BENEFITS AND PRIVILEGES OF SENIOR CITIZEN Presented by: Abolhasan S. Balindong, CPA Revenue Officer RDO 113-West Davao City 1

BENEFITS AND PRIVILEGES OF SENIOR CITIZEN

Presented by:

Abolhasan S. Balindong, CPARevenue Officer

RDO 113-West Davao City

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

RMC 45-2010 RR 7-2010 RR 8-2010

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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

Comparison of 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 4

Comparison of 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.

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

d to l - plus other benefits

and privileges

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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PRIVILEGES for the SENIOR CITIZENS

a. The grant of twenty percent (20%) discount and exemption from the value added tax (VAT) on the sale of the following goods and services:

1. on the purchase of medicines

2. on the professional fees of attending physician/s

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3. on the professional fees of licensed professional health providing home health care services

4. on medical and dental services, diagnostic and laboratory fees

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5. in actual fare for land transportation travel

6. in actual transportation fare for domestic air transport services and sea shipping vessels and the like

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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, leisure and amusement

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9. on funeral and burial services for the death of senior citizens

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c. the grant of a minimum of five percent (5%) discount relative to the monthly utilization of water and electricity supplied by the 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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d. Exemption from training fees for socioeconomic programs

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

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

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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

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PRIVILEGES for the SENIOR CITIZENSi. The retirement benefits of retirees shall be

regularly reviewed to ensure their continuing responsiveness and sustainability

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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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Special Discounts to Senior Citizens Centers 50% discount on the ff consumption by

Senior Citizens Center and Residential Care/Group Homes that are run by gov’t. or non-stock, non-profit domestic corp: Water Electricity Telephone

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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 INCOME3) 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 %

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TAXES ON PASSIVE INCOME4) 10% final withholding tax on cash and/or

property dividends

5) Capital gains tax from sales of shares of stock not traded in the stock exchange

6) 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.

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Special Features 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 age

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Special Features SC can avail of the promotional discount or

the discount provided herein, whichever is higher If the promotional discount is less than the

minimum discount, the seller shall increase the discount to meet the minimum.

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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.

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Tax Treatment of the Discount Granted to SC 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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Comparison on Benefits

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RA 9994 Old Law RegularInvoice Price 11,200.00 11,200.00 11,200.00 Less: 12% VAT *1,200.00 Sales -exclusive of VAT 10,000.00 11,200.00 11,200.00 Less 20% Discount 2,000.00 2,240.00 Payable by SC 8,000.00 8,960.00 11,200.00

*[(11,200 / 112%) x 12%] = P1,200

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.

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Tax Treatment of the Discount Granted to SC 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:

Cash P 40

Senior Citizen Discount Expense 10

Sales P50

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Tax Treatment of the Discount Granted to SC

The discount granted by the seller of qualified goods and services 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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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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The discount can only be allowed as a deduction from gross income for the same taxable year that the discount is granted;

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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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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, except water and electricity (RR 8-2010);

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 exceed

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

punished 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 PayableSales 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 Total 3,428.57

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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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The end

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Documents

BENEFITS AND PRIVILEGES OF SENIOR CITIZEN Presented by: Abolhasan S. Balindong, CPA Revenue Officer RDO 113-West Davao City 1