BIR Ruling No. 214-11

July 5, 2011 BIR RULING NO. 214-11 Sec. 109 (G); 00-000 Truecare Medical Corporation Unit 18, Marikina East Centre Building 83 Gil Fernando Avenue, San Roque Marikina City Attention: Dr. Carlos C. Sandico IV President Gentlemen : This refers to your letter dated November 26, 2010 stating that Truecare Medical Corporation (TMC) is a corporation organized and existing under the laws of the Philippines and is duly registered with the Securities and Exchange Commission (SEC) under SEC Registration No. CS200509315 with TIN 238-896-936-000. It is primarily organized "To engage in and operate the business of facilitating and assisting in providing health care, medical needs and other allied medical services to individuals, such as providing for doctors, nurses, medical practitioners and professions, the buying and selling of pharmaceutical products, health foods and other goods and items incidental thereto or connected therewith, and to do and perform any and all acts and things necessary, proper or convenient for and incidental to the furtherance and/or implementation of the purposes therein mentioned." In the aforesaid letter, you posit that TMC provides doctors, nurses, medical practitioners, professionals, hospitals, laboratory services and medicines which TMC purchased locally to said retirees. The cost and mark-up of medicine and medical services are being billed to Tricare Overseas Program (TOPP), a US based institution providing health care insurance benefits to all US military retirees and active duty personnel. TMC received payments from TOPP through checks, mostly in US dollar denomination. TMC has no other patients other than US retirees and their dependents. TMC is licensed by the City of Marikina to operate as a medical clinic, providing for medical services under Permit No. 12769 dated May 31, 2010. Based on the foregoing representations, you now request for ruling that the above services rendered by TMC is exempt from the coverage of the value-added tax (VAT) in accordance with Section 109 (G) of the Tax Code of 1997. In reply thereto, please be informed that under Section 109 (G) of the Tax Code of 1997, as implemented by Revenue Regulations No. 16-2005, provides that medical, dental, hospital and veterinary services except those rendered by professionals, are exempt from the imposition of the value-added tax. aIcHSC However, based on the representations of TMC, it operates as a pharmacy or drug store and likewise acts as a conduit between the patients and its medical practitioners. Thus, if TMC operates as a pharmacy or drug store, the sale of drugs and medicine is subject to VAT pursuant to Section 4.109-1 (g) of Revenue Regulations No. 16-2005. On the other hand, in Commissioner of Internal Revenue vs. Philippine Health Care Provides, Inc., G.R. No. 168129 dated April 24, 2007, the Supreme Court ruled that the business activity of Philippine Health Care Providers, Inc. is not actually rendering medical service but merely acting as a conduit between the members and their accredited and recognized hospitals and clinics. It merely provides and arranges for the provision of pre-need health care services to its members for a fixed prepaid fee for a specified period of time. Accordingly, Philippine Health Care Providers, Inc. does not actually provide medical and/or hospital services, but merely arranges for the same, its services are not VAT-exempt. SUCH BEING THE CASE, this Office in applying above-cited jurisprudence holds that the service rendered by TMC is not actually rendering medical service but merely acting as a conduit and its services are NOT VAT-EXEMPT. 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.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue