BIR threshes out tax on health card premiums
Mary Grace Padin (The Philippine Star) - November 28, 2018 - 12:00am

MANILA, Philippines — The Bureau of Internal Revenue (BIR) is set to issue a new circular to clarify its legal interpretation pertaining to the taxability of premiums paid by employers for their employees’ health cards, according to the Department of Finance (DOF).

In a text message, Finance Assistant Secretary Antonio Lambino said the BIR is reviewing Revenue Memorandum Circular 50-2018, which states that health card premiums are included in the computation of the P90,000 tax-free privilege on employee benefits and bonuses.

Lambino clarified that such tax treatment on premiums charged by health maintenance associations is not part of the Tax Reform for Acceleration and Inclusion (TRAIN) Act.

“This is not a provision of the TRAIN. BIR is studying the issue and I understand a circular will be issued to clarify the matter,” Lambino told The STAR.

He said the item involving the tax treatment of health cards would be retracted in the meantime while the BIR reviews the matter.

“The forthcoming RMC is to revert to the previous interpretation while BIR is thoroughly studying the matter,” Lambino said.

“Question 7 in RMC 50 will be deleted and reviewed. Not just this specific issuance but previous legal opinions as well,” he said.

In a separate interview, BIR Deputy Commissioner Maria Cabreros said the circular clarifying the matter is expected to come out within the week.

The official, however, declined to provide more details on the content of the forthcoming issuance.

RMC 50-2018 was issued last May 11 to clarify certain provisions of Revenue Regulations 8-2018 and 11-2018. The RRs were issued to implement the TRAIN Law’s income tax provisions including withholding tax.

Item No. 7 of the RMC provides that “premium on health card paid by the employer for all employees, whether rank and file or managerial/supervisory, under a group insurance shall be included as part of other benefits of these employees which are subject to the P90,000 threshold.”

The P90,000 threshold refers to the tax-free limit for employee benefits and bonuses as provided under the TRAIN Law.

Senator Eduardo Angara, however, called on the BIR to withdraw the RMC as it reverses previous BIR regulations which state that premium on health cards are tax-free.

The senator said 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 0963 or the TRAIN Law.

Angara said instead of clarifying revenue regulations, the circular instead created a confusion as to the proper treatment of the premiums on health cards.

He said it is crucial for the BIR to clear up the regulation as employers are set to release the 13th month pay and Christmas bonuses of their employees in the coming weeks.

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