Obligations of Hopitals, Clinics, HMOs to Withhold Taxes from Medical Practitioners

Medicine is one of the professions where Bureau of Internal Revenue (BIR) look at when it comes to tax non-compliance.  We are not saying that doctors and other medical practitioners are not paying the right taxes but, it was just observed in the past and even today that there were transactions which are off-books.


Issuance of the Revenue Regulations No. 14-2013

It could be observed that sometimes, when you visit your doctor for a consultation, you pay and you are not issued with a receipt.  And if sometime you were issued with, it is not a valid receipt.  That is where questions on compliance kicks in and might be one of the reasons why BIR issued Revenue Regulations No. 14-2013.

Reading Revenue Regulations No. 14-2013, it may seem like BIR wants to reiterate the obligation of hospitals, HMOs and other similar establishments on withholding taxes of medical practitioners who are not under an employer-employee relationship with the hospital, clinic or HMO and other similar establishments.

Under RR No. 14-2013, any amount collected for and paid to medical practitioners (includes doctors of medicine, doctors of veterinary science and dentists) by hospitals and clinics or paid directly to the medical practitioners by health maintenance organizations (HMOs) and/or similar establishments shall be subjected to:

  • 15% withholding tax if the current year income payments to medical practitioner exceeds P720,000
  • 10% if it doesn’t exceed P720,000

Duties of Hospitals, HMOs and Other Similar Establishments

Following are the duties of hospitals, clinics, HMOs and similar establishments:

  • withhold and remit taxes due on the professional fees of their respective accredited medical practitioners, paid by patients who were admitted and confined to such hospitals and clinics
  • ensure that correct taxes due on the professional fees of their medical practitioners have been withheld and timely remitted to the BIR
  • shall not allow their medical practitioners to receive payment of professional fees directly from patients
  • shall submit the names and addresses of medical practitioners in the following classifications, every 15th day after the end of each calendar quarter:
    • Medical practitioners whose professional fee was paid by the patients directly to the hospital or clinic
    • Medical practitioners who did not charge any professional fee from their patients
  • shall submit to the BIR (Collection Division of the Regional Office having jurisdiction over the place where the income earner is registered/Large Taxpayers Collection Division for large taxpayers in Metro Manila/LTDO for large taxpayers outside Metro Manila), in three (3) copies [two (2) copies for the BIR and one (1) copy for the taxpayer], a sworn statement executed by the president/managing partner of the corporation/company as to the complete and updated list of medical practitioners accredited with them.

Tax Forms to be Used

The taxes withheld from a medical practitioner of 10% or 15%, depending on the above conditions, are creditable.  This means that the withholding taxes can be claimed as tax credit against the practitioner’s tax liability for a given period.

The hospital, clinics, HMO and other similar shall issue Certificate of Creditable Tax Withheld at Source (BIR Form No. 2307) to medical practitioners who are subjected to withholding, every 20th day following the close of the taxable quarter or upon request of the payee.

The list of all income recipients-payees shall be included in the Alphalist of Payees Subject to Expanded Withholding Tax attached to BIR Form No. 1604-E (Annual Information Return of Creditable Income Taxes Withheld (Expanded)/Income Payments Exempt from Withholding Tax).

The BIR seems serious with running against tax evaders.  This year alone, news about cases filed against professionals, business people and entities mushroomed the media.  It is then better for all of us to do the right thing than to suffer the consequences later.  To be safe, always remember to consult your accountants and auditors to ensure that you are compliant with all the tax requirements.

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Disclaimer: Opinions expressed in this article are that of the author and information provided are for general conceptual guidance for public information and are not substitute for expert advice. Contact support@philcpa.org for more information and if you want to avail professional services. Find us on Facebook!

Orlando Calundan is a CPA who has exposures in FS audit of entities in various industries such as real estate, food/restaurants, manufacturing, service organizations and BPOs, automotive, holding/investment companies and more. He also has exposure on internal audit engagements.

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