Expanded Withholding Tax on PHIC Medical Payments

Ask AI

BIR REVENUE MEMORANDUM CIRCULAR NO. 38-2011: Expanded Withholding Tax on PHIC Medical Payments

Getting related questions...
What do you want to know about the law?
Your conversations and searches stay on your device. We do not store or track your activity on our servers. To know more about our privacy commitment see jur.ph/privacy Ask AI provides quick answers grounded in full case texts to avoid mistakes. Always verify with the original text.

Ask AI

Title Supreme Court: Expanded Withholding Tax on PHIC Medical Payments

Law: Bir Revenue Memorandum Circular No. 38-2011

Decision Date: Sep 1, 2011

The Bureau of Internal Revenue clarifies that payments made by the Philippine Health Insurance Corporation to medical practitioners and hospitals for member benefits are subject to expanded withholding tax rates of 10% or 15% for professional fees and 2% for facility fees, emphasizing PHIC's responsibility as a withholding agent.

expanded withholding

philippine health

A

Application of Expanded Withholding Tax (EWT) on Medical Services Payments

Payments by PHIC to medical practitioners are subject to EWT at 10% or 15%, contingent on the practitioner's declared gross income.
Payments to hospitals for services to PHIC members are subject to a 2% EWT rate.

Clarification on Nature of Payments and Tax Withholding Requirement

Some PHIC regional offices consider payments to hospitals and doctors as reimbursement rather than payment for services, and thus, refrain from withholding tax.
The Circular affirms that such payments are indeed subject to EWT when paid directly by PHIC to service providers.

Legal Basis and Computation of EWT

Section 2.57.2(A) of RR No. 2-98, as amended, governs the applicable EWT rate for professional fees.
Section 2.57.3 mandates withholding by the person controlling and disbursing the payment.
PHIC calculates benefits on a per-case basis, distinguishing professional fees from facility fees, each with their specific EWT rates.

Specific EWT Rates and Payment Allocation

Professional fees paid directly to medical practitioners are subject to 10% or 15% EWT.
Facility fees paid to hospitals or clinics are taxed at 2% EWT.

Illustration of Withholding Procedure

Example: A PHIC member's benefits total P14,000 (P4,000 professional fees, P10,000 facility fees).
PHIC must withhold P600 on professional fees (15%) and P200 on facility fees (2%), totaling P800.
The net payment by PHIC to the hospital is P13,200 after withholding.

Official Receipt Issuance Guidelines

Hospital issues Official Receipt only for the facility fee amount (P10,000).
Medical practitioner issues Official Receipt for professional fees (P4,000).

Issuance of BIR Form 2307 (Certificate of Income and Tax Withheld)

PHIC issues separate certificates: one to the hospital (income P10,000, tax withheld P200) and one to the medical practitioner (income P4,000, tax withheld P600).

Directive to Internal Revenue Officers and Concerned Entities

Emphasis on proper tax withholding compliance by PHIC regional and field offices.
Instruction to widely disseminate the Circular for adherence in practice.

END