BIR Ruling [DA-044-05]

January 28, 2005 BIR RULING [DA-044-05] SEC. 30 (e) Philippine Long Distance Telephone Company 15/F Ramon Cojuangco Bldg. Makati Avenue, Makati City Attention: Ma. Criselda B. Guhit Coordinator Tax Management Section Gentlemen : This refers to your letter received by this Office on January 5, 2004, requesting a confirmation of your opinion that your payment for hospital services to Iloilo Mission Hospital (IMH), a non-stock, non-profit corporation, is subject to the 2% withholding tax. It is represented that IMH is a non-stock, non-profit corporation duly registered with the Securities and Exchange Commission; that the purposes for which it is formed are as follows: to function as a hospital, maintain hospital service, give comfort to the sick, lift up the spirit of patients who enter into its confines toward kinship with the Great Healer; cooperate with medical doctors toward the cure and healing of patients; render a service cure and healing of patients; render a service and medical care in connection with the works and ideals of the Convention of Philippine Baptist Churches, Inc ., always with the aim of rendering the highest form of medical service in accordance with accepted medical standards; provided that purely medical or surgical services shall be rendered by duly qualified physicians and surgeons; and that patients shall be forced to contract the services of doctors who may or may not be connected with the hospital; that your company have been withholding the 2% EWT from your payments of hospital services but IMH objected on the ground that they have been granted by this Bureau a Certificate of Tax Exemption on July 8, 1981 pursuant to then Section 27 (e) of the National Internal Revenue Code, now Section 30 (e) of the Tax Code of 1997. In reply, please be informed that your opinion is hereby confirmed. Section 30, the last paragraph thereof, provides that notwithstanding the provisions in the preceding paragraphs, the income of whatever kind and character of the foregoing organizations from any of their properties, real or personal, or from any of their activities conducted for profit regardless of the disposition made of such income, shall be subject to tax imposed under the Code. DECcAS Accordingly, inasmuch as you are a paying client to IMH your payment for their hospital services constitute taxable income as their activities in accommodating your company as one of their clients could be perceived as one conducted for profit. Thus, the withholding tax of 2% on services is tenable. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different then this ruling shall be considered null and void. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group