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Philippine Health Care Providers, Inc.: Commissioner of Internal Revenue

1) The petitioner Philippine Health Care Providers, Inc. provides medical services to individuals through health care agreements. The CIR demanded payment of deficiency taxes for 1996-1997 totaling P224,702,641.18. 2) The CTA cancelled the DST assessment but ordered payment of VAT deficiency. The CIR appealed, arguing the health care agreement was subject to DST as a non-life insurance contract. The CA agreed but the SC ruled it was not insurance subject to DST. 3) The SC granted reconsideration, reversed the CA decision, and cancelled the 1996-1997 DST assessment. It found health care agreements were not subject to DST under Section 185 of the Tax Code.

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20 views17 pages

Philippine Health Care Providers, Inc.: Commissioner of Internal Revenue

1) The petitioner Philippine Health Care Providers, Inc. provides medical services to individuals through health care agreements. The CIR demanded payment of deficiency taxes for 1996-1997 totaling P224,702,641.18. 2) The CTA cancelled the DST assessment but ordered payment of VAT deficiency. The CIR appealed, arguing the health care agreement was subject to DST as a non-life insurance contract. The CA agreed but the SC ruled it was not insurance subject to DST. 3) The SC granted reconsideration, reversed the CA decision, and cancelled the 1996-1997 DST assessment. It found health care agreements were not subject to DST under Section 185 of the Tax Code.

Uploaded by

Patricia Ann Nicole Reyes
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as ZIP, PDF, TXT or read online on Scribd
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Philippine Health

Care Providers, Inc.


vs.
Commissioner of
Internal Revenue
G.R. No. 167330, September 18, 2009
600 SCRA 413
Petitioner Philippine Health Care Providers, Inc. is a
domestic corporation engaged in providing the medical
services enumerated below to individuals who enter into
health care agreements with it:

Preventive medical services,
On January 27, 2000, respondent Commissioner of
Internal Revenue (CIR) sent petitioner a formal demand
letter and the corresponding assessment notices
demanding the payment of deficiency taxes, including
surcharges and interest, for the taxable years 1996 and
1997 in the total amount of P224,702,641.18.
Petitioner protested the assessment in a letter dated February
23, 2000. As respondent did not act on the protest, petitioner
filed a petition for review in the Court of Tax Appeals (CTA)
seeking the cancellation of the deficiency VAT and DST
assessments.
CTA’s decision: Cancelled the DST assessment. Ordered the payment
of VAT deficiency.

CIR appealed the decision to the CA contending that petitioner’s health


care agreement was a contract of insurance subject to DST under
Section 185 of the 1997 Tax Code.

CA’s decision
SC’s decision:on
The healthfor
Petition care agreement
Review: wason
Denied inthe
the ground
nature of a non-
that
life insurance
petitioner’s contract
health caresubject to DST.
agreement during the pertinent period was in
the nature of non-life insurance which is a contract of indemnity
ruling:

1. No, health maintenance organizations are not engaged in the insurance


business. Under RA 7875 (or “The National Health Insurance Act of
1995”), an HMO is an entity that provides, offers or arranges for
coverage of designated health services needed by plan members for a
fixed prepaid premium. To determine whether an HMO is an insurance
business or not, one test – principal object and purpose test – may be
applied, that is to determine whether the assumption of risk and
indemnification of loss (which are elements of an insurance business) are
the principal object and purpose of the organization or whether they are
merely incidental to its business.
ruling:

2. No, health care agreements are not subject to DST.


From the language of Section 185, it is evident that
two requisites must concur before the DST can apply,
namely: (1) the document must be a policy of
insurance or an obligation in the nature of indemnity
and (2) the maker should be transacting the business
of accident, fidelity, employer’s liability, plate, glass,
steam boiler, burglar, elevator, automatic sprinkler, or
other branch of insurance (except life, marine, inland,
and fire insurance).
WHEREFORE, the motion for reconsideration is GRANTED. The August
16, 2004 decision of the Court of Appeals in CA-G.R. SP
No. 70479 is REVERSED and SET ASIDE. The 1996 and 1997 deficiency
DST assessment against petitioner is hereby CANCELLED and SET
ASIDE. Respondent is ordered to desist from collecting the said tax.
notes:

• Even if a contract contains all the elements of an insurance contract, if its primary purpose is the
rendering of service, it is not a contract of insurance.

• Distinctions between a minute resolution and a decisionThe constitutional requirement under the
first paragraph of Section 14, Article VIII of the Constitution that the facts and the law on which the
judgment is based must be expressed clearly and distinctly applies only to decisions, not to minute
resolutions. A minute resolution is signed only by the clerk of court by authority of the justices, unlike
a decision. It does not require the certification of the Chief Justice. Moreover, unlike decisions, minute
resolutions are not published in the Philippine Reports. Finally, the proviso of Section 4(3) of Article
VIII speaks of a decision. Indeed, as a rule, this Court lays down doctrines or principles of law which
constitute binding precedent in a decision duly signed by the members of the Court and certified by
Related Jurisprudence:

In Blue Cross and Philamcare, the Court


pronounced that a health care agreement is in the
nature of non-life insurance, which is primarily a
contract of indemnity. However, those cases did not
involve the interpretation of a tax provision.
Instead, they dealt with the liability of a health
service provider to a member under the terms of
The Power To Tax Is Not The
Power To Destroy
As a general rule, the power to tax is an incident of sovereignty and is
unlimited in its range, acknowledging in its very nature no limits, so
that security against its abuse is to be found only in the responsibility
of the legislature which imposes the tax on the constituency who is to
pay it. So potent indeed is the power that it was once opined that "the
power to tax involves the power to destroy.

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