A HEALTH maintenance organization (HMO) is not covered by the value-added tax (VAT) exemption granted to medical, dental, hospital and veterinary services under the Tax Code of 1997.
An HMO does not actually render medical service, but merely acts as a conduit between the members and their accredited hospitals to arrange for the provision of pre-need health care services to its enrolled members for a fixed prepaid fee and a specified period of time.
HMOs are, therefore, subject to VAT. (Commissioner of Internal Revenue vs. Philippine Health Care Providers Inc., G.R. 168129, April 24, 2007)
Under Revenue Regulations 16-2005 or the consolidated VAT regulations, as amended, the gross receipts of HMOs shall be the total amount of money or its equivalent representing the service fee actually or constructively received during the taxable period for the services performed or to be performed for another person, excluding the VAT.
The compensation for their services, representing their service fee, is presumed to be the total amount received as enrollment fee from their members plus other charges received. (Source: Punongbayan and Araullo)
