Senator Sonny Angara has filed a bill which seeks to ensure that health insurance premiums paid by employers for their employees will remain tax-free.
Angara earlier chided the Bureau of Internal Revenue (BIR) for issuing Revenue Memorandum Circular (RMC) 50-2018 which taxed group health insurance premiums, noting that such issuance was not included among the provisions of the Tax Reform for Acceleration and Inclusion (TRAIN) Act, otherwise known as Republic Act 10963.
The RMC, which reports said was originally issued to clarify concerns on the TRAIN’s income tax provisions, only caused confusion as it specifically stated that the medical insurance premiums paid by the employer for its employees, whether rank and file or managerial or supervisory, and their dependents shall be included as part of bonuses and benefits, and therefore shall be subject to income and fringe benefit tax, Angara said.
“It should be noted that RA 10963 did not amend the tax treatment of health premiums nor was it intended, in any way, to diminish the take home pay of taxpayers by subjecting them to the PHP90,000 tax-exempt bonus,” Angara, chair of the Senate ways and means committee, said in filing Senate Bill 2112.
“The tax reform was enacted primarily to increase the purchasing power of each taxpayer who has been overburdened by the inequitable and unprogressive income tax that has not been changed for almost two decades. The health of its citizens remain a primary concern of the government, thus, all support and assistance should be given to ensure that Filipinos, especially the workers, remain fit and healthy,” he added.
The RMC issued last May 11 stated that “premium on health card paid by the employer for all employees, whether rank and file or managerial or supervisory, under a group insurance should be included as part of other benefits of these employees which are subject to the PHP90,000 threshold.”
This means that medical insurance premiums paid by the employers for all employees should be subjected to income tax and fringe benefit tax.
Under the TRAIN law, the employees’ bonuses and other benefits amounting to PHP90,000 and below should be tax free. Beyond PHP90,000 threshold is already taxable.
Angara said the said BIR issuance, in effect, reverses its previous rulings and regulations that premium on health cards shall be tax-free.