BIR orders PhilHealth to withhold doctors’ taxes

The Bureau of Internal Revenue has directed the Philippine Health Insurance Corp. to withhold income tax payments of doctors in an effort to collect more income tax from professionals.

The BIR ruled through Revenue Memorandum Circular No. 38-2011 that PhilHealth payouts on members’, covering doctor’s professional fees as well as hospital facility fees, are subject to withholding tax.

Revenue Commissioner Kim S. Henares said that under earlier BIR rulings, professional fees are subject to an expanded withholding tax of 10 percent if the gross yearly income of the professional is P720,000 or lower, or 15 percent if higher.

PhilHealth “as the [entity] having control of the payment, is required to withhold the tax … on income payment made to professionals, including medical practitioners,” Henares said.

Also, Henares said facility fees paid to hospitals and clinics are subject to a 2-percent expanded withholding tax, which PhilHealth should also administer.

Facility fees include charges for medical procedures, room and board, and medicines from the establishments’ pharmacy.

Last week, Henares said, the BIR announced its goal to improve by 20 percent its collection of income tax from individuals this year, targeting to raise P192 billion from professionals who are now wary of the drive against tax evaders.

She said collections are expected to shoot up with an increase in the tax filings and declarations of professionals like doctors and lawyers “who are now more compelled to file proper taxes.”

Henares said the BIR has been coordinating with the Professional Regulation Commission under its Run after Tax Evaders program.

Citing data from the PRC, she said there are some three million professionals in the country including nurses, doctors, lawyers, engineers and seamen. Those with higher incomes such as doctors and lawyers number around 190,000, Henares added.

The BIR chief said individual income taxes accounted for about 32 percent of the BIR’s collection of taxes on net income and profits.

However, bulk of the individual income tax payments comes from individuals earning compensation income whose tax payments are withheld by their employers, instead of professionals who generally earn more than employees.