HMO Income and Your Taxes

How an HMO pays a doctor

When you're accredited with an HMO, the fees it pays you are professional income, not salary, because there's no employer-employee relationship. Before paying, the HMO withholds a percentage of your fee as a prepayment of your income tax and issues you a Form 2307 (the withholding certificate) for it. That withheld amount isn't an extra charge, it's money already paid toward your taxes in your name, which you later subtract from what you owe.

What rate the HMO withholds

The same creditable withholding rates that apply to all of a doctor's professional fees apply here: 5% if your gross income for the year is ₱3,000,000 or less and you're non-VAT, and 10% if you're above ₱3,000,000 or VAT-registered. To be withheld at the lower 5%, you give the HMO your sworn declaration of gross income and a copy of your Certificate of Registration, the same paperwork you'd give any payer.

The rule that catches doctors out: withholding on collected fees

Here's what makes HMO and hospital income different from a fee you collect directly from a private patient. The institution is required to withhold on your professional fee even when it's the one collecting the payment on your behalf, and doctors generally aren't allowed to take professional fees directly from admitted or covered patients whose bills the institution handles. The one documented exception is where no professional fee was in fact charged, evidenced by a sworn declaration jointly signed by you and the patient. In practice this means most of your HMO income reaches you already net of withholding, with a 2307 to match.

A worked example: an HMO fee through your return

The paperwork that gets you the 5% rate

Whether an HMO withholds 5% or 10% often comes down to one document. To be withheld at the lower 5%, you give each HMO a sworn declaration of your gross income together with a copy of your Certificate of Registration, ordinarily near the start of the year. Skip it and the HMO is entitled to withhold at 10%, which isn't lost money (it's still a credit you'll recover on your return) but it does tie up more of your cash through the year. Doctors accredited with several HMOs give the same declaration to each, so it's worth doing once, early, for all of them.

How HMO income lands on your returns

Because HMO fees are ordinary professional income, they flow through your filings the same way clinic fees do. You report the income on your quarterly returns (1701Q) and your annual return, and you claim the HMO's 2307 credits against the tax due, supported by your summary of withholding certificates. The only practical challenge unique to HMO work is volume: a doctor accredited with multiple HMOs can accumulate many 2307s across the year, so the discipline is simply to capture each one as it arrives rather than reconstruct them at filing time.

HMO income is taxable, and it counts toward VAT

Two things follow from HMO fees being professional income. First, it's fully subject to income tax, at graduated rates or under the 8% option if you're eligible. Second, it's added to the rest of your professional receipts when measuring the ₱3,000,000 VAT threshold, so a doctor with heavy HMO volume can cross into VAT on the strength of HMO work alone. It's not a separate, lightly-taxed category. It's core practice income.

Fee-for-service, capitation, and other arrangements

HMOs don't all pay doctors the same way. Some pay a fee for each consultation or procedure, while others use capitation, a fixed periodic amount for being available to a pool of members regardless of visit count, and a few blend the two. However the payment is structured, it's still professional income to you, taxed under the same rules, and generally subject to the same creditable withholding when the HMO pays it out. The label the HMO uses on your statement doesn't change the tax character of the money. What can differ is the paperwork trail, so if your HMO arrangement is unusual, it's worth confirming how it withholds and documents your payments rather than assuming it matches a standard fee-for-service setup.

Frequently asked questions