Philippine Health Care Providers vs.

CIR
G.R. No. 167330, September 18, 2009
Corona, J:
Doctrine:
FACTS:

Phillipine Health Care Providers was assessed of deficiency documentary stamp tax.
Petitioner

Phillipine Health Care Providers

Respondent
Commissioner of Internal Revenue

Petitioner argues that its health care services are not Respondent Commissioner of Internal Revenue
in the nature of an insurance business.
[CIR] sent petitioner a formal demand letter and the
corresponding assessment notices demanding the
payment of deficiency taxes, including surcharges
and interest, for the taxable years 1996 and 1997 in
the total amount of P224,702,641.18.

DST is imposed only on a company engaged in the

business of fidelity bonds and other insurance
policies. Petitioner, as an HMO, is a service
provider, not an insurance company.

Respondent appealed the CTA decision to the

[Court of Appeals (CA)] insofar as it cancelled the
DST assessment. He claimed that petitioners health
care agreement was a contract of insurance subject
to DST under Section 185 of the 1997 Tax Code.

ISSUE: Whether or not the taxes collected are valid?

HELD: No. HMOs are not engaged in the business of Insurance. Upon application of the principal object
and purpose test, it was found that at the subject taxable years, the petitioner was not in the business of
insurance. Therefore, the section 185 of the NIRC does not apply to the Petitioner because the provision
only imposes DST on policies of insurance issued by entities actually in said business.
Tax statutes are to be construed strictly against the taxing authority. The provision was made at the time
when HMOs were not existent in the country and it has not been amended ever since, even though
amendments were made left and right for the NIRC. This shows the intent of legislature to no longer
expand the scope of said section.
Although the power to tax is unlimited in range, it is tempered by the hammer of due process and
smoothened before it applies to the people.