BENEFITS AND PRIVILEGES TO SENIOR CITIZEN

Presented by:

Susan D. Tusoy

Asst. Chief, Assessment Division, RR 19

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Legal Basis RA 7432 / RR 2-94 RA 9257 / RR 4-2006 RA 9994

RMC 45-2010 RR 7-2010

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Prescribe the guidelines for: The availment of the income tax exemption of senior

citizens; VAT exemption privileges Tax privileges granted to establishments giving

discount Tax implication of taking care and supporting senior

citizen Tax privileges granted to entities who engage senior

citizen as their employees3

Benefits:RA 7432 RA 9257 RA 9994

Exemption from ITR

- Annual TaxabIe does not exceed P60k or such amount determined by NEDA

Exemption from ITR - Annual TaxabIe does not exceed the poverty level as determined by NEDA

a. Exemption from Income Tax who are considered to be minimum wage earners under RA 9504.

20% discount on transportation services, hotels and similar lodging establishments, restaurant, recreation centers, and purchases of medicine anywhere in the country

20% discount from all establishments on services of hotels and similar lodging establishments, purchase of medicines for the exclusive use and enjoyment of SC, and funeral and burial services

b. 20% discount and exemption from VAT:

1. Purchase of medicines, influenza and pnuemococcal vaccines, and other essential medical supplies, accessories and equipments

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Benefits:RA 7432 RA 9257 RA 9994

Min. of 20% discount on admission fees on theaters etc.

20% discount on admission fees on theaters, cinema houses, concert halls, circuses, carnivals etc.

2. PF of attending physicians

3. PF of licensed professional health providing home health care services

4. On medical/dental services, diagnostic and laboratory fees

5. In actual fare for land transportation travel in PUBs, PUJs, taxis,AUVs, shuttle services and public railways, including LRT, MRT, and PNR

6. Actual transportation fare for domestic air transport services and sea shipping vessels, based on the actual fare & advanced booking

20% discount on medical dental services, PF of attending doctors and diagnostic and laboratory fees

20% discount in fare for domestic air and sea travel

20% discount in public railways, skyways and bus fare

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Benefits:RA 7432 RA 9257 RA 9994

7. On the utilization of services in hotels and similar lodging establishments, restaurants and recreation centers

8. On admission fees charged by theaters, cinema houses and concert halls, circuses, leisure and amusement; and

9. On funeral and burial services for the death of senior citizen

c. Grant of a minimum of 5% discount on the monthly utilization of water and electricity supplied by public utilities

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On the utilization of water & electricity Minimum of 5% discount The individual meters are registered in the name

of SC residing therein Provided that the monthly consumption does not

exceed: 100 kWh for electricity 30 cubic meters for water

The privilege is granted per household regardless of the number of SC residing therein.

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PRIVILEGES for the SENIOR CITIZENS

(d) Exemption from training fees for socioeconomic programs

(e) Free medical and dental services diagnostic and laboratory fees in all government facilities

(f) Free vaccination against the influenza virus and pneumococcal disease for indigent senior citizen patients

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PRIVILEGES for the SENIOR CITIZENS

(g) Educational assistance to senior citizens

(h) The continuance of the same benefits and privileges given by the GSIS, the SSS and the PAG-IBIG as the case maybe, as are enjoyed by those in actual service

(i) The retirement benefits of retirees shall be regularly reviewed to ensure their continuing responsiveness and sustainability

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PRIVILEGES for the SENIOR CITIZENS

(j) The government may grant special discounts for senior citizens on purchase of basic commodities

(k) Provision of express lanes for senior citizens

(l) Death benefit assistance of a minimum of P 2,000.00

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Income Tax of Senior Citizen Generally, qualified SC deriving returnable

income, whether from compensation or otherwise, are required to file and pay income tax;

If qualifies as Minimum Wage Earner Exempt from income tax subject to the

provisions of RR 10-2008

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Income Tax of Senior Citizen If aggregate amount of gross income do not

exceed the personal (basic and additional) Exempt from Income Tax Not required to file ITR

The exemption of SC will not extend to all types of income earned during the taxable year.

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TAXES ON PASSIVE INCOME(1) 20% final withholding tax on interest

income; royalties; prizes and other winnings

(2) 7 ½ % final withholding tax on interest income from a depositary bank under the expanded foreign currency deposit system

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TAXES ON PASSIVE INCOME(4) Withholding taxes on interest income on

pre-terminated long term deposit:

less than 3 years = 20 %

3 years to less than 4 years = 12 %

4 years to less than 5 years = 5 %

(5) 10% final withholding tax on cash and/or property dividends

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TAXES ON PASSIVE INCOME(6) Capital gains tax from sales of shares of

stock not traded in the stock exchange

(7) 6% final withholding tax on presumed capital gains from the sale of real property

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Special Features The granting of exemptions and discounts shall be

for the exclusive use and enjoyment or availment of the senior citizen on the purchase of goods and services enumerated in this Act.

In the availment of the privileges, the senior citizen or his/her duly authorized representative, may submit any of the ff: OSCA ID (being honored nationwide) Passport Other docs to establish that SC is citizen of the Republic

and at least 60 years of age20

Special Features SC can avail of the promotional discount or

the discount provided herein, whichever is higher

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Tax Treatment of the Discount Granted to SC Establishments granting the discount may

claim the discounts granted as a tax deduction based on the cost of the goods sold or services rendered.

Example:Selling Price (10 pcs. Allopurinol @P5/pc) P 50.00

Less 20% Discount 10.00

Amount payable by the Senior Citizen P 40.00

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Tax Treatment of the Discount Granted to SC The selling price to be charged by the seller

must be net of VAT because SC is exempt from VAT

The cost of discount shall be allowed as a deduction from the gross income for the same taxable year

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Tax Treatment of the Discount Granted to SC For the establishment to be allowed to claim

the discount as a deduction, the amount of sales that must be reported for tax purposes is the undiscounted SP and not the amount of sales net of the discount.

The income statement of the seller must reflect the discount not as a reduction from sales but as a deduction from its gross income.

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Tax Treatment of the Discount Granted to SC The entry to record the transaction in the

books of the seller:

Debit –Cash P 40

Senior Citizen Discount Expense 10

Credit – SalesP50

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Tax Treatment of the Discount Granted to SC

The discount granted by the seller of qualified goods and services, i.e., the promotional discount, 20% discount, 5% discount on water and electricity of the 50% discount of utilities for SC Centers shall be treated as an ordinary and necessary expense under the category of itemized deduction and can only be claimed if the seller does not opt the OSD.

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Conditions in claiming the discount granted as an additional item of deduction:

Only that portion of the gross sales exclusively used, consumed or enjoyed by the SC shall be eligible for the deductible sales discount;

The gross selling price and the sales discount must be separately indicated in the OR or SI

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Conditions in claiming the discount granted as an additional item of deduction:

Only the actual amount of the discount granted or a sales discount not less than the statutory rate, whichever is higher, based on the gross selling price can be deducted from gross income/gross receipts;

The seller must record its sales inclusive of the discount granted;

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Conditions in claiming the discount granted as an additional item of deduction:

The discount can only be allowed as a deduction from gross income for the same taxable year that the discount is granted;

Required to keep accurate record of sales Name of SC OSCA ID Gross Sales/Receipts Sales discount granted Date of transaction Invoice No. of every transaction

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Conditions in claiming the discount granted as an additional item of deduction:

Only business establishments selling any of the qualified goods and services to Senior Citizens where an actual discount was granted may claim the deduction;

The seller must not claim the OSD

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Availment of Income Tax Exemption of SCA SC who is MWE, or whose income does not

exceed his personal exemption, will be exempt from income tax upon compliance with the ff: A SC must first be qualified by submitting a

certified true copy of OSCA ID Card Must file a sworn statement on or before Jan. 31

of every year that his taxable income of the previous year does not exceed the poverty level

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Availment of Income Tax Exemption of SC If qualified, his name shall be recorded by the

RDO in the Master List of Tax-Exempt SC for that particular year

A senior citizen who is entitled to substituted filing is not required to file ITR pursuant to RR 2-98 as amended.

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Special Features The total amount of the claimed tax deduction

net of VAT shall be included in their gross sales/receipts for tax purposes and shall be subject to proper documentation

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LIABILITY FOR OTHER INTERNAL REVENUE TAXES

(1) VAT or other percentage taxes

(2) Donor’s tax

(3) Estate tax

(4) Excise tax on certain goods and

(5) Documentary stamp tax

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Exemption from VAT Sales of goods and services under Sec. 4 & 5

of this RR shall be exempt from VAT; The seller must follow the invoicing

requirement (RR 16-2005). If using POS, the machine tape must segregate exempt sales from taxable sales;

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Exemption from VAT The input tax attributable to the exempt sale

shall not be allowed as input tax credit and must be closed to cost or expense account.

The exemption shall not cover indirect taxes

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Personal Exemptions of Benefactors of Senior Citizen The benefactor shall be entitled to claim the

basic personal exemption of P50,000 Not entitled to additional P25,000 If required to file an ITR, the benefactor shall

state therein the name, birtday and OSCA ID No. of the dependent senior citizen

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Additional Deduction for those Employing Senior Citizen Private establishments are entitled to

additional deduction of 15% of total amount paid as salaries and wages The employment shall have to continue for a

period of at least six (6) months The annual taxable income of SC does not excess

the poverty level. The SC shall submit sworn certification.

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Penalties and Sanctions 1st offense – Penalty of not less than P50K but

not more than P100k and imprisonment of not less than 2 yrs and not more than 6 yrs.

Subsequent violation - Penalty of not less than P100K but not more than P200k and imprisonment of not less than 2 yrs and not more than 6 yrs.

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Penalties and Sanctions Any person who abuses the privileges shall be

punishes with a fine of not less than P50K and not more than P100K and imprisonment of not less than 6 months

For alien or foreigner – may suffer deportation

If the offender is a corporation/organization, the official/s directly involved shall be liable.

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IllustrationGIVEN DATA:

Sales - Exclusive of VAT 10,000.00 * 200,000.00 Cost of sales -VAT exclusive 8,000.00 150,000.00 Operating Expenses 33,600.00 ***Inclusive of discount** inclusive of input tax of P3,600Required: Compute for the ff: 1. VAT Payable 2. Taxable Income

SALES TO SC

TOTAL SALES FOR THE MONTH

EXCLUDING SALES TO SC

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VAT Payable

Sales 200,000.00 Output Tax 24,000.00 Less Input Tax from Purchases 18,000.00 from Purchases (sold to SC) - Operating Expenses 3,428.57 *** 21,428.57 VAT Payable 2,571.43 ***Input Tax on Operating Expenses 3,600.00 Add: Pro-rated VAT on OPEX (P3,600 x 10/210) x 200/210

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Taxable IncomeSales 210,000.00 Cost of Sales 158,960.00 *Gross Income 51,040.00 Senior Citizen Discount 2,000.00 Operating Expenses 30,171.43 **Taxable Income 18,868.57 * Cost of Sales

VAT taxable Sales 150,000.00

Sales to Exempt Person + VAT component 8,960.00

158,960.00 **Operating Expenses -net of VAT 30,000.00 Add: Pro-rated VAT on OPEX (P3,600 x 10/210) 171.43

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Daghang salamat!

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