THE Supreme Court (SC) has ruled that for purposes of determining the value-added tax (VAT) liability of health-care providers, the amounts earmarked and actually spent for medical utilization of its members should not be included in the computation of its gross receipts.
Thus, in a 22-page ruling penned by Associate Justice Bienvenido Reyes, the SC’s Third Division granted the petition filed by Medicard Philippines Inc. seeking a reversal to the decision issued by the Court of Tax Appeals (CTA) on September 2, 2015, ordering it to pay the Bureau of Internal Revenue (BIR) the deficiency VAT assessment totaling to P660 million, including 20-percent interest per year starting January 2007.
Medicard is a health maintenance organization (HMO) that provides prepaid health and medical insurance coverage to its clients.
“The decision dated September 2, 2015, and resolution dated January 29, 2016, issued by the Court of Tax Appeals en banc…are reversed and set aside,” the SC declared.
It held that the definition of gross receipts under Revenue Regulations 16-2005 and 4-2007, in relation to Section 108(A) of the National Internal Revenue Code, as amended by Republic Act 9337, for purposes of determining its VAT should exclude 80 percent of the amount of the contract price earmarked as fiduciary funds for the medical utilization of its members.