TAXATION

FAR EASTERN UNIVERSITY – MANILA

SENIOR CITEZN AND PWDs (701)

Summary of Tax Incentives

Goods and services for their
exclusive use and enjoyment
or availment
Tax incentives for qualified
establishments selling of goods
and services
Private entities that improve or
modify their physical facilities
Water and electricity
consumption
Person with Disability
20% discount given, may be claimed as
a deduction
Additional deduction of 25% of total
salaries paid to disabled employees
Additional deduction of 50% of direct
cost of modification of physical facilities
Not Applicable
Senior Citizen
20% discount given, may be claimed as a
deduction
Additional deduction of 15% of total
salaries paid to senior citizen employees
Not applicable
Public utilities such as water and
electricity who gave 5% discount may
claim such as deduction

Electric consumption not exceeding 100

kw hrs and water consumption not
exceeding 30 m3.

Monthly utilization of water and electricity

provided that meter bases are under the
name of the senior citizen

Notes:
Senior Citizens Center and residential
care/group homes, at least fifty (50%)
per cent discount on the consumption
by a Senior Citizens Center and
residential care/group homes (electricity,
water and telephone)

A. Definition
Senior Citizen
Senior citizen or elderly refers to any Filipino who is a resident of the Philippines, and who is, 60 years old and above.

It may apply to senior citizens with "dual citizenship" status provided they prove their Filipino citizenship and have at
least 6 months residency in the Philippines

(PWDs )
A person with disability, whether minor or of legal age and who is a Filipino citizen, who may or may not be related to
his benefactor and who is living with and dependent upon such benefactor for his/her chief support shall qualify as a
dependent (Section 2 d, Revenue o Regulations No. 1-2009)

Person with disability shall refer to an individual suffering from restriction or different abilities, as a result of mental,
physical or sensory impairment to perform activity in a manner or within the range considered normal for human
being (Section 2 b, Revenue Regulations No. 1-2009)

B. Exemptions and Discount

Senior Citizen
If the returnable income of a Senior Citizen is in the nature of compensation income but he qualifies as a minimum
wage earner, he shall be exempt from income tax on the said compensation. He is also exempted from income tax if
his taxable income does not exceed his personal exemptions

All establishments, supplying certain goods and services availment, shall give a discount of 20%

The monthly utilization of water and electricity by the Senior Citizen supplied by public utilities will be subject to a 5%
discount.

1) Provided, That the individual meters for the foregoing utilities are registered in the name of the senior citizen
residing therein

2) Provided, further, That the monthly- consumption does not exceed one hundred kilowatt hours (100 kWh) of
electricity and thirty cubic meters (30 m3) of water

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3) Provided, furthermore, That the privilege is granted per household regardless of the number of senior citizens
residing therein

50% discount for electricity, water and telephone consumption if consumed by a Senior Citizen Center administered
by the Government or domestic NGOs organized and operated primarily for the purpose of promoting the well-being
of abandoned, neglected unattached or homeless Senior Citizens.

Sale of any goods and services to Senior Citizens shall be exempt from the value-added tax (e.g medicines,
professional fees of attending physicians and licensed health workers, medical and dental services, actual fare for land
transportation travel as well as air transport services and sea shipping vessels, utilization of services in hotels and
similar lodging places, restaurants and recreation centers, s admission fees charged by theatres, cinema houses, a
etc. funeral and burial services for the death of Senior Citizen)

(PWDs )
If the returnable income of a PWD is in the nature of compensation income but he qualifies as a minimum wage
earner, he shall be exempt from income tax on the said compensation. He is also exempted from income tax if his
taxable income does not exceed his personal exemptions

All establishments, supplying certain goods and services for their exclusive use and enjoyment or availment, shall give
a discount of 20%

PWDs are not entitled to the 5% discount on monthly utilization of water and electricity.

Not provided for PWD Center

Sale of any goods and services to PWDS shall be exempt from the value-added tax (e.g. medicines, professional fees
of attending physicians and licensed health workers medical and dental services, actual fare for land transportation
travel as well as air transport services and sea shipping vessels, utilization of services in hotels and similar lodging
places, restaurants and recreation centers admission fees charged by theatres, cinema houses, etc. funeral and burial
services for the death of PWD).

C. Only one discount

Senior Citizen

A Senior Citizen who is also a PWD Can claim only one discount

(PWDs )
A PWD who is also a Senior Citizen can claim only one discount

D. Higher discount may be availed

Senior Citizen
In the purchase of goods and services which have promotional discount, the senior citizen or, PWD can avail of the
promotional discount or the senior citizen/PWD discount, whichever is higher.

(PWDs)
In the purchase of goods and services which have promotional discount, the senior citizen or, PWD can avail of the
promotional discount or the senior citizen/PWD discount, whichever is higher.

E. Treatment of discount for income tax and VAT purposes

Senior Citizen
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 the gross income, net of value-added tax, if applicable,
for income tax purposes. and from gross sales or gross receipts of the business enterprise concerned, for VAT or other
percentage tax purposes

(PWDs)
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 the gross income, net of value-added tax, if applicable,
for income tax purposes. and from gross sales or gross receipts of the business enterprise concerned, for VAT or other
percentage tax purposes

F. VAT-exempt sale of goods with corresponding discount

Senior Citizen
Medicines, including influenza and pneumococcal vaccines;

Goods are limited to basic necessities (rice, com, bread excluding pastries and cakes; fresh, dried and canned fish;
pork, beef and poultry meat; eggs, fresh and processed milk; vegetables, coffee and creamer; sugar; cooking oil;
7. Senior Citizen and PWDs Page 2 of 6
salt; soap; firewood; charcoal and candles.);

Goods are limited to prime commodities (fresh fruits; flour; dried, processed and canned pork, beef and poultry meat;
canned sardines and tuna; noodles, onions; garlic; geriatric diapers; herbicides, poultry, swine and cattle feeds
veterinary products for poultry, swine and cattle nipa shingles, plyboard and batteries; electrical supplies and light
bulbs and steel wire.) (not mentioned for PWDs)

(PWDs)
Medicines, including influenza and pneumococcal vaccines;

Goods are limited to basic necessities (rice; corn; bread excluding pastries and cakes; fresh, dried and canned fish;
pork, beef and poultry meat; eggs; fresh and processed milk; vegetables; coffee and creamer; sugar, cooking oil; alt;
soap; firewood; charcoal and candles)

G. VAT-exempt of services with corresponding discount

Senior Citizen
Professional fees of attending physicians

Professional fees of licensed professional health workers (not mentioned for PWDs)

On medical and dental services, diagnostic and laboratory fees

Actual fare for land transportation in public utility buses, jeepneys, taxis, AUVs, shuttle services and public railways,
including LRT, MRT and PNR

Actual transportation fare for domestic air transport services and sea shipping vessels and the like

On the utilization of services in hotels and similar lodging establishments, restaurants and recreation centers

On admission fees charged by theatres, cinema houses and concert halls, circuses, carnivals, and other similar places

Funeral and burial services for death of Senior Citizen/PWD

(PWDs)
Professional fees of attending physicians

On medical and dental services, diagnostic and laboratory fees

Actual fare for land transportation in public utility buses jeepneys, taxis, AUVs, shuttle services and public railways
including LRT, MRT and PNR

Actual transportation fare for domestic air transport services and sea shipping vessels and the like;

On the utilization of services in hotels and similar lodging establishments, restaurants and recreation centers

On admission fees charged by theatres, cinema houses and concert halls, circuses, carnivals, and other similar places;

Funeral and burial services for death of Senior Citizen/PWD

H. Proof to submit to avail of the exemption and discount

Senior Citizen
ID issued by the Office of the Senior Citizen Affairs (OSCA) of the place where the senior citizen resides; Provided,
that the identification card issued by the particular OSCA shall be honoured nationwide.

Passport of the senior citizen concerned.

Other document that establish that the senior citizen is a citizen of the Republic and is at least sixty (60) years of age
as further provided in the implementing rules and regulations.

(PWDs)
ID issued by the city or municipal mayor or the barangay captain of the place of residence.

Passport of the PWD

Transportation discount fare ID issued by National Council for the Welfare of Disabled Persons (NCWPD)

I. Tax incentive for qualified establishments selling goods and services

7. Senior Citizen and PWDs Page 3 of 6

Senior Citizen
Fifteen percent (15%) of the total amount paid as salaries and wages to senior citizens shall be allowed as additional
deduction.

Conditions for the allowance of deduction:

a. The employment shall have to continue for a period of at least six (6) months
b. The annual taxable income of the senior citizen does not exceed the poverty level.

Establishments granting sales discount to Senior Citizens (promotional discount, the 20% discount, the 5% discount
on water and electric consumption, or the 50% discount on electricity, water and telephone consumption by Senior
Citizen Center) on their sales of goods and/or service shall be entitled to deduct the said sales discounts from their
gross income subject to certain conditions

(PWDs)
Private entities that employ disabled persons who meet e the required skills or qualifications, either as regular
employee, apprentice or learner, shall be entitled to an additional deduction, from their gross income, equivalent to
twenty-five percent (25%) of the total amount paid as e salaries and wages to disabled persons.
Conditions:
a. That such entities present proof as certified by the Department of Labor and Employment that disabled persons are
under their employ
b. The disabled employee is accredited with the Department of Labor and Employment and the Department of Health
as to his disability, skills and qualifications.

Private entities that improve or modify their physical facilities in order to provide reasonable accommodation for
disabled persons shall also be entitled to an additional deduction from their net taxable income, equivalent to fifty
percent (50%) of the direct costs of the improvements or modifications.

This does not apply to improvements or modifications of facilities required under Batas Pambansa Bilang 344.

Establishments granting sales discount to PWD (promotional discount, the 20% discount) on their sales of goods
and/or service shall be entitled to deduct the said sales discounts from their gross income subject to certain
conditions.

Exemption does not apply

Senior Citizen
20% final withholding tax on certain passive income

15% final withholding tax on interest from a depository bank under EFCDS

10% final withholding on dividends, share in the net income, etc.

Capital gains tax from sale of shares of stock not traded in the stock exchange -15%

6% capital gains tax on presumed capital gain on sale of real property classified as capital asset

VAT or other Percentage Taxes, if he is self-employed or engaged in business or practice of profession

Donor's Tax

Estate Tax

Excise Tax on certain goods

Documentary Stamp Tax

(PWDs)
20% final withholding tax on certain passive income

15% final withholding tax on interest from a depository bank under EFCDS

10% final withholding on dividends, share in the net income, etc.

Capital gains tax from sale of shares of stock not traded in the stock exchange 15%

6% capital gains tax on presumed capital gain on sale of real property classified as capital asset

VAT or other Percentage Taxes, if he is self-employed or engaged in business or practice of profession

7. Senior Citizen and PWDs Page 4 of 6

Donor's Tax

Estate Tax

Excise Tax on certain goods

Documentary Stamp Tax

PROBLEMS
1. Dess Able, a person with disability, is the accountant of Phil Ai Company earning a salary of P30,000 a month.
Which of the following is not a tax consequence on Dess?
a. She is not subject to value added tax.
b. She is entitled to 20% discount on certain establishments.
c. The establishment may be entitled to a special deduction from gross income which is equivalent to the
amount granted as discount.
d. If she is also a senior citizen, she will be entitled to another 20% discount exclusive of the discount
allowed as PWD.

Items 2 to 5 are based on the following information:

2. Senor C.T. Zen, 65 years old is a person with disability. He purchased medicines from a drugstore with a list
price of P22,400. If the amount is gross of discount and value-added tax, how much should Senor Zen pay to
the drugstore?
a. P22,400
b. 20,000
c. 16,000
d. 18,400

3. In the preceding questions, how much special deduction from gross income can be claimed by the drugstore in
computing its taxable income?
a. P2,400
b. 4,000
c. 8,000
d. 6,400

4. In the preceding question, how much should Zen pay if he is not a senior citizen?
a. P22,400
b. 20,000
c. 16,000
d. 18,400

5. In the preceding question, if Mr. Zen avails of the 20% discount as a PWD which of the following cards is not
acceptable for his proper identification?
a. ID card issued by the local government unit where he is residing.
b. ATM card / credit card.
c. Passport of the person with disability.
d. ID card issued by the National Council for the Welfare of Disabled Persons.

6. In question 4, how much special deduction from gross income can be claimed by drugstore?
a. P2,400
b. 4,000
c. 4,800
d. 6,400

7. Which of the following statements is true?

a. A Hongkong national who comes to the Philippines for a tourist visit in Boracay shall be entitles to a 20%
discount on plane fare and hotel accommodations.
b. A senior citizen who buys “fishball” from an ambulant vendor shall be entitled to a 20% discount on
amount which is net of VAT.
c. The monthly electric bill in a household where a senior citizen lives shall be subject to 5% discount based
on the amount.
7. Senior Citizen and PWDs Page 5 of 6
 d. A multi-millionaire senior citizen shall be also entitled to the 20% discount.

8. UrangGurang, 70 years old, took an air-conditioned Philtranco bus in Naga City with a normal fare of P800
from Naga to Manila. How much should be paid by UrangGurang to the bus conductor?
a. P800.00
b. 160.00
c. 571.43
d. 640.00

9. In the preceding question, suppose he took an airplane (instead of bus) in going to Manila and the fare
(inclusive of taxes and gross of discount) was P1,680. How much fare should be paid by UrangGurang?
a. P1,680
b. 1,344
c. 1,500
d. 1,200

10. Super Lolo, 90 years old, tendered a lunch for his two grandchildren, Karen and Isabel in one popular fastfood
chain in town. Karen ordered spaghetti, drinks and burger with an invoice price of P85.00, gross of VAT. Isabel
ordered chicken with rice and drinks with an invoice price of P92.00, while Super Lolo ordered chicken with
spaghetti and drinks worth P106.40, gross of VAT. How much should be paid by Super Lolo for the foods
ordered?
a. P283.40
b. 217.60
c. 253.00
d. 234.06

Problem 11: ABC Corporation has a soft spot for senior citizens and persons with disability (PWDs). As such, it hires
senior citizens and PWDs to work in the company for at least six (6) months. The following data for the current year
taken from the books of accounts are provided by the corporation:
Gross sales P30,000,000
Sales discount (excluding discounts to senior citizens and PWDs) 4,000,000
Cost of sales 10,000,000
Salaries of senior citizens 1,000,000
Salaries of PWDs 600,000
Physical facilities in order to provide reasonable accommodation for 400,000
PWDs(fully deductible)
Other operating expenses 6,000,000
During the same period the corporation also allows 20% discount to senior citizens and PWDs who buy goods from the
company. The sales are as follows (not part of the gross sales above):
Sales to senior citizens P1,600,000
Sales to PWDs 1,000,000
Required:
1. How much is the total discount to be given to senior citizens and PWDs?
2. How much is the total itemized deductions including the special itemized deductions?
3. How much is the output VAT of the corporation?
4. How much is taxable net income for the year?

7. Senior Citizen and PWDs Page 6 of 6