BENEFITS AND PRIVILEGES OF SENIOR CITIZEN

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Presented by:

Ms. Susan D. Tusoy, CPA, MPSAsst. Chief, Assessment Division

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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PRIVILEGES for the SENIOR CITIZENS

• Example:Total Selling Price (inclusive of VAT) 199.95Less: 12% VAT 21.42Total Selling Price (net of VAT) 178.53Less: 20% discount 35.71Amount Payable by the Senior Citizen 142.82

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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

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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

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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 undiscounted SP of the goods sold or services rendered.

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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

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Tax Treatment of the Discount Granted to SC

• 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

• The discount granted by the seller of qualified goods and services, i.e., the promotional discount, 20% discount, 5% discount on water and electricity and 50% discount of utilities for SC Centers

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Tax Treatment of the Discount Granted to SC

Cont.

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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Tax Treatment of the Discount Granted to SC

• Example:Total Selling Price (inclusive of VAT) 199.95Less: 12% VAT 21.42Total Selling Price (net of VAT) 178.53Less: 20% discount 35.71Amount Payable by the Senior Citizen 142.82

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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 Credit Cash 142.82Senior Citizen Discount Expense 35.71 Sales

178.53

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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;

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

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

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

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Exemption 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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Illustration

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GIVEN 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

VAT Payable

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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 Total 3,428.57

Taxable Income

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Sales 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 Total 30,171.43

Income Tax of Senior Citizen

• Generally, qualified SC deriving returnable income, whether from compensation or otherwise, are required to file and pay income tax;

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Income Tax of Senior Citizen

• 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

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Income Tax of Senior Citizen

• 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

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TAXES ON PASSIVE INCOME

2) 7.5 % 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 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 INCOME

4) 10% final withholding tax on cash and/or property dividends

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TAXES ON PASSIVE INCOME

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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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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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:

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Availment of Income Tax Exemption of SC

–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

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Availment of Income Tax Exemption of SC

• 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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Additional Deduction for those Employing Senior Citizen

• Private establishments are entitled to additional deduction of 15% of total amount paid as salaries and wages

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Additional Deduction for those Employing Senior Citizen

–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.

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Penalties and Sanctions

• 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

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Penalties and Sanctions

• 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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Thank you!!!

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