & AnswerQ&A (BIR REVENUE MEMORANDUM CIRCULAR NO. 38-2011)
Yes, PHIC is one of the Government-Owned and Controlled Corporations exempt from income tax.
No, PHIC is not exempt from its responsibilities as a withholding agent and must withhold correct taxes on its income payments.
Yes, payments to hospitals and medical practitioners by PHIC for services rendered to PHIC members are subject to EWT.
The EWT rate on payments to medical practitioners is either 10% or 15%, depending on the medical practitioner's declared gross income in a year according to Section 2.57.2(A) of Revenue Regulations No. 2-98, as amended.
Payments to hospitals for medical services provided to PHIC members are subject to an EWT rate of 2% as prescribed under Section 2.57.2(N) of RR No. 2-98, as amended.
No, the fact that payments are reimbursements of members’ benefits does not exempt them from withholding tax obligations as PHIC controls the payments.
The person having control over the payment and who claims the expenses is responsible for withholding the corresponding withholding tax.
PHIC determines the members' medical benefits based on a pre-approved amount per case, distinguishing the amount to be paid as professional fees and the amount for medical services (facility fees).
PHIC must issue separate BIR Form 2307 for the hospital reflecting the facility fee amount and tax withheld, and for the medical practitioner reflecting the professional fees and tax withheld.