QuestionsQuestions (BIR REVENUE REGULATIONS NO. 7-2010)
RR No. 7-2010 is issued pursuant to Section 244 of the National Internal Revenue Code (Tax Code), in relation to Section 2 of Republic Act (RA) No. 9994 (Expanded Senior Citizens Act of 2010) and the IRR provisions. It prescribes guidelines for: (1) income tax exemption of senior citizens; (2) VAT exemptions and rules for VAT-registered sellers granting discounts to senior citizens; (3) tax implications for establishments giving discounts; (4) tax treatment when benefactors provide care/support; and (5) privileges of private entities employing senior citizens.
A Senior Citizen is any Filipino citizen who is a resident of the Philippines and is 60 years old or above. Dual citizens may qualify if they prove Filipino citizenship and have at least 6 months residency in the Philippines.
Generally, qualified senior citizens deriving returnable income must still file income tax returns and pay tax as they file the return. However, exemption from income tax applies if: (1) compensation income earners qualify as minimum wage earners under RA 9504; or (2) aggregate gross income does not exceed their personal exemptions (basic and additional). If income exceeds personal exemptions, they are not exempt and generally must file.
No. RR No. 7-2010 states that the exemption will not extend to all types of income. The senior citizen can still be liable for other internal revenue taxes such as final withholding taxes on interest, royalties (with specified rates and exceptions), prizes (with exceptions), dividends, capital gains tax in specific instances, and presumed capital gains from real property (subject to rules and exclusions like principal residence).
The sales discount must be at least 20% of the gross selling price for eligible goods/services. For water and electricity from public utilities, the minimum discount is 5%.
Examples include: (1) medicines and essential medical supplies/accessories/equipment; (2) professional fees of attending physicians in private hospitals/clinics (based on charged compensation); (3) medical and dental services/diagnostic and laboratory fees; (4) actual fare for land transportation in public utilities (PUBs/PUJs/taxis/shuttles/railways like LRT/MRT/PNR); (5) fares for domestic air transport and sea shipping based on actual fare/advanced booking; (6) hotel and lodging services; (7) restaurant/consumable items; (8) admission fees (theaters/cinemas/concert halls/museums/parks); and (9) funeral and burial services for the deceased senior citizen.
It means the purchase/availment must be for the senior citizen’s personal consumption or personal use only. Proxies/authorization for non-senior citizens are not honored for dine-in privileges, and bulk orders or contracted party packages are not covered. The goods/services must relate to the senior citizen’s own consumption/transaction.
RR No. 7-2010 requires that food/drinks/consumables purchased by the senior citizen must be processed separately as an independent transaction from non-eligible companions, to ensure eligibility for the 20% discount and VAT exemption for the senior citizen’s portion. If all diners are senior citizens presenting valid IDs, each is entitled to the 20% discount and VAT exemption.
Yes, the 20% discount applies to take-out/take-home/drive-thru orders excluding bulk orders, as long as it is the senior citizen who is present and personally ordering, and they can show a valid senior citizen ID card.
Yes, subject to conditions for excluding bulk orders. The senior citizen must provide the ID card number during telephone ordering, and the senior citizen ID card must be presented upon delivery to verify identity. Delivery fees charged separately are not entitled to the discount and are subject to tax.
MEMC is the amount corresponding to the combination of the most expensive and biggest single-serving meal with beverage served in a quick service restaurant, used to deem/flexibly estimate a single senior citizen food purchase. It applies to food purchases by senior citizens for take-out/take-home/drive-thru and delivery transactions mentioned in the rules.
Establishments may claim the discounts as a tax deduction based on the cost of goods sold or services rendered to senior citizens. Discounts may be treated as ordinary and necessary expenses deductible from gross income for itemized deductions, and only if the seller does not opt for the Optional Standard Deduction (OSD). The seller must ensure proper documentation and that eligible sales are segregated and recorded.
The seller must report sales as the undiscounted selling price for tax purposes, not the amount net of the discount. The discount amount is claimed as a deduction rather than being used to reduce gross sales. Documentation must reflect the discount separately, and the accounting treatment should reflect discount as a deduction (e.g., Sales credited at full selling price, with discount expense debited).
(1) Qualify as a senior citizen by presenting a certified true copy of the OSCA ID to the Commissioner of Internal Revenue or the RDO with jurisdiction; (2) file a Sworn Statement on or before January 31 each year stating annual taxable income for the previous year does not exceed the poverty level as determined by NEDA through NSCB; and (3) if qualified, the RDO records the senior citizen’s name in the Master List of Tax-Exempt Senior Citizens.
A senior citizen whose compensation income from only one employer exceeds the poverty level but has had withholding tax applied may still be entitled to substituted filing of income tax return under Revenue Regulations No. 2-98, as amended (i.e., not required to file a full ITR under the usual rules, subject to RR conditions).
Private establishments may claim an additional deduction equivalent to 15% of total salaries/wages paid to senior citizens, subject to Section 34 of the Tax Code and implementing rules, provided: (1) the employment continues for at least 6 months; and (2) the annual taxable income of the senior citizen does not exceed the poverty level determined by NEDA/NSCB, supported by a sworn certification submitted by the senior citizen to the employer.
Violations of RR provisions are punishable under the Tax Code, and violations of the IRR and RR No. 7-2010 include: first violation—fine not less than P50,000 but not more than P100,000 and imprisonment of not less than 2 years but not more than 6 years; subsequent violations—fine not less than P100,000 but not more than P200,000 and imprisonment between 2 years and 6 years. Abuse of privileges—fine P50,000–P100,000 and imprisonment of not less than 6 months. Aliens/foreigners are deported after sentence; if the offender is a corporation/entity, the responsible officials are liable.
Sales of goods and services under the covered sections to senior citizens are exempt from VAT. Sellers are precluded from billing any VAT to the senior citizen to ensure the senior citizen fully receives the discount under the Act. The seller must follow invoicing requirements under RR No. 16-2005 (including segregation of exempt from taxable sales if using POS/cash registers). Input taxes attributable to exempt sales are not allowed as input tax credit and must be closed to cost/expense.