The medical profession is regarded as one of the more lucrative professions in the Philippines. An eye consultation which last for five minutes could already cost you at least P500 for the doctor’s fees. Yet, the Bureau of Internal Revenue (BIR) has noticed that the medical profession is among the sector of professionals where tax evasion is most rampant.
Following a line of issuances to curb tax evasion in the professional sector, the BIR has issued Revenue Regulations (RR) No. 14-2013, amending pertinent provisions of Revenue Regulations No. 2-98. RR 14-2013 gives hospitals, clinics, health maintenance organizations (HMOs) and similar establishments the duty to withhold and remit taxes due on the professional fees of their respective accredited medical practitioners, which include doctors of medicine, doctors of veterinary science, dentists, medical technologists, allied health workers and other medical practitioners who are not under employer-employee relationship with the hospital, clinic of HMO and other similar establishments. The creditable withholding tax shall be 15 percent if the income payments to the medical practitioner for the current year exceed P720,000 and 10 percent, if otherwise. The withholding tax shall not apply only upon proof that no professional fee has in fact been charged by the medical practitioner and paid by his patient. This fact may be shown through submission of a sworn declaration jointly executed by the medical practitioner and the patient, or his duly authorized representative, in case the patient is a minor or otherwise incapacitated.
The regulation, which took effect on Oct. 1, 2013, also requires hospitals and clinics to submit names and addresses of medical practitioners classified as either: (i) medical practitioners whose professional fee was paid by the patients directly to the hospital or clinic; or (ii) medical practitioners who did not charge any professional fee from their patients. The list shall be submitted to the collection division of the revenue region for non-large taxpayers and to the Large Taxpayers Document Processing and Quality Assurance Division (LTDP&QAD) in the national office of Large Taxpayers District Office (LTDO) in the region for large taxpayers, where such hospital or clinic is registered, every 15th day after the end of each taxable quarter.
All hospitals and clinics shall likewise submit to the collection division of the regional office having jurisdiction over the place where the income earner is registered, or to the Large Taxpayers Collection Division for large taxpayers in Metro Manila, or to the LTDO for large taxpayers outside Metro Manila, three (3) copies of a sworn statement executed by the president/managing partner of the corporation/company as to the complete and updated list of medical practitioners accredited with them.
With the obligation to withhold also comes the duty of hospitals, clinics and HMOs to issue a Certificate of Creditable Tax Withheld at Source to medical practitioners who are subjected to withholding, every 20th day following the close of the taxable quarter or upon request of the payee.
An interesting inclusion in the regulation is the provision directing hospitals and clinics to prohibit their medical practitioners from receiving professional fees directly from in-patients. Instead, the hospital must include the professional fees in the total medical bill of the patient which shall be payable directly to the hospital. Doctors claim that this practice of requiring patients to pay directly to the hospital has long been adopted in the Philippines. As such, they are curious as to why there is a need for the said provision in the regulation. On the other hand, the BIR deems it necessary to ensure that medical practitioners will pay the right taxes.
Also noteworthy is the applicability of the regulation only to professional fees paid by patients who were admitted and confined to hospitals or clinics. Does this mean that the professional fees for outpatient services can still be billed directly to patients? If so, wouldn’t the BIR be foregoing a considerable amount of taxes by not including the professional fees for outpatient services? As the regulation does not seem to cover the entire professional fees of doctors, would the BIR be issuing another issuance addressing professional fees for outpatient services? This we cannot know for sure but considering BIR’s extensive effort to raise revenues, we can expect immediate action on any issue not sufficiently addressed by this regulation.
Ma. Arlene S. Borja is a supervisor from the tax group of Manabat Sanagustin & Co. (MS&Co.), the Philippine member firm of KPMG International.
This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.
The view and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or MS&Co. For comments or inquiries, please email manila@kpmg.com or rgmanabat@kpmg.com
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