Revenue Regulations (RR) No. 14-2013 (RR No. 14-2013) dated September 20, 2013 was issued to further amend the provisions of RR 2-1998, as last amended by Revenue Regulations No. 30-2003 and Revenue Regulations No. 17-2003, relative to the application of the following expanded withholding tax on professional fees of medical practitioners or doctors in the Philippines:
Medical practitioners or doctors refers to those accredited by the hospitals, clinics, and health maintenance organizations (HMOs) as independent parties practicing their medical profession and not under employer-employee of the hospital, clinic, HMO or similar establishment. As such, they are subject to expanded withholding tax in the Philippines and not to withholding tax on compensation. Notably, RR No. 14-2013 provides for the following rules:
Responsibility of hospitals, clinics, HMOs and others to withhold
It shall be the duty and responsibility of the hospitals, clinics, HMOs and similar establishments to 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. They must ensure that correct taxes due on professional fees of doctors have been withheld and timely remitted to the Bureau of Internal Revenue (BIR) using BIR Form No. 1601-E on a monthly basis.
Direct payment of patients not allowed
Hospitals and clinics shall not allow their medical practitioners to receive payment of professional fees from patients who were admitted and confined to such hospital and clinics. Rather, the fees must be included in the total billings to the patient of the practitioner which shall be payable directly to the hospital or clinic. This is imposed as a control to ensure that payments of patients for professional fees of doctors will be subjected to withholding tax.
Joint Affidavit if no professional fees collected
If the doctor did not charge professional fees, there should be no withholding tax. To establish such fact for tax purposes, the doctor who did not charge professional fee and the patient or his authorized representative, must jointly execute a sworn declaration (Annex “A” in RR 14-2013. If the medical practitioner fails or refuses to execute a sworn statement, the hospital or clinic shall inform the Revenue District Office of the fact within ten (10) days from such incident.
Quarterly Report of hospitals and clinics
Hospitals and clinics shall submit the list of names and addresses of medical practitioners in prescribed format of the BIR every 15th day after the end of calendar quarter with the following details:
The list in prescribed BIR format shall be submitted to the BIR – Collection Division of the Revenue Region for non-large taxpayer, or for large taxpayers, to Large Taxpayer Document Processing and Quality Assurance Division (LTDP & QAD) or to the Large Taxpayers District Office of registration. Failure to submit is subject to penalties.
Updated List of Accredited Doctors
All hospitals and clinics shall submit a sworn statement executed by the the president of the corporation or managing partner of the company with the complete and updated list of medical practitioners accredited with them in three (3) copies (2 copies for BIR and 1 copy for the hospital or clinic).
BIR Forms and Submissions
Based on the above obligations under RR No. 14-2013, the following list of BIR forms and submissions of hospitals, clinics, HMOs and similar establishments could be summed-up and enumerated:
It should be noted that a penalty is imposed for each failure to file the above form and submissions.
This regulation shall be effective on October 1, 2013 and hospital, clinics, HMOs and similar establishments are advised to coordinate with the BIR office of registration for the corresponding compliance.
RR No. 14-2013 is a new measure of the BIR to ensure tax compliance on the medical field by imposing more obligations on the part of hospitals, clinics, HMOs and similar establishments dealing with the medical practitioners. Such reports are intended for a more transparency on the amounts of professional fees paid to doctors and medical practitioners to encourage them to report such income and pay the corresponding taxes due thereon. As such, we would highly recommend that hospitals, clinics, HMOs and similar establishments to comply with the above, and for the doctors and medical practitioners to also abide by the tax rules. It should be bear in mind the each failure is subject to penalty that may cost a fortune through times, or worst the professional career.
Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. For comments, you may please send mail at email@example.com, or you may post a question at Tax and Accounting Center Forum and participate therein.
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