Tax Resources PH icon

TAX RESOURCES PH

Tax resources for Filipinos

RMC No. 67-2012: Circularizes the pertinent portions of the Supreme Court Decision in G.R. Nos. 195909 and 195960 entitled “Commissioner of Internal Revenue –vs- St. Luke’s Medical Center, Inc.,” on the Income Tax treatment of proprietary non-profit hospitals and on the 1998 deficiency Income Tax liability of St. Luke’s Medical Center, Inc. on the revenues it derived from services to paying patients and their tax implications and implementation thereof

Files
Download this file

Summary

RMC No. 67-2012 circularizes parts of the Supreme Court decision in G.R. Nos. 195909 and 195960 (Commissioner of Internal Revenue vs. St. Luke’s Medical Center, Inc.) on the Income Tax treatment of proprietary non-profit hospitals and similar institutions.

Key points

  1. 10% rate for private non-profit hospitals and schools. Private non-profit hospitals and educational institutions whose gross income from unrelated trade, business or other activity does not exceed 50% of total gross income pay 10% on taxable income, except those covered by Section 27(D) of the NIRC.
  2. Regular corporate rate. The Section 27(A) regular corporate rate applies to those whose unrelated income exceeds 50% of total gross income. It also applies to institutions claiming Section 27[B] coverage that fail to meet the definition of ‘proprietary’ and ‘non-profit’.
  3. Charitable and social welfare claims. Non-stock, non-profit corporations that fail to meet the definition of charitable, or are not organized and operated exclusively for charitable or social welfare purposes, are not exempt under Section 30[E] and [G]. Their taxable income is subject to the 30% rate under Section 27(A).
  4. Profit activities. Being non-stock and non-profit does not alone exempt an institution from tax. Income from for-profit activities is taxed, at the 10% preferential rate under Section 27(B) for a proprietary non-profit hospital such as St. Luke’s, as long as profits are not distributed and are reinvested.
  5. Implementation. Revenue officials must collect the proper taxes from private non-profit hospitals and educational institutions starting from January 1, 1998. The institutions remain liable to other applicable taxes, if warranted.

Who is affected

  • Private non-profit hospitals and educational institutions
  • Non-stock, non-profit corporations or associations claiming charitable or social welfare status
  • Revenue officials and employees

Deadlines and effectivity

  • Collection of proper taxes: starting from January 1, 1998
  • Supreme Court decision dated September 26, 2012

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.

Copies of BIR issuances are hosted here for reference. For the official version, check bir.gov.ph. Summaries by Tax Resources PH are not a substitute for the full text or professional advice.