PinoyBusiness.ORG – Home

The Philippines’ Supreme Court (SC) reversed its earlier decision and said that health care agreements of health maintenance organizations (HMOs) are exempt from documentary stamp taxes (DST).

HMOs are the companies that provide various forms of medical insurance. Their health care agreements cover prepaid medical services, including medical check-ups. What they are not are contracts are contracts involving losses and/or damages, the High court said in its 40-page resolution, and therefore they are exempted from the DST.

The recent ruling which was penned by Associate Justice Renato Corona, granted the appeal of petitioner Philippine Health Care Providers Inc. which sought the reversal of the SC’s decision on June of 2008.

In the earlier decision, Health Care Providers was ordered to pay the Bureau of Internal Revenue (BIR) more than P376 million representing DST. Said

According to the BIR ruling, 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),” said SC, citing section 185 of the National Internal Revenue Code (NIRC).

As it ruled that “Health care agreements are clearly not within the ambit of Section 185 of the NIRC and there was never any legislative to impose the same on health maintenance organizations (HMOs) like petitioner, the same should not be arbitrarily and unjustly included in its coverage.”

The SC also recognized that various courts in the United States have ruled that HMOs are not in the insurance business.

The DST charged is equivalent to 12.5 percent of the premium paid.

Imposing the DST on the HMO industry was said to lead to the industry’s death. Currently, there are thirty-six registered HMOs operating in the Philippines.