Health care agreements exempt from documentary stamp tax

Health care agreements of health maintenance organizations (HMOs) – companies that provide various forms of medical insurance – are exempt from documentary stamp taxes (DST), the Philippines’ Supreme Court said, reversing its earlier decision. Health care agreements cover prepaid medical services – including medical check-ups – and are not contracts involving losses and/or damages, the High Court said in a 40-page resolution. As such, these are exempted from the DST. This recent decision – penned by Associate Justice Renato Corona – granted the appeal of petitioner Philippine Health Care Providers Inc. which sought the reversal of the High Court’s June 2008 decision. The earlier decision ordered the petitioner to pay the Bureau of Internal Revenue (BIR) more than P376 million representing DST, including surcharges and interest for the years 1996 and 1997. The DST is imposed on “all policies of insurance or bonds or obligations of the nature of indemnity for loss, damage, or liability made or renewed by any person, association or company, or corporation, (except life, marine, inland and fire insurance)," the High Court said, citing section 185 of the National Internal Revenue Code. “Health care agreements are clearly not within the ambit of Section 185 of the NIRC and there was never any legislative intent to impose the same on health maintenance organizations (HMOs) like petitioner, the same should not be arbitrarily and unjustly included in its coverage," the Court ruled. Under the same provision, the DST charged is equivalent to 12.5 percent of the premium paid. Moreover, imposing the DST on the HMO industry would lead to the industry’s death. Thirty-six registered HMOs operate in the Philippines. The court also recognized that various United States courts have ruled that HMOs are not in the insurance business. - GMANews.TV