New withholding tax treatment of premiums on health card of employees

(Revenue Memorandum Circular No. 50-2018)


Under RMC No. 50-2018, a new tax treatment was prescribed for premium on health card paid by the employers for their employees.

The premium on the health card under a group insurance, whether paid for rank and file or managerial/supervisory employees, shall be included as part of other taxable benefits of these employees, which can be exempt within the P90k bonus threshold. Premiums for individual policies paid for employees holding managerial or supervisory functions shall be subject to fringe benefits tax. (FBT)

The RMC was issued as a clarification to Revenue Regulations Nos. 08-2018 and 11-2018.

Please note that this treatment would appear to be partly a reversal of previously issued revenue regulations and rulings on health card premiums.  This also appears to be inconsistent with the provisions of the Tax Code, as interpreted in previous rulings by the BIR. 

Under Sec. 33 (c) of the 1997 NIRC, the contributions of the employer to hospitalization benefit plans of employees are not subject to FBT.  This was reiterated in Revenue Regulations No. 3-98 implementing the FBT.

On the basis of the above tax code exemption, previous rulings by the BIR provide that premium payments made by employers for the benefit of its eligible employees (managerial and rank-and-file) are not subject to withholding tax on compensation nor to fringe benefits tax.   This has also been the treatment recognized by the BIR during tax assessments.  Health premium payments are allowed as deductible expenses even if not subjected to withholding tax on compensation.


However, given that RMC 50-2018 is the most recent BIR issuance, there is a risk that BIR will issue deficiency withholding tax assessment if health premiums paid after the issuance of RMC 50-2018 dated May 11, 2018, were not subjected to withholding tax on compensation or FBT.