Tax Exemption of Phil. Health Insurance Corp.

May 5, 1999 BIR RULING NO. 062-99 R.A. 7875-000-00-062-99 Philippine Health Insurance Corporation 8th Floor Philippine Heart Center Bldg. East Avenue, Diliman, Quezon City Attention: Enrique M . Zalamea, Jr . President and CEO Gentlemen : This refers to your letters dated May 25, 1998 and September 29, 1998 which was referred to this Office by the Office by Regional Director of Revenue Region No. 7, Quezon City, requesting for a certification to the effect that the Philippine Health Insurance Corporation (PHIC) is a tax-exempt entity under Section 15 of Republic Act No. 7875, otherwise known as the "National Health Insurance Act of 1995" which provides, viz: "SEC. 15. Exemption from Taxes and Duties . The corporation shall be exempt from the payment of taxes on all contributions thereto and all accruals on its income or investments earnings. Any donation, contribution, bequest, subsidy or financial aid which may be made to the Corporation shall constitute as allowable deduction from the income of the donor for income tax purposes and shall be exempt from donor's tax, subject to such conditions as provided for in the National Internal Revenue Code, as amended (now Tax Code of 1997)." In reply thereto, please be informed that pursuant to Section 27(C) of the Tax Code of 1997, PHIC is one of the government owned or controlled corporations, agencies or instrumentalities that is exempt from the payment of corporate income tax. LLphil Moreover, pursuant to Section 15 of R.A. 7875, donations in favor of the PHIC are exempt from the payment of the donor's tax imposed under Section 99(A) of the tax Code of 1997. Furthermore under Section 101(A)(2) and (B)(1) of the Tax Code of 1997, gifts made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit or to any political subdivision of the said Government by a resident and non-resident shall be exempt from donor's tax. On the other hand, under Section 34(H)(2)(a) of the Tax Code of 1997, viz: "(2) Contributions deductible in Full . Notwithstanding the provisions of the preceding subparagraph, donations to the following institutions or entities shall be deductible in full: "(a) Donations to the Government . Donations to the government of the Philippines or to any of its agencies or political subdivisions, including fully-owned government, corporations , exclusively to finance, to provide for, or to be used in undertaking priority activities in education, health , youth and sports development, human settlements, science and culture, and in economic development according to a National Priority Plan determined by the National Economic and Development Authority (NEDA) , in consultation with appropriate government agencies, including its regional development councils and private philanthropic persons and institutions: Provided, That any donation which is made to the Government or to any of its agencies or political subdivisions not in accordance with the said priority plan shall be subject to the limitations prescribed in paragraph (1) of this subsection." In relation to this, Section 34(H)(I) of the Tax Code of 1997, provides: "Contributions or gifts actually paid or made within the taxable year to, or for the use of the Government of the Philippines or any of its agencies or any political subdivision thereof exclusively for public purposes, or to accredited domestic corporations or associations organized and operated exclusively for religious, charitable, scientific, youth and sports development, cultural or educational purposes or for the rehabilitation of veterans, or to social welfare institutions, or to non-government organizations, in accordance with rules and regulations promulgated by the Secretary of Finance, upon recommendation of the Commissioner, no part of the net income of which inures to the benefit of any private stockholder or individual in an amount not in excess of ten percent (10%) in the case of an individual, and five percent (5%) in the case of a corporation, of the taxpayer's taxable income derived from trade, business or professional as computed without the benefit of this and the following subparagraph. In view thereof, this Office is of the opinion that PHIC is exempt from the payment of income tax, and that all donations, contributions, bequest, subsidy or financial aid which may be made to it shall be exempt from donor's tax and shall be allowable as deduction from the gross income of the donor for income tax purposes subject to the conditions set forth under the aforequoted provisions of the Tax Code. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue