VAT Exemption and Disco: sor Citi and PWDs unts to Senior Citizens Under RA 9994, otherwise known as the Expanded Senior Citizens Act of 2010, Senior Citizens are entitled to the following benefits: 1, Vat exemption and 20% discount on certain items; and 2. 5% special discount on basic necessities and prime commodities Persons with Disability (PWDs), are likewise entitled to the aforementioned 20% and 5% discounts as provided under RA 7277, otherwise known as the Magna Carta Law for PWDs, as amended. DEFINITION OF TERMS: : Senior Citizen or Elderly - refers to any Filipino citizen who is a resident of the Philippines, “dual citizenship” status sixty (60) years old or above. It may apply to senior citizens with s citizenship and have at least six (6) months residency in the provided they prove their Filipino n h Philippines (RA 9994 otherwise known as “Expanded Senior Citizens Act of 2010" and its elated revenue regulations! circulars RR 7-2010, RR 8-2010, RMC 38-2012). n with permanent! legal residence in the Philippines, and ted to a foreign country, has returned to the Philippines in, and whose immigrant visa has been surrendered to Resident Citizen — a Filipino Citize shall include one, who, having migral with a definite intention to reside therelt the foreign government. ith Disability shall refer to an individual suffering from restriction or different Fan ith Diy et a gr peo oh manner or within the range considered normal for human being ( 299Valte Added, VAT Exempt Sales and 20% Discount to Senior Citizens and Pwo, The following items sold to a senior citizen (sc) or PWD are vat exempt and will entitle the SC/PWD to a minimum discount of 20%: eeu 4a eae Tae keaa ede’. Gea) | 1. Medicine and Drug Purchases including influenza and pneumococcal vaccines and such other essential medical supplies, accessories and equipment. 2. Professional fees of attending physicians in all private hospitals, medical faciities, ‘outpatient clinics and home health care services, 3. Professional fees of licensed health workers providing home health care services in all private hospitals, medical facilities, outpatient clinics, and home health care services 4, Medical and dental services, diagnostic and laboratory fees 5. On actual fare for land transportation travel 6 Toll fees are not the same as ‘fares’. Hence, it is not subject to the 20% Senior Citizen Discount. 7. In actual fare for domestic air transport and sea shipping vessels and the like 8. On the utilization of services in hotels and similar lodging establishments, restaurants, recreation centers 9. On admission fees charged by theaters, cinema houses and concert halls, circuses, camivals and other similar places of culture, leisure and amusement. 10. On funeral and burial services of senior citizens, 1 On the fees and charges relative fo the utization all services in hotels and similar ong establishments; restaurants and recreation cents On admission fees charged by theaters, cingns houses, concert halls, circuses, camivals and opr similar places of culture, leisure and amusement On the purchase of medicines in all drugstores, (On medical and dental services including diagnos, and laboratory fees such as, but not limited te, rays, computerized tomography scans and blogg tests, and professional fees of attending doctors in all government facilities, subject to the guidelines be issued by the Department of Health (DOH), coordination with the Philippine Health insurance | Corporation (PhilHealth); | On medical and dental services including diagnoste and laboratory fees, and professional fees of attending doctors in all private hospitals and | medical facilities, in accordance with the rules and regulations to be issued by the DOH, in coordinaton with the PhilHealth; On fare for domestic air and sea travel On actual fare for land transportation travel such as, but not limited to, public utility buses or jeepneys (PUBsIPUJs), taxis, asian utility vehicles (AUVS), shuttle services and public railways, including light Rail Transit (LRT), Metro Rail Transit (MRT) and Philippine National Railways (PNR); and On funeral and burial services for the death of the | PWD: Provided, That the beneficiary or any perso | who shall shoulder the funeral and burial expenses of the deceased PWD shall claim the discount under this rule for the deceased PWD upo” presentation of the death certificate. Such expenses | shall cover the purchase of casket of Um. embalming, hospital morgue, transport of the body ‘o intended burial site in the place of origin, butsh2 exclude obituary publication and the cost of memorial lotValee Added Tae RULE FOR RESTAURANTS (RR 7-2010) item: ed hacia shall be for the sale of food, drinks, dessert and other consumable y the establishments, including value meals and promotional meals, caer the consumption of the general public. Condiments and side products fall within the ambit of “other consumable items served by the establishments”. The 20% discount and vat exemption for restaurants shall apply to: Dine in, take-out, take-home, drive-thru, deli . , j , delivery orders (excluding bulk orders), called-in or phoned-in orders. Bulk orders are within the context of pre-contracted or pre-arranged group meals or packages, arid hence, not entitled to 20% discount and VAT exemption es meals, group meals or group walk-ins including purchase of a whole cake and pizza fers. “Pasalubong” food items which are single-serving/solo meal for the personal and exclusive consumption of the Senior Citizen. However, other “pasalubong” food items (eg. box of biscocho, bottles or jars of ginamos, several packels of mango preserves, etc) which are not for the personal and exclusive consumption of the Senior Citizen are NOT entitled to 20% discount and VAT exemption. This limitation extends to “novelty items’ or non-consumables sold in restaurants NOTE: a > Meals primarily prepared and intentionally marketed for children and not for Senior Citizen's personal consumption are not entitled to 20% discount. (Rule IV, Article 7, Section 3(d) of the Rules and Regulations implementing RA No. 9994; Section 6 of RR No. 7-2010). > Generally, alcoholic beverages are not subject to the 20% discount and VAT exemption especially if purchased “in bulk”, ‘in buckets” or “in cases’. However, if served as a single serving drink, its purchase by a Senior Citizen is entitled to the 20% discount and VAT exemption. However, alcoholic beverages purchased in a bar, club or cabaret are exempt from VAT but subject to amusement tax of 18% under Section 125 of the NIRC, as amended. A Senior Citizen may still avail of the 20% discount on the purchase of an alcoholic drink but the discount shall be limited only to a single serving of an alcoholic beverage. Cigarettesicigars are not the food or essential items deemed subject to the 20% discount. Toll fees are not the same as “fares”. Hence, it is not subject to the 20% Senior Citizen Discount.Vale Added? a \d Amount Due i les discounts grant the sale of goods and services with sal ed pial sctablishments to senior citizens and PWDs shall be Computation of Discount an by business c computed in accordance with the following formula: Total sales inclusive of vat P41 ee Less: 12% vat; (P1,120 x 3/28) __(120)_ Total sales exclusive of vat** gob} : 20% discount*** En et Less: 20 ist —Pe0p Total amount due The amount of gross sales or gross receipts to be reported by the seller shall be the undiscounted amount of P1,000 (as provided in the illustration above). The discount granted shall be reported as deduction from the gross income of the seller instead of deducting the same to the amount of gross sales/receipts. The journal entries in the books of the seller shall be as follows: Cash Fan ~ P800 | Senior Citizen/PWD discount expense 200 Sales __P1,000 | SELLER IS NOT SUBJECT TO VAT The 20% sales discounts granted by non-vat sellers (i.e., subject to 3% Percentage Tax) shall be computed in accordance with the following formula: Total sales P1,120 Less: 20% discount (224) Total sales net of discount PP896 3% Percentage Tax (P1,120 x 3%) P33.6 The amount of gross sales or gross receipts to be reported by the ee oe be the undiscounted amount of P1,120 (as rovided in the deduction gee The discount granted shall be reported as Seerion om the gross income of the seller instead of deducting the '@ amount of gross sales/receipts.f , Valee Added Tag the journal entries in the books of the seller shall be as follows: Cash Senior Citizen/PWD di oo aaa D discount expense 224 pt 12 Percentage tax due expense P33.6 Cash/Percentage due payable P33.6 INPUT VAT ATTRIBUTABLE TO SALE TO SCs and PWDs Ttie input tax attributable to the vat exempt sale is considered as cost or an expense account by business establishments and shall not be allowed as input tax credit EXEMPTION FROM PERCENTAGE TAX While the Magna Carta Law for Senior Citizens and PWDs expressly provide for vat exemption on their purchase of certain goods and services, the law does not include exemption from the payment of Percentage Tax. GRANT OF 5% SPECIAL DISCOUNT for Senior Citizens (RR 7-2010 as amended by RR 8-2010 and RMC 38-2012). ent (5%) of the regular retail price of basic necessities and prime commodities as defined under Section 2 of the joint DTI-DA Administration Order No. 10-02, series of 2010, shall be granted to Senior Citizens on their purchases thereof, taking into consideration that said purchases shall be for the personal and exclusive consumption and/or enjoyment of the Senior Citizen (Section 3, Joint DTI-DA Administrative Order No. 10-02, Series of 2010). ‘efer to goods “vital to the needs of consumers, for istence” while prime commodities are goods that A special discount of five perc Basic necessities their sustenance and exi are “essential” to them = Basic Necessities * — Rice; Corn; Bread excluding pastries and cakes Fresh, dried and canned fish and other marine products * Fresh pork, beef and poultry meet + — Fresh eggsValee Added Teg Fresh and processed milk Fresh vegetables including root crops Coffee and coffee creamer Sugar; Cooking oil; Salt Powdered, liquid, bar laundry and detergent soap Firewood; Charcoal; Candles = Prime Commodities Fresh fruits; Flour Dried, processed and canned pork, beef and poultry meat Dairy products not faling under basic necessities Canned sardines, tuna Noodles; Onions; Garlic Geriatric diapers Herbicides Poultry, swine and cattle feeds Veterinary products for poultry, swine and cattle Nipa shingle, plyboard and construction nails Batteries Electrical supplies and light bulbs Steel wire Retailers - shall mean any natural or juridical person engaged in the business of selling consumer products directly to consumers, which shall include among others, supermarkets, grocery/convenience stores and shops but excluding stalls in food courts, food carts and sari-sari stoges with a capitalization of less than 100,000, public and private wet markets, talipapa and cooperative stores. Purchase of basic necessities and prime commodities are not exempt from vat (unless expressly provided as exempt under the law) such as: : Subject to Basic or Prime commodity VAT 5% disct. | 1.Sugar, coffee Ye: Ye | 2.Fresh fruits Ne ‘_ * | 3.Rice, corn ; 1 4.Bread . \e 4,Electrical supplies i e ap hee = amount of purchases shall not exceed P4,300 per calendar one oe of unused amount. A purchase booklet issued by OSCA 0 the retailer upon purchase of basic necessities and prime commodities, 304Valac Added. Tag 5% Special Discount to PWDs (RR 9-2019). Ds Cia heen Special discount of five percent (5%) of mn the preset from the value-added tax The ded, Paragraph) of “basic necessities wel 'Scount is limited to purchases not Per calendar week without carry- consumption and or enjoyment within the calenc i \dar week. that said amount shall be spent on at least four inde le y ae basic necessities and prime commodities. ee fe Basic necessities shalll include: 1. All kinds and variants of rice Corn All kinds of bread (pastries and cakes not included) Fresh, dried and canned fish and other marine products (including frozen and in various modes of packaging) 5. Fresh pork, beef and poultry meat 6. _ All kinds of fresh eggs (excluding quail eggs) 7. Potable water in bottles and containers 8. Fresh and processed milk (excluding milk labelled as food supplement) 9. Fresh vegetables including root crops 10. Fresh fruits £ 11. Locally manufactured instant noodles 12. Coffee and coffee creamer 13. All kinds of sugar (excluding sweetener) 14. All kinds of cooking oil 15. Salt 16. Powdered liquid, bar laundry and detergent soap 17. Firewood 18. Charcoal 19. All kinds of candles 20. Household liquefied petroleum gas, not more than 11kgs, LPG content once very five (5) months bought for LPG dealers 21. Kerosene, not more than 2 liters per month awn Prime commodities shall include: 1. Flour Dried, processed and canned pork, beef and poultry meat Dairy products not falling under the definition of basic necessities Onions and garlic Vinegar, patis and soy sauce Toilet/ bath soap Fertilizer NOWSON 305Valec lei,» 8. Pesticides 9, Herbicides 10. Poultry feeds, livestock feeds and fishery feeds 11. Veterinary products 12. Paper, school supplies 13. Nipa Shingle 14. Sawali 15. Cement, clinker, GI sheets 16. Hollowblocks 17. Plywood 2 18. Plyboard 19. Construction nails 20. Batteries (excluding cellphone and automotive batteries) 21. Electrical supplies and light bulbs 22. Steel wires Deduction from the Gross Income of the Seller The seller/establishment may claim the discounts granted (20% and/or 5%) to SCs and PWDs as deduction from gross income based on the net cost of the goods sold or services rendered Provided, however, that the cost of the discount shall be allowed as deduction from the 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 value-added tax, 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. Prohibition on the availment of double discounts A senior citizen who is at the same time a PWD can only claima single 20% discount on a particular transaction. Same rule shall apply 0 the 5% discount on basic necessities and prime commodities. The 20% and the 5% discounts may not also be claimed if the SC and PWD claims a higher discount as may be granted by the commercia establishment and/or under other existing laws or in combination wil . other discount program/s. In the purchase of goods and services whic are on promotional discount, the SC/PWD shall avail of either Hic on discount or the 20%/5% discount, whichever is higher be lees than 20%8%6 that must be given to the SC/PWD shall in n° cast4. Transportati i i Trans poration services sich isive use or enjoyment: NY ir and sea t . * Natio ransportati nal land transportation iver Hotels, resorts and , Sore c Restaurants ther similar lodging establishments Medicine and dru: € 9 pur Recreation centers. sss Sports equipment purch: ts € ase Admission fees privilege NORD All other goods and services sold by the foregoing establishments not otherwise included in the enumeration, as provided by law, shall not be granted with a discount privilege, notwithstanding ‘hat euch goods and services are in relation to the sale of goods and services for the actual and exclusive use or enjoyment of the qualified National Athletes and Coaches. VAT on the sale of goods and services with sales discounts granted by business establishments shall be computed in accordance with the following formula: Amount of sale (inclusive of vat) P1,120 Less: 12% vat; (P1,120 x 3/28) te (120). Total amount exclusive of vat** P1,000 Less: 20% discount** ___(200) Total amount net of discount and vat P800 Add: 12% VAT; (P1,000 x 12%)**** ___120_ TOTAL AMOUNT DUE 5, 9920% ted amount “The amount of sales to be reported shall be the undiscount “The discount granted shall not be deducted from sales or gross receipts of the sel itemized deduction from the gross incor +The VAT is computed based 0” undiscounted sales: ler but as an alified National Athletes ices shall be entitled to ing discounts to qu: 5 income, subject to Establishments granti and Coaches on their sale of goods oe deduct the said sales discount i conditions provided under RR 13-1 . an7Valee Added Te For percentage tax sellers, the amount of sales discounts ai shall be included for the purposes of computing the 3% percentan” tax and shall be included as part of the gross sales and/receipts ¢ income taxation purposes, but the sales discount granted shall » accounted as deduction from the gross income of the establishmen, for the same taxable year that the discount was granted. t Computation of discount on non-vat taxpayer: Sales/Receipts P1,120 Less: 20% discount*** __(224)_ Total amount due net of discount P896 Percentage Tax Due (P1,120 x 3%) P33.6 The amount of sales discount granted shall be allowed as itemize deduction from gross income for the same taxable year that the discount was granted provided that the taxpayer is not availing Optional Standard Deduction (OSD). The gross selling price and the sales discount must be separately indicated in the official receipt or sales invoice issued by the establishment for the sale of goods or services to qualified National Athletes and Coaches. Only the actual amount of sales discount not exceeding 20% of the gross selling price or gross receipts can be deducted from the gross income, net of vat if applicable, and shall be subject to proper documentation. Provided, however, that if the establishment granting the discount availed of the OSD or opted to be taxed at 8% income tax rate, if applicable, the sales discount given cannot be claimed as allowable deduction from the gross income. Prohibition on the availment of double discounts The foregoing privileges shall not be claimed if the National Athletes and Coaches claims a higher promotional discount as may be granted by the commercial establishment and/or under other existing laws or in combination with other discount program(s). National Athletes and Coaches who are at the same time a seni" citizen or PWD can only claim a single 20% discount on a particular sale transaction.Value Added Tag MIXED BUSINESS TRANSACTIONS A Vat registered person m: : ay be engaged in a combination of sales subject to vat, zero-rated vat, and vat exempt transactions. For vat purposes, this is known. as mixed business transactions. The main concern in mixed business tra ion i of input Vat. nsaction is the allocation or apportionment A vat registered person who i i ions. is also engaged in transactions not subject to vat shall be allowed of Input tax credit as follows: a. Total input tax which can be directly attributed to transactions subject to vat (except vat taxable sales of goods and services to the government or GOCCs); and b. Ratable Portion of any input tax which cannot be directly attributed to either activity (allocation shall be on the basis of sales volume) TABLE 8-11: VAT PAYABLE ON MIXED TRANSACTIONS Output vat Pax Less: Input vat = Directly attributed to vatable transactions (xx) + Not directly attributed (mixed transactions) to vatable transactions computed as follows per RR 14-2005: Taxable sales private entities x input tax** (xx) Total Sales* x input tax" (10x) Taxable sales gov't Total Sales* Exempt sales x input tax™* NA‘ Total Sales* Balance PXXXx Less: 5% withholding vat on sales made to the government = _(xxx’ VAT Payable Pxxx_ le input vat is limited to standard input vat. As discussed of to the government, the allowable eed fard input vat is closed to either in the preceding pages, any difference between the actual and stand expenselcost or income, as the case may be ‘**treated as expense or costaN Valte Aded'% ILLUSTRATION 23: A taxpayer is engaged in the sale of VAT taxable goods and at the same time is also en | in non-VAT business, in the same business establishment. The following data for the ‘gate | year were provided for purposes of determining the correct amount of vat payable: ‘Able | Sales (subject to vat, net) . P15,000 09 | Sales (subject to other percentage taxes, net) 5,000,009 | Purchase of services directly attributable to vatable sales (net) 2,000 009 Purchase of supplies directly attributable to vatable sales (net) 2,000,009 | Purchase of supplies directly attributable to vatable sales 800,000 | (from non-vat suppliers) | Purchase of services attributable to both vatable and non-vatable sales 1,120,009 | (gross of vat) | Purchase of supplies attributable to both vatable and non-vatable sales 1,000,009 | (net of vat) | REQUIRED: DETERMINE THE VAT PAYABLE. Answer: P1,140,000 Output vat (P15M x 12%) P1,800,000 Input vat: Directly attributable to vatable sales (P4M x 12%) (480,000) Input vat on purchase of goods/services used in both types (180,000) of businesses [(P1,120,000 x 3/28) + (1M x 12%)] x 15/20* VAT PAYABLE “P1,140,000 *ratio of sales subject to vat over total sales i