BIR withdraws tax on health card premiums

MANILA, Philippines — Just as employees start to get their 13th month pay and bonuses, the Bureau of Internal Revenue (BIR) has withdrawn a provision from Revenue Memorandum Circular 50-2018 which taxed group health insurance premiums.

Internal Revenue commissioner Caesar Dulay has issued RMC 96-2018 to amend RMC 50 and delete from the previous circular Item 7, which stated that premiums paid by employers for health cards should be part of the computation of the P90,000 tax-free privilege on employee benefits and bonuses.

The new circular also deleted Item 34 of the previous issuance, which involve the withholding tax imposed on director’s fees.

According to Dulay, there is a need to review and delete the items as they were not part of the Tax Reform for Acceleration and Inclusion (TRAIN) Act. To note, RMC 50 was originally issued to clarify concerns on the income tax provisions of the said law.

 “In the implementation of the subject law (TRAIN), RMC No. 50 -2018 was issued to address the frequently asked questions during the various briefings held relative to the said law. There were, however, further queries which were often raised but which were not part of the TRAIN Law,” Dulay said.

“Thus, there is a need to go over those questions/answers from the same RMC since it was issued specifically to clarify the provisions of the TRAIN Law and its subsequent implementing rules and regulations.”

“In view of the foregoing, the implementation of the pertinent provisions under RMC 50-2018 relative to the group health insurance premiums and director’s fees, which were not affected by the provisions of the TRAIN Law, are hereby deleted from RMC 50-2018,” he said.

RMC 50-2018    was issued last May 11 to answer inquiries about Revenue Regulations 8-2018 and 11-2018, which were released to implement the TRAIN law’s income tax provisions including withholding tax.

Item number 7 of the RMC provided that “premium on health card paid by the employer for all employees, whether rank and file or managerial/supervisory, under a group insurance should be included as part of other benefits of these employees which are subject to the P90,000 threshold.”

Under the TRAIN Law, employees’ 13th month pay and other bonuses amounting to P90,000 and below should be tax free.

Item 34, meanwhile, explained the tax treatment for director fees.

Due to the confusion it generated on the tax treatment of health insurance premiums, RMC 50 received backlash from lawmakers and labor groups.

Sen. Eduardo Angara earlier said the MRC reversed previous BIR regulations which state that premium on health cards are tax-free.

The senator stressed that health premiums should not be included in the computation of taxable bonuses and benefits. He added that imposition of tax on HMO premiums is not in any way mentioned in Republic Act 10963 or the TRAIN Law.