Digest of Philippine Health Care Providers vs. CIR

Philippine Health Care Providers, Inc. v. Commissioner of Internal Revenue G.R. 167330 (September 18, 2009) Corona, J.: Facts: On January 27, 2000, the respondent CIR sent petitioner assessment of deficiency taxes, both Value-Added Tax (VAT) and documentary stamp tax (DST) in the total amount of P224,702,641.18 for taxable years 1996 and 1997. Petitioner protested such assessment in a letter, but the respondent did not act on the protest which led the petitioner to file a petition in the Court of Tax Appeals (CTA) seeking the cancellation of said assessments. CTA partially granted the petition wherein the petitioner is ordered to pay the deficiency VAT and set aside the DST deficiency tax. Respondent appealed in Court of Appeals (CA) with regard to the cancellation of DST assessment. CA granted the petition. The Court affirmed CA’s decision. Hence, petitioner filed a motion for reconsideration.

Issue: Whether or not the petitioner is liable to pay the DST on its health care agreement pursuant to Sec.185 of the National Internal Revenue Code of 1997

Held: Petition granted. Petitioner is not contemplated to be included in “or other branch insurance” covered by Section 185 of NIRC because it is a Health Maintenance Organization (HMO) and not an insurance company. HMOs primary purpose is rendering service to its member by lowering prices and reducing the cost rather than the risk of medical health. On the other hand, insurance businesses undertakes for a consideration to indemnify its clients against loss, damage or liability arising from unknown or contingent event. The term “indemnify” therein presuppose that a liability or claim has already been incurred. In HMOs, there is no indemnity precisely because the member merely avails of medical services to be paid or already paid in advance at a pre-agreed price under the agreements. Moreover, HMOs play an important role in society as partners of the State in achieving its constitutional mandate of providing citizens with affordable health services. Also, the DST assessment of the petitioner for the years 1996 and 1997 became moot and academic since it availed tax amnesty under RA 9480 on December 10, 2007. Thus, petitioner is entitled to immunity from payment of taxes for taxable year 2005 and prior years.