revenue_memorandum_circular RMC No. 21-2005RMC No. 21-2005 2005-05-30

RMC No. 21-2005 — Circularizes the guidelines and policies for sourcing, pooling and distribution of Philhealth “Common Fund” in Department of Health (DOH) Hospitals and other Government Clinics and Hospitals Digest | Full Text

REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE May 3, 2005 REVENUE MEMORANDUM CIRCULAR NO. 21-2005 SUBJECT: Guidelines and Policies for Sourcing, Pooling and Distribution of Philhealth "Common Fund" in Department of Health (DOH) Hospitals and other Government Clinics and Hospitals TO: All Withholding Agents, Government Clinics and Hospital officials and employees, Philhealth Officials and employees, Internal Revenue Officers and Others Concerned. Background: For the proper implementation Item N, Section 52, Rule VIII of the Implementing Rules and Regulations of Republic Act 7875 entitled "National Insurance Act of 1995" that provides professional fees for services rendered by salaried public health providers may be retained by the health care institution in which services are rendered for pooling and distribution among health personnel. The manner of distributing the profession fees is left to the discretion of the health care institution and the funds are kept on a trust account The professional fees for services rendered by the medical staff which are billed to and released by the Philippine Health Insurance Corporation , net of the 10% withholding tax is in the name of the Office of the Chief Hospital though they are not intended for his account but for distribution to all hospital personnel as honorarium and other usage. The issue is anchored that the income and credits are not claimed accordingly. POLICIES AND GUIDELINES: 1. Professional fees from services rendered by salaried public health service providers paid by Philhealth kept in "common fund" shall not be subjected to 10% expanded withholding tax considering that the payor of income is a government entity and the recipient of income is also a government entity without proprietary function, and that such gross income payment shall be in the name of the public health institution. Philhealth shall issue a Certificate of Income Payment not Subject to Withholding Tax (BIR Form No. 2304) and included in submission of the Annual Information Return to BIR.

2. The Public Health Institution upon the distribution of their share from Philhealth to their medical and non-medical personnel shall be responsible for the withholding of tax on compensation, the issuance of Employer's Certificate of Compensation Payment/Tax Withheld (BIR Form No. 2316) and the submission of Annual Information Return. Such share from Philhealth shall form part of compensation income for the taxable year subject to appropriate withholding tax rate. They shall ensure that tax due is equal to tax withheld following the year-end adjustment procedure. 3. Disbursements of funds from Philhelath other than the distribution of additional compensation to public health workers shall be subjected to expanded withholding tax under Section 2.57.2(N) of Revenue Regulations No. 2-98 as amended, on purchases by government from local/resident suppliers on purchases of goods at 1% and on purchase of services other than those covered by other withholding tax rates at 2%. All internal revenue officers and employees and others concerned are enjoined to give this Circular as wide a publicity as possible. (Original Signed) GUILLERMO L. PARAYNO, JR. Commissioner of Internal Revenue

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