Medical insurance premiums likely to go up

MANILA, Philippines - Expect an increase in the premiums you pay for the medical insurance offered by your health maintenance organizations or HMOs.

This as the Bureau of Internal Revenue (BIR), will now be going after HMOs operating in the country to make sure that they are paying the right amount of taxes.

BIR Commissioner Joel Tan-Torres said a large number of HMOs continue not to comply with the BIR rules by computing their value-added tax (VAT) obligations incorrectly.

Tan-Torres said the taxable base of HMOs for VAT purposes should be based on gross receipts. The gross receipts should be less the deductions for medical utilization like medical, dental, laboratory, professionals and hospital bills.

“Gross receipts” is the total amount of money representing the service fee actually received during the taxable period for the services performed or to be performed for another person, excluding the VAT.

At present, the BIR chief said, most HMOs do not comply with the gross receipts rule and just compute their tax base the way they want.

As such, the BIR issued Revenue Memorandum Circular 39-2010 on May 21, confirming the agency’s position on gross receipts.

Accordingly, Tan-Torres has instructed all Revenue District Offices (RDOs) to monitor closely the monthly and quarterly VAT returns beginning June 30, 2010 to Dec. 31, 2010 of all HMOs under their jurisdiction to ensure that they are computing their tax obligations based on gross receipts.

The BIR chief gave the district chiefs the go-signal to conduct verification of the monthly and quarterly VAT returns without the need to issue Letters of Authority or Tax Verification Notices.

However, Tan-Torres said the RDOs are allowed only to issue “Reminder Notices” if it has been ascertained that the HMOs are not complying with the rule of paying the VAT based on gross receipts.

“We are advising all HMOs who have not complied correctly with the VAT computation to amend their previously filed tax returns immediately to avoid harsh penalties and even tax fraud prosecution,” the BIR chief said.

Tan-Torres said all HMOs should now factor this VAT computation on their products so that they will not have to shoulder the burden.