Building our future by fostering our past

(First of two parts)

We Filipinos are known, among other things, for our hospitality, our gleaming smile in the face of adversity and of course, the poster boy of the Philippines as of the moment, Manny “Pacman” Pacquiao. But one of the Filipino traits that I am most proud of that is still deeply ingrained in the Filipino family is our high regard for the elderly. This can be seen in every Filipino home wherein it is customary to do the “mano” to the senior members of a household as a gesture of respect and reverence.

This distinct and estimable Filipino attribute is very much evident with the passing of Republic Act No. 9994 otherwise known as the “Expanded Senior Citizens Act of 2010”. With the ratification of this important piece of legislation, the elderly or senior Filipino citizen, defined as “any resident citizen of the Philippines at least 60 years old” (Section 3 Republic Act No. 9994), is given benefits and privileges that promote the improvement of his/her total well-being and their full participation in society.

One notable privilege conferred to senior citizens by RA No. 9994 is the grant of 20-percent discount and exemption from the value-added tax (VAT) on the purchase of medicines, medical supplies and equipment and availment of medical and dental services subject to the rules regulations issued by the Department of Health (DOH) as stated in Section 4 (a) (1) Republic Act No. 9994. This 20-percent discount and VAT exemption is also applied to actual fare for land transportation travel and domestic air transport services and sea shipping vessels and the like.

Furthermore, the said privileges apply to the utilization of services in hotels and similar lodging establishments, restaurants, funeral and burial services for the death of senior citizens, recreational centers and places of leisure. Establishments supplying any of the listed goods and services may claim the discount as a tax deduction based on the cost of goods sold or services rendered to senior citizens. Such sale to senior citizens being exempt from VAT, the selling price to be charged by the seller must be net of VAT. In so doing, in order to be allowed to claim the discount as a deduction, the amount of sales that must be reported for tax purposes of the said establishments is the undiscounted selling price and not the amount of sales of the discount (Section 7 Revenue Regulations No. 7-2010). Lastly, the input tax attributable to the exempt sale shall not be allowed as an input tax credit and must be closed to cost or expense account by the seller. (Section 10 Revenue Regulations No. 7-2010).

These benefits are not without limitations though. These limitations are laid down in the provisions of Revenue Regulations No. 7-2010 which is the Implementing Rules of RA No. 9994 issued by the Bureau of Internal Revenue (BIR). The implementing rules provide that such purchases and services availed by the senior citizen shall be “for their exclusive use and enjoyment or availment”. Also, the other government agencies (i.e.DOTC, DTI, DA, DILG, DOT) are mandated by law to issue their respective rules and guidelines to implement these privileges to senior citizens.

To be continued

(McDonald G. Abalos is a supevising senior for Tax of Manabat Sanagustin & Co., CPAs, a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG in the Philippines. For comments or inquiries, please email [email protected] or [email protected])