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    CIR v. Phil Healthcare Providers

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    Michaella Reyes
    The CIR assessed a deficiency VAT against Philippine Health Care Providers, Inc. for tax years 1996 and 1997. PHCP protested, arguing it was exempt under an earlier VAT ruling. The CTA partially agreed, cancelling the DST assessment but ordering PHCP to pay a portion of the deficiency VAT. The CA and later motions affirmed this outcome. The Supreme Court also ruled PHCP was exempt under the earlier ruling due to acting in good faith, as the term "health maintenance organization" was unknown when the ruling was issued. Therefore, VAT Ruling No. 231-88 exempting PHCP from VAT had retroactive application.

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    CIR v. Phil Healthcare Providers

    Uploaded by

    Michaella Reyes
    62 views2 pages
    The CIR assessed a deficiency VAT against Philippine Health Care Providers, Inc. for tax years 1996 and 1997. PHCP protested, arguing it was exempt under an earlier VAT ruling. The CTA partially agreed, cancelling the DST assessment but ordering PHCP to pay a portion of the deficiency VAT. The CA and later motions affirmed this outcome. The Supreme Court also ruled PHCP was exempt under the earlier ruling due to acting in good faith, as the term "health maintenance organization" was unknown when the ruling was issued. Therefore, VAT Ruling No. 231-88 exempting PHCP from VAT had retroactive application.

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    The CIR assessed a deficiency VAT against Philippine Health Care Providers, Inc. for tax years 1996 and 1997. PHCP protested, arguing it was exempt under an earlier VAT ruling. The CTA partially agreed, cancelling the DST assessment but ordering PHCP to pay a portion of the deficiency VAT. The CA and later motions affirmed this outcome. The Supreme Court also ruled PHCP was exempt under the earlier ruling due to acting in good faith, as the term "health maintenance organization" was unknown when the ruling was issued. Therefore, VAT Ruling No. 231-88 exempting PHCP from VAT had retroactive application.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    62 views2 pages

    CIR v. Phil Healthcare Providers

    Uploaded by

    Michaella Reyes
    The CIR assessed a deficiency VAT against Philippine Health Care Providers, Inc. for tax years 1996 and 1997. PHCP protested, arguing it was exempt under an earlier VAT ruling. The CTA partially agreed, cancelling the DST assessment but ordering PHCP to pay a portion of the deficiency VAT. The CA and later motions affirmed this outcome. The Supreme Court also ruled PHCP was exempt under the earlier ruling due to acting in good faith, as the term "health maintenance organization" was unknown when the ruling was issued. Therefore, VAT Ruling No. 231-88 exempting PHCP from VAT had retroactive application.

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    of 2

    COMMISSION OF INTERNAL REVENUE v.

    PHILIPPINE HEALTH CARE


    PROVIDERS, INC

    FACTS:

    On July 25, 1987, EO No. 273 was issued amending the National Internal Revenue Code of 1977
    (Presidential Decree No. 1158) by imposing Value-Added Tax (VAT) on the sale of goods and
    services that took effect Jan 1, 1988. Before effectivity of aforementioned E.O., respondent wrote
    the CIR, petitioner, inquiring whether the services it provides in its healthcare program are
    exempt from the payment of the VAT. On June 8, 1988, petitioner through the VAT Review
    Committee, issued VAT Ruling No. 231-88 stating that respondent, as a provider of medical
    service, is exempt from VAT coverage which was also subsequently confirmed by Regional
    Director Osmundo G. Umali in a letter dated April 22, 1994.

    Meanwhile, on January 1, 1996, Republic Act (R.A.) No. 7716 (Expanded VAT or E- VAT Law) took
    effect, amending further the National Internal Revenue Code of 1977. Then on January 1, 1998,
    R.A. No. 8424 (National Internal Revenue Code of 1997) became effective. This new Tax Code
    substantially adopted and reproduced the provisions of E.O. No. 273 on VAT and R.A. No. 7716
    on E-VAT. Then on Oct 1, 1999, BIR sent respondent a Preliminary Assessment Notice for
    deficiency in its payment of VAT, for taxable years 1996 and 1997. On Oct 20, 1999 respondent
    filed a protest with the BIR.

    On January 27, 2000, petitioner CIR sent respondent a letter demanding payment of "deficiency
    VAT" in the total amount P224,702,641.18 for taxable years 1996 and 1997. On which the
    respondent filed another protest questioning the assessment notices.

    However, petitioner did not take any action on respondent’s protests. Hence, respondent filed
    with the Court of Tax Appeals a petition for review. CTA rendered its decision, which states;

    WHEREFORE, in view of the foregoing, the instant Petition for Review is PARTIALLY
    GRANTED. Petitioner is hereby ORDERED TO PAY the deficiency VAT amounting to
    P22,054,831.75 inclusive of 25% surcharge plus 20% interest from January 20, 1997 until
    fully paid for the 1996 VAT deficiency and P31,094,163.87 inclusive of 25% surcharge plus
    20% interest from January 20, 1998 until paid for the 1997 VAT deficiency. Accordingly,
    VAT Ruling No. 231-88 is declared void and without force and effect. The 1996 and 1997
    deficiency DST assessment against petitioner is hereby CANCELLED AND SET ASIDE.
    Respondent is ORDERED to DESIST from collecting the said DST deficiency tax.
    SO ORDERED.

    Petitioner seasonably files with the court of appeals a petition for review which CA affirmed the
    CTA resolution. Petitioner then filed a motion for reconsideration, but was denied by the
    appellate court.
    ISSUE/S:

    Whether or not respondent’s services are subject to VAT

    Whether or not VAT Ruling No. 231-88 exempting respondent from payment of VAT has
    retroactive application.

    RULING/S:

    Section 103 of the Tax Code exempts taxpayers engaged in the performance of medical, dental,
    hospital, and veterinary services from VAT. In respondent’s letter requesting of its VAT-exempt
    status, it was held that it showed respondent provides medical service only between their
    members and their accredited hospitals, that it only provides for the provision of pre-need health
    care services, it contracts the services of medical practitioners and establishments for their
    members in the delivery of health services.

    The Court held that respondent Philhealth care providers, Inc. acted in good faith. The term
    health maintenance organization was first recorded in the Philippine statute books in 1995. It is
    apparent that when VAT Ruling No. 231-88 was issued in respondent’s favor, the term health
    maintenance organization was unknown and had no significance for taxation
    purposes. Therefore, believed in good faith that it was VAT exempt for the taxable years 1996
    and 1997 on the basis of VAT Ruling No. 231-88.

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