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    Medicard Tax Digest

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    maan leyva
    The Supreme Court ruled in favor of Medicard Philippines, Inc. in its case against the Commissioner of Internal Revenue. [1] The Court held that the absence of a Letter of Authority violated Medicard's right to due process. [2] It also held that the amounts Medicard earmarked and paid to medical service providers should not be included in its gross receipts for calculating its value-added tax. [3] The value-added tax is only on the value charged for the taxpayer's service.

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    Medicard Tax Digest

    Uploaded by

    maan leyva
    30 views2 pages
    The Supreme Court ruled in favor of Medicard Philippines, Inc. in its case against the Commissioner of Internal Revenue. [1] The Court held that the absence of a Letter of Authority violated Medicard's right to due process. [2] It also held that the amounts Medicard earmarked and paid to medical service providers should not be included in its gross receipts for calculating its value-added tax. [3] The value-added tax is only on the value charged for the taxpayer's service.

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    The Supreme Court ruled in favor of Medicard Philippines, Inc. in its case against the Commissioner of Internal Revenue. [1] The Court held that the absence of a Letter of Authority violated Medicard's right to due process. [2] It also held that the amounts Medicard earmarked and paid to medical service providers should not be included in its gross receipts for calculating its value-added tax. [3] The value-added tax is only on the value charged for the taxpayer's service.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    30 views2 pages

    Medicard Tax Digest

    Uploaded by

    maan leyva
    The Supreme Court ruled in favor of Medicard Philippines, Inc. in its case against the Commissioner of Internal Revenue. [1] The Court held that the absence of a Letter of Authority violated Medicard's right to due process. [2] It also held that the amounts Medicard earmarked and paid to medical service providers should not be included in its gross receipts for calculating its value-added tax. [3] The value-added tax is only on the value charged for the taxpayer's service.

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    MEDICARD PHILIPPINES, INC.

    , Petitioner,
    vs.
    COMMISSIONER OF INTERNAL REVENUE, Respondent
    .G.R. No. 222743; April 5, 2017
    C, REYES.J

    FACTS:

    MEDICARD is a health maintenance organization (HMO) that provides prepaid health and
    medical insurance coverage to its clients. Individuals enrolled in its health care programs pay an
    annual membership fee and are entitled to various preventive, diagnostic and curative medical
    services provided by duly licensed physicians, specialists, and other professional technical staff
    participating in the group practice health delivery system at a hospital or clinic owned,
    operated or accredited by it.

    MEDICARD filed it first, second, and third quarterly VAT Returns through Electronic Filing and
    Payment System (EFPS) on April 20, July 25, and October 25, 2006, respectively, and its fourth
    quarterly VAT Return on January 25, 2007.

    Upon finding some discrepancies between MEDICARD’s Income Tax Returns (ITR) and VAT
    Returns, the CIR issued a Letter Notice (LN) dated September 20, 2007. Subsequently, the CIR
    also issued a Preliminary Assessment Notice (PAN) against MEDICARD for deficiency VAT.
    MEDICARD received CIR’s FAN dated December 10, 2007 for allegedly deficiency VAT for
    taxable year 2006 including penalties.

    Upon finding some discrepancies between MEDICARD’s Income Tax Returns (ITR) and VAT
    Returns, the CIR issued a Letter Notice (LN) dated September 20, 2007. Subsequently, the CIR
    also issued a Preliminary Assessment Notice (PAN) against MEDICARD for deficiency VAT.
    MEDICARD received CIR’s FAN dated December 10, 2007 for allegedly deficiency VAT for
    taxable year 2006 including penalties.

    Medicard filed a protest but it was denied so it went to the CTA.


    The CTA Division held that the determination of deficiency VAT is not limited to the issuance of
    Letter of Authority (LOA) alone and that in lieu of an LOA, an LN was issued to MEDICARD
    informing it if the discrepancies between its ITRs and VAT Returns and this procedure is
    authorized under Revenue Memorandum Order (RMO) No. 30-2003 and 42-2003.

    ISSUES:
    1. Whether or not the absence of the Letter of Authority fatal.
    2. Should the amounts that MEDICARD earmarked and eventually paid to the medical
    service providers still form part of its gross receipts for VAT purposes?
    HELD:
    1. Yes, the absence of the LOA violated MEDICARD’s right to due process.

    An LOA is the authority given to the appropriate revenue officer assigned to perform
    assessment functions. Under the NLRC, unless authorized by the CIR himself or by his
    duly authorized representative, through an LOA, an examination of the taxpayer cannot
    ordinarily be undertaken. An LOA is premised on the fact that the examination of a
    taxpayer who has already filed his tax returns is a power that statutorily belongs only to
    the CIR himself or his duly authorized representatives.

    Here, there is no dispute that no LOA was issued prior to the issuance of a PAN and FAN
    against MEDICARD. Therefore, no LOA was also served on MEDICARD.

    2. No, the VAT is a tax on the value added by the performance of the service by the
    taxpayer.

    It is, thus, this service and the value charged thereof by the taxpayer that is taxable
    under the NLRC. An HMO like MEDICARD is principally engaged in the sale of services. Its
    VAT base and corresponding liability is, determined under SEC 108(A) of the tax code as
    amended.

    Under Sec 108, however, the scope of the term gross receipts for VAT purposes is
    limited only to the amount that the taxpayer received for the services it performed or to
    the amount it received as advance payment for the services it will render in the future
    for another person.

    Hence, for the purposes of determining the VAT liability of an HMO, like MEDICARD, the
    amounts earmarked and spent for medical utilization of its members should not be
    included in the computation of the gross receipts.

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