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TAXATION: Senior Citizen & Persons w/ Disabilities 2021

R.C.Pendon

Senior Citizens (SCs) & Persons with Disabilities (PWDs) Senior Citizen Refers to any Filipino citizen who is a resident of the Philippines and who is sixty (60) years old or above. It may apply to senior citizens with “dual citizenship” status provided they prove their Filipino citizenship and have at least six (6) months residency in the Philippines.

Persons with Disabilities PWDs are those who have long-term physical, mental, intellectual, or sensory impairments which in interaction with various barriers may hinder their full and effective participation in society on an equal basis with others. The term “PWD” shall be further classified/categorized by the DOH.

Disabilities shall mean a physical or mental impairment that substantially limits one or more psychological, physiological or anatomical function of an individual or activities of such individuals; a record of such an impairment; or being regarded as having such an impairment.

Summary of Benefits 20% discount & VAT exempt on selected goods and services 5% Special Discount on the Sale of Prime Commodities and Basic Necessities 5% discount on water and electricity Additional deduction for compensation paid by employers

Senior Citizen

PWDs

Yes

Yes

Yes

Yes

Yes

Not applicable

Yes (15%)

Yes (25%)

Special Discounts to SCs & PWDs 1. 20% discount & VAT exempt on selected goods and services 2. 5% discount on water and electricity (SCs only) 3. 5% Special Discount on the Sale of Prime Commodities and Basic Necessities

TAXATION: Senior Citizen & Persons w/ Disabilities 2021

R.C.Pendon

Special Incentives on Establishments 1. Senior Citizens Center and residential care/group homes- For the consumption of water, electricity, and telephone, there shall be granted by public utilities a discount of at least fifty (50%) percent on the consumption by a that are: a. run by the Government or by a non-stock, non-profit domestic corporation b. organized and operated primarily to promote the well-being of abandoned, neglected, unattached, or homeless Senior Citizens 2. Additional Deduction for Compensation Paid to SCs —establishments employing Senior Citizens shall be entitled to an additional deduction from their gross income equivalent to fifteen percent (15%) of the total amount paid salaries and wages to Senior Citizens provided the following conditions are met: a. The employment shall have to continue for a period of at least six (6) months; b. The annual taxable income of the Senior Citizen does not exceed the poverty level (as may be determined by the NEDA thru the NSCB) c. The Senior Citizen shall submit to his employer a sworn certification that his annual taxable income does not exceed the poverty level.

3. Additional Deduction for Compensation Paid to PWDs —establishments employing PWDs shall be entitled to an additional deduction from their gross income equivalent to twenty-five percent (25%) of the total amount paid as salaries and wages to PWDs provided the following conditions are met: a. The entities must present proof as certified by the Department of Labor and Employment that the PWDs are under their employment. b. PWDs must also be accredited with the Departments of Labor and Employment and Health as to their disability, skills, and qualifications. 4. Additional Deduction to Improvements for PWDs- Private entities that improve or modify their physical facilities to provide reasonable accommodation for PWDs shall be entitled to an additional deduction from their net income, equivalent to 50% of the direct cost of the improvements or modifications.

20% discount & VAT exempt on selected goods and services All establishments, supplying any of the following goods and services for the SC’s or PWD’s exclusive use and enjoyment or availment, shall give a discount of twenty (20%) percent plus VAT exemption. The granting of discount herein mentioned shall apply to the sale of the following goods and services: a) Medicines, including influenza and pneumococcal vaccines, and such other essential medical supplies, accessories and equipment b) On the professional fees of attending physician/s in all private hospitals, medical facilities, outpatient clinics, and home health care services c) On professional fees of licensed professional health workers providing home health care services d) On medical and dental services, diagnostic and laboratory fees in all private hospitals, medical facilities, outpatient clinics, and home health care services Page 2 of 9

TAXATION: Senior Citizen & Persons w/ Disabilities 2021

R.C.Pendon

e) On actual fare for land transportation travel. (excluding toll booth fees) f) On actual transportation fare for domestic air transport services and sea shipping vessels and the like, based on the actual fare and advanced booking. g) On the utilization of services in hotels and similar lodging establishments, restaurants, and recreation centers. h) On admission fees charged by theaters, cinema houses and concert halls, circuses, carnivals, and other similar places of culture, leisure, and amusement i) On funeral and burial services for the death of SCs & PWDs. The beneficiary or any person who shall shoulder the funeral and burial expenses of the deceased SC or PWD shall claim the discount, such as the casket, embalmment, cremation cost and other related services for the SC or PWD upon payment and presentation of his death certificate;

Application of discount for Restaurants •

If, for example, a group of 5 comprised of four (4) Non-Senior Citizens and one (1) SC/PWD dines in a restaurant, how should the group be billed? o In computing the 20% discount and the exemption from VAT, the formula shall be:

The formula above will apply if no “individualized” food item can be ordered or if the transaction with the SC or PWD is not processed separately. •

For restaurants, are condiments and side products covered by the 20% discount and VAT exemption? o Yes. For restaurants, the discount shall be for the sale of food, drinks, dessert, and other consumable items served by the establishments, including value meals and promotional meals, offered for the consumption of the general public.

•

For set meals, what are the rules? o The 20% discount and VAT exemption also apply to set meals, provided, that the meal shall be limited to a single-serving meal with a beverage for an individual SC or PWD. In case the set meal is not limited to a single serving and shared with NonSC/Non-PWD, the value of the food purchase attributable to the SC or PWD may be computed following the formula stated previously.

•

If an SC/PWD orders various dine-in foods, then take home the leftover. Is the order subject to a 20% discount? o The 20% discount shall apply to dine-in, take-out, and take-home orders (excluding bulk orders) as long as it is the SC/PWD himself/herself who is present and personally ordering and can show a valid SC/PWD ID card.

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TAXATION: Senior Citizen & Persons w/ Disabilities 2021

R.C.Pendon

•

What is the rule for the purchase of group meals by “group walk-ins” or group composed of all SC or PWD? o If the group of diners is composed of SC or PWD who ordered for group meals or food items for sharing in restaurants, each SC or PWD with a valid SC or PWD ID card shall be entitled to a 20% discount and VAT exemption, hence, if all the SC or PWD in the group have valid SC or PWD ID cards, the entire food purchase shall be entitled to the 20% discount and VAT exemption. In case not all the SC or PWD have their valid SC or PWD ID cards, the value of the food purchase attributable to SC or PWD with SC or PWD ID cards may be computed following the formula outlined.

•

What is considered “bulk orders”? o Bulk orders are within the context of pre-contracted or pre-arranged group meals or packages, and hence, not entitled to a 20% discount and VAT exemption.

•

Are set orders primarily marketed for children (i.e., happy meal or kiddie meal) entitled to 20% discount if purchased by a Senior Citizen? o No, meals primarily prepared and intentionally marketed for children and not for Senior Citizen’s personal consumption are not entitled to a 20% discount. o But for PWD, set orders for children is subject to the 20% discount & VAT exemption.

•

What comprises the Most Expensive Meal Combination (MEMC)? o The MEMC is an amount corresponding to the combination of the most expensive and biggest single-serving meal with beverages served in a quick-service restaurant. The MEMC is deemed flexible and is adjusted accordingly by food establishments to estimate a single food purchase for an individual SC or PWD. MEMC is applied only to take-out, take-home, drive-thru, and delivery orders.

•

Are purchases of “pasalubong” by SC or PWD from stores, kiosks, food carts, and stalls in food courts subject to a 20% discount? Are they exempt from VAT? o “Pasalubong” food items, which are single-serving/solo meal for the personal and exclusive consumption of the SC or PWD, are entitled to the 20% discount, as well as the exemption from VAT. However, other “pasalubong” food items (e.g., a box of biscocho, bottles or jars of ginamos, several packets of mango preserves, etc.) which are not for the personal and exclusive consumption of the SC or PWD are NOT entitled to 20% discount and VAT exemption. This limitation extends to “novelty items” or non-consumables sold in restaurants.

•

For call-in/phone-in orders, what are the rules? o Called-in or phoned-in orders are actually delivery orders entitled to 20% discount and VAT exemption. Hence, they are likewise subject to certain conditions; i.e., SC or PWD ID card number must be given while making the order over the telephone; the SC or PWD ID card must also be presented upon delivery to verify the identity of the senior citizen entitled to the 20% discount and VAT exemption. o In case of called-in or phoned-in orders of grouped meals, the food establishment must determine the number of SC or PWD composing the group, and the 20% percent discount shall be computed based on the value of the food attributable to the qualified SC or PWD. Likewise, the SC or PWD ID card number/s must be given while making the order over the telephone, and the SC or PWD ID card/s must be

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TAXATION: Senior Citizen & Persons w/ Disabilities 2021

R.C.Pendon

presented upon delivery to verify the identity of the SC or PWD entitled to the 20% discount and VAT exemption. •

Is the purchase of a whole cake subject to a 20% discount? (also applies to pizza) o A purchase of a whole cake may be considered as a purchase of a “group meal or meal for sharing.” For instance, if the whole cake purchased is good for five (5) persons, and the group of diners is composed of five (5) SC or PWD, each with a valid SC or PWD ID card, then they shall be entitled to the 20% discount, or the entire food purchase shall be entitled to the 20% discount. If the group of diners is composed of SC or PWD, but not all have their valid SC or PWD’s ID card or composed of SC or PWD and Non- SC or Non- PWD Citizens, the value of the cake attributable to the qualified SC or PWD/s. If an SC or PWD purchases a slice of cake or a personal serving of cake, he shall be entitled to the 20% discount.

•

What is the rule on the purchase of alcoholic products such as beer, wine, and other liquors? Are they considered “drinks” entitled to the 20% discount and VAT exemption? o Generally, alcoholic beverages are not subject to the 20% discount and VAT exemption especially if purchased “in bulk”, “in buckets” or “in cases”. However, if served as a single serving drink, its purchase by a SC or PWD is entitled to the 20% discount and VAT exemption. o However, alcoholic beverages purchased in a bar, club or cabaret are exempt from VAT but subject to amusement tax of 18% under Section 125 of the NIRC, as amended. A SC or PWD may still avail of the 20% discount on the purchase of an alcoholic drink but the discount shall be limited only to a single serving of an alcoholic beverage.

•

Are cigars and cigarettes considered “consumables” subject to the 20% discount? o Cigarettes/cigars are not food or essential items deemed subject to the 20% discount.

•

Are delivery fees/charges for delivery orders subject to the 20% discount? o If the delivery fee/charge is NOT billed separately, it is subject to the 20% discount. However, if such delivery fee/charge is billed separately, it is not entitled to the 20% discount and is subject to VAT.

Special Cases in granting the discount •

If a store offers a promotional discount, can the 20% SC or PWD discount also be availed? o No. In the purchase of goods and services which are on promotional discount, the Senior Citizen shall avail of either the promotional discount or the 20% discount, whichever is higher. However, the discount that must be given to the Senior Citizen shall in no case be less than 20%.

•

If the SC or PWD used his privilege card/promotional discount which is higher than the 20% SC or PWD discount, is the sale exempt from VAT? o Yes, the sale of goods and services on promotional discount is still exempt from VAT. (Section 10 of RR No. 7-2010)

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TAXATION: Senior Citizen & Persons w/ Disabilities 2021 •

R.C.Pendon

In case of business establishments are non-VAT taxpayers, are SCs or PWDs also exempt from the payment of the percentage tax on their purchases of goods and/or services? o No. The law does not include exemption of payment of Percentage Tax. Thus, the exemption does not cover other indirect taxes passed on by the seller to a SC or PWD buyer, such as percentage tax.

5% Special Discount on Utilities (not applicable to PWDs) The monthly utilization of water and electricity by the Senior Citizen supplied by public utilities will be subject to a five percent (5%) discount upon concurrence of the following: 1. the individual meters for the said utilities are registered in the name of the Senior Citizen residing therein 2. the monthly consumption does not exceed one hundred kilowatt hours (100kwh) of electricity and thirty cubic meters (30 m3) of water; and 3. the privilege is granted per household regardless of the number of Senior Citizens residing therein.

5% Special Discount on basic necessities and prime commodities A special discount of five percent (5%) of the regular retail price of basic necessities and prime commodities shall be granted to SC or PWD on their purchases thereof, taking into consideration that said purchases shall be for the personal and exclusive consumption and/or enjoyment of the SC or PWD. It is NOT exempt from VAT. The SC or PWD shall enjoy a special discount of 5% of the regular retail price provided that the total amount of said purchase shall not exceed P1,300 per calendar week.

NOTE: Sari-sari stores, as well as talipapa, wet markets; and cooperative stores are exempted from granting the 5% discount to senior citizens. Sari-sari stores refer to “mom and pop” type of establishments that are engaged exclusively in retail business, specifically selling an assortment of commodities in “tingi” or in small quantity solely to end-users. Groceries operating inside the wet markets are covered by the Guidelines to grant the special discount on select goods.

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TAXATION: Senior Citizen & Persons w/ Disabilities 2021

R.C.Pendon

“Basic Necessities” – are goods vital to the needs of consumers for their sustenance and existence. For purposes of this Order necessities shall include:

1. All kinds and variants of rice 2. Corn 3. All kinds of bread (Pastries and cakes not included) 4. Fresh, dried and canned fish and other marine products (including frozen and in various modes of packaging) 5. Fresh pork, beef and poultry meat 6. All kinds of fresh eggs (excluding quail eggs) 7. Potable water in bottles and containers 8. Fresh and processed milk (excluding milk labelled as foods supplement) 9. Fresh vegetables including root crops 10. Fresh fruits

11. Locally manufactured instant noodles 12. Coffee and coffee creamer 13. All kinds of sugar (excluding sweetener) 14. All kinds of cooking oil 15. Salt 16. Powdered, liquid, bar laundry and detergent soap 17. Firewood 18. Charcoal 19. All kinds of candles 20. Household liquefied petroleum gas, not more than 11kgs. LPG content once every five (5) months) bought from LPG dealers 21. Kerosene, not more than 2 liters per month.

“Prime Commodities” – are goods not considered as basic Necessities but are essential to consumers. For purposes of this Order commodities shall include: 1. Flour 2. Dried, processed and canned pork, beef and poultry meat 3. Dairy products not falling under Section 1(a) of this Order 4. Onions and Garlic 5. Vinegar, patis and soy sauce 6. Toilet/Bath soap 7. Fertilizer 8. Pesticides 9. Herbicides 10. Poultry feeds, livestock feeds and fishery feeds

11. Veterinary products 12. Paper, school supplies 13. Nipa shingle 14. Sawali 15. Cement, clinker, GI sheets 16. Hollow blocks 17. Plywood 18. Ply Board 19. Construction nails 20. Batteries (excluding cellphone and automotive batteries) 21. Electrical supplies and light bulbs 22. Steel wires

Discount is an Ordinary and Necessary expense for the establishment The discount granted by the seller to the SC or PWD shall be treated as an ordinary and necessary expense deductible from gross income. It cannot be claimed as expense if the taxpayer elected the OSD option in computing net taxable income.

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TAXATION: Donor’s Tax 2021

R.C.Pendon

Carlos Superdrug Corp. v. DSWD This Supreme Court case questions the validity of the benefits granted to senior citizen. It should be noted that the benefits and discount granted are made mandatory by law and the losses are shouldered by the private establishments. No reimbursement or subsidy will be given by the government. The only benefit given to the private establishments is that they can claim it as a tax deduction, which is not enough to cover everything. Having said that, this raises the question of whether the State can impose upon private establishments the burden of partly subsidizing a government program. The SC said yes for it is inline with the state’s police power. For this reason, property rights must bow to the primacy of police power because property rights, though sheltered by due process, must yield to general welfare. Police power as an attribute to promote the common good would be diluted considerably if on the mere plea of petitioners that they will suffer loss of earnings and capital, the questioned provision is invalidated.

Problem 1 A VAT-registered restaurant has signage on every table. It says that “Senior Citizen Discount is limited to P145.00 per person”. A senior citizen ordered a meal for a total of P1,200 gross of VAT and before discount. How much will the senior citizen pay? Answer: P 857.14

Problem 2 Mr. Wanna is a former chief accountant of SMF Holdings. Due to his old age he retired and subsequently registered as a Senior Citizen to avail the benefits specified in R.A. 9994. Even though he is a former chief accountant, he is not aware of the other benefits that a SC can acquire since it is not within his field of expertise. He approached you to ask what the different benefits are. You asked what his recent purchases are, and his recent bill from Meralco and Maynilad, all are in the E...