Senior Citizen Discounts

Someone asked me, "I have a friend who...

owns a hardware. One of his customers is a senior citizen and is claiming VAT exemption for his purchase of paint. Is he correct?"

My answer is the customer is wrong. Indeed, RA 9994 recently granted VAT exemption to senior citizens, in addition to the regular discount of 20% they used to enjoy. However, this exemption is limited. IRR for RA 9994 (Expanded Senior Citizen Act of 2010)

First, to qualify as a senior citizen, one must be a Filipino over 60 years old with a valid senior citizen ID card.

Second, under R.A. 9994, the following are the benefits of Senior Citizens:

• 20 percent discount and exemption from value-added tax (VAT) on the purchase of these goods and services

- Medicine and Drugs

- Essential medical Supplies

- Medical and dental services in private facilities

- Professional Fees of physicians

- Air and sea transport

- Public land transportation

- Hotels, restaurants, recreation centers

- Funeral and burial services

• five percent discount on electric and water consumption provided that the individual meters for the utilities are registered in the name of the senior citizen and that monthly consumption should not exceed 100 kilowatt hours of electricity and 30 cubic meters of water;
• free vaccination against the influenza virus and pneumococcal disease for poor seniors;
• P2,000 death benefit assistance; and
• monthly social pension of P500 for indigent older persons.# (DSWD-Social Marketing Service) June 18, 2010

In addition, senior citizens are entitled to exemption from payment of individual income tax provided he is considered to be minimum wage earner under RA 9504.

Private entities that shall employ senior citizens as employees upon effectivity of the Act, shall be entitled to an additional deduction from their gross income, equivalent to fifteen percent (15%) of the total amount paid as salaries and wages to senior citizens.

In the case under consideration, the purchase of paint is not listed in the discount/exemption provided by law. The senior citizen, even if he qualifies under the first item, cannot claim such exemption simply because he is not using those services expressly exempted. Under the law, exemptions are strictly construed against the claimant.

The establishment may claim the discounts provided herein as tax deductions based on the cost of the goods sold or services rendered: Provided, That the cost of the discount shall be allowed as deduction from gross income for the same taxable year that the discount is granted: Provided, further, That the total amount of the claimed tax deduction net of VAT, if applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to proper documentation and to the provisions of the National Internal Revenue Code (NIRC), as amended.