TAX IMPLICATION
Senior Citizens Act of 2010
Presented by:
Susan D. Tusoy
Asst. Chief, Assessment Division, RR 19
1
Legal Basis



RA 7432 / RR 2-94
RA 9257 / RR 4-2006
RA 9994



RMC 45-2010
RR 7-2010
RR 8-2010
2
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 employees
3
PRIVILEGES for the SENIOR
CITIZENS
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
6
PRIVILEGES for the SENIOR
CITIZENS
9. on funeral and burial services for the death
of senior citizens
8
PRIVILEGES for the SENIOR
CITIZENS
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


Meters are registered in the name of SC
residing therein
Monthly consumption does not exceed


100kwh for electricity
39 cubic meters for water
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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
11
PRIVILEGES for the SENIOR
CITIZENS
f. Free vaccination against the influenza
virus and pneumococcal disease for
indigent senior citizen patients
12
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
13
PRIVILEGES for the SENIOR
CITIZENS
i. The retirement benefits of retirees shall be
regularly reviewed to ensure their
continuing responsiveness and
sustainability
14
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
16
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.
17
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
3) Withholding taxes on interest income on preterminated 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 INCOME
4) 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.
21
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.
22
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.
23
Tax Treatment of the Discount
Granted to SC

Example:
Selling Price (10 pcs. Medicine X @P1,000) P10,000.00*
Less 20% Discount
2,000.00
Amount payable by the Senior Citizen P 8,000.00
*Net of VAT of P1,200.00 (12%)
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Comparison on Benefits
Invoice Price
Less: 12% VAT
Sales -exclusive of VAT
Less 20% Discount
Payable by SC
RA 9994 Old Law Regular
11,200.00 11,200.00 11,200.00
1,200.00
*
10,000.00 11,200.00 11,200.00
2,000.00 2,240.00
8,000.00 8,960.00 11,200.00
*[(11,200 / 112%) x 12%] = P1,200
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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.
27
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:
Debit –Cash
P 8,000.00
Senior Citizen Disc. Exp.
2,000.00
Credit – Sales
P10,000.00
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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
31
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;
32
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;
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Conditions in claiming the discount granted
as an additional item of deduction:

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
35
Availment of Income Tax
Exemption of SC
A 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
36
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.

37
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
38
LIABILITY FOR OTHER
INTERNAL REVENUE TAXES
(1)
(2)
(3)
(4)
(5)
VAT or other percentage taxes
Donor’s tax
Estate tax
Excise tax on certain goods and
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;
40
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
41
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
42
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.
43
Illustration
GIVEN DATA:
Sales - Exclusive of VAT
Cost of sales -VAT exclusive
Operating Expenses
*Inclusive of discount
** inclusive of input tax of P3,600
Required: Compute for the ff:
1. VAT Payable
2. Taxable Income
SALES TO SC
10,000.00 *
8,000.00
TOTAL SALES
FOR THE
MONTH
EXCLUDING
SALES TO SC
200,000.00
150,000.00
33,600.00 **
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VAT Payable
Sales
Output Tax
Less Input Tax
from Purchases
from Purchases (sold to SC)
Operating Expenses
VAT Payable
***Input Tax on Operating Expenses
Add: Pro-rated VAT on OPEX (P3,600 x 10/210)
Total
200,000.00
24,000.00
18,000.00
3,428.57 ***
3,600.00
x 200/210
3,428.57
21,428.57
2,571.43
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Taxable Income
Sales
Cost of Sales
Gross Income
Senior Citizen Discount
Operating Expenses
Taxable Income
210,000.00
158,960.00 *
51,040.00
2,000.00
30,171.43 **
18,868.57
* Cost of Sales
VAT taxable Sales
Sales to Exempt Person + VAT component
**Operating Expenses -net of VAT
Add: Pro-rated VAT on OPEX (P3,600 x 10/210)
150,000.00
8,960.00
158,960.00
30,000.00
171.43
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Daghang salamat!
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