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Rulings on tax-exempt hospitals

/ 06:31 AM February 09, 2013

THE Bureau of Internal Revenue (BIR) has issued Revenue Memorandum Circular No. 4-2013 requiring tax-exempt hospitals to secure revalidated tax exemption rulings/certification.

Section 27(B) of the Tax Code, as amended, subjects proprietary hospitals which are non-profit to an income tax at the rate of ten percent (10 percent) on their taxable income.


Some proprietary non-profit hospitals, which are owned and/or operated by non-stock non-profit institutions, were able to secure tax exemption rulings from the BIR on the ground that these institutions are charitable or social welfare organizations and thus, exempt from the corporate income tax under Section 30 of the Tax Code.

However, in the recent case of Commissioner of Internal Revenue vs. St. Luke’s Medical Center Inc., GR Nos. 195909 and 195960, dated Sept. 26, 2012, the Supreme Court laid down guidelines in determining whether a proprietary non-profit hospital may be exempted from income tax.


In order to uniformly apply these guidelines, it is necessary according to the Revenue Memorandum Circular to re-evaluate tax exemptions previously issued to proprietary non-profit hospitals, or to non-stock, non-profit institutions/entities operating hospitals.

Accordingly, all hospitals and non-stock, non-profit organizations operating hospitals which were issued tax-exempt rulings by the BIR are required by the Revenue Memorandum Circular to submit a request for revalidation of their tax-exempt status by submitting the following documents to the Revenue District Office where the organization is registered:

Letter application which must state the specific paragraph of Section 30 of the Tax Code under which it seeks exemption;

Copies of the corporation’s latest Articles of Incorporation and By-laws duly certified by the Securities and Exchange Commission;

Certificate of Registration with the BIR;

Tax Clearance issued by the Revenue District Office where the corporation is registered;

Copies of the Income Tax Returns or Annual Information Returns and Financial Statements for the last three years; and


A statement of its modus operandi stating therein its sources of revenues.

In the course of review of the application for tax exemption, the BIR may require the submission of other documents as the circumstances may warrant.

All rulings issued prior to November 1, 2012 which grant tax exemption to proprietary non-profit hospitals or to non-stock non-profit entities operating hospitals under Section 30 of the Tax Code shall no longer be valid.

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