BIR Regs on Tax Privileges for Senior Citizens

Legal basis and related tax rules

The Regulations are issued pursuant to Section 244 of the National Internal Revenue Code of 1997, as amended (Tax Code).
The Regulations are issued in relation to Section 2 of Republic Act No. 9994 and to Section 2, Article 4, Rule II of the Implementing Rules and Regulations of the Act.
The income tax exemption mechanics and other senior-citizen tax implications are anchored to the Tax Code, including its provisions on withholding taxes, VAT/percentages tax, and other taxes.
The minimum wage earner income tax exemption treatment is tied to Revenue Regulations No. 10-2008.
The substituted filing of income tax return is tied to Revenue Regulations No. 2-98, as amended.
VAT invoicing and POS/Cash Register Machine segregation requirements are tied to Revenue Regulations No. 16-2005.

Policy and coverage of privileges

The Regulations set guidelines to govern the availment of income tax exemption of Senior Citizens.
The Regulations set guidelines for VAT exemption privileges granted to VAT-registered taxpayers selling covered goods and services to Senior Citizens.
The Regulations set guidelines for tax privileges granted to establishments giving discounts on sales to Senior Citizens.
The Regulations set the tax implication of taking care and supporting Senior Citizens through benefactors.
The Regulations set tax privileges granted to private entities that engage Senior Citizens as employees.
Section 1 covers the above privileges under the framework of Republic Act No. 9994 and implements the rules governing their tax effects and practical administration.

Core definitions for implementation

A Senior Citizen is any Filipino citizen, a resident of the Philippines, sixty (60) years old or above.
Senior Citizens may include those with dual citizenship, provided they prove Filipino citizenship and have at least six (6) months residency in the Philippines.
A Resident Citizen is a Filipino Citizen with permanent/legal residence in the Philippines, including one who migrated abroad but returned with a definite intention to reside and surrendered the immigrant visa to the foreign government.
A Benefactor is any person, related or not, who provides care or assistance and on whom the Senior Citizen depends for primary care and material support, as certified by the C/MSWDO (City or Municipal Social Welfare and Development Officer).
A Dependent is a Senior Citizen, related or not, who lives with and depends on a Benefactor for chief support.
A Minimum Wage Earner is a private-sector worker paid the statutory minimum wage, or a public-sector employee with compensation income of not more than the statutory minimum wage in the non-agricultural sector where assigned.
OSCA refers to the Office of the Senior Citizens Affairs of cities and municipalities, headed by a Senior Citizen serving a term of three (3) years.
Annual Taxable Income of a Resident Senior Citizen means compensation, business and other income received by a Resident Senior Citizen during each taxable year from all sources as defined in Section 31 of the Tax Code.
Sales Discount is the actual discount, or that discount which shall not be lower than twenty (20%) per cent of the gross selling price to Senior Citizens, except that for water and electricity from public utilities, the minimum Sales Discount is five (5%) per cent.
An Establishment is any public or private entity duly licensed and/or franchised by national government agencies or local government units.

Income tax exemption and other tax exposure

Qualified Senior Citizens deriving returnable income in the taxable year must file income tax returns and pay the tax as they file the return.
A Senior Citizen whose returnable income is compensation income and who qualifies as a minimum wage earner under Republic Act No. 9504 is exempt from income tax on that compensation income under Revenue Regulations No. 10-2008.
A Senior Citizen whose aggregate gross income earned during the taxable year does not exceed personal exemptions (basic and additional) is exempt from income tax and need not file an income tax return.
The income tax exemption does not extend to all types of income; Senior Citizens can still be liable for other taxes, including final withholding and capital gains/final withholding taxes under the Tax Code, such as:
- A 20% final withholding tax on interest income from currency bank deposits and similar deposit benefits; royalties are 10% final withholding tax except for books and other specified literary/musical works; prizes and other winnings are subject to the specified rates and exceptions.
- A 7.5% final withholding tax on interest income from a depository bank under the expanded foreign currency deposit system.
- Final withholding tax on pre-termination of a 5-year long-term deposit or investment with holding-period rates of 5% (four years to less than five years), 12% (three years to less than four years), and 20% (less than three years).
- A 10% final withholding tax on cash/property dividends from specified entities, and on distributable net income shares or net income shares after tax under the specified partnership/association/joint venture rules.
- Capital gains tax on sales of shares of stock not traded in the stock exchange.
- A 6% final withholding tax on presumed capital gains from sale of real property classified as a capital asset, except principal residence presumed capital gains.
Section 8 requires the income tax exemption for a Senior Citizen who is a minimum wage earner or whose taxable income does not exceed personal exemptions to be obtained by compliance with these requirements:
1. Qualification by the Commissioner of Internal Revenue or duly authorized representative (including the Revenue District Officer (RDO) with jurisdiction) by submitting a certified true copy of the OSCA ID.
2. Filing a Sworn Statement on or before January 31 each year that annual taxable income for the previous year does not exceed the poverty level determined by NEDA through NSCB.
3. If qualified, the RDO records the name in the Master List of Tax-Exempt Senior Citizens for that year, which the RDO is required to keep.
A Senior Citizen compensation earner deriving from only one employer whose annual taxable income exceeds the poverty level, but whose income has been subjected to withholding tax on compensation, is entitled to substituted filing of income tax return under Revenue Regulations No. 2-98, as amended.
Section 9 establishes that Senior Citizens are subject to other internal revenue taxes, including:
- VAT or percentage tax depending on gross annual sales/receipts threshold: VAT applies if gross annual sales/receipts exceeds P1,500,000 or such amount adjusted pursuant to Section 109 (1) (V) of the Tax Code; otherwise, the Senior Citizen is subject to 3% percentage tax.
- Donor’s Tax on donations made during any calendar year unless exempt under specific law provisions.
- Estate Tax on the estate at death under Title III of the Tax Code and implementing regulations.
- Excise tax on certain goods and Documentary Stamp Tax.

Grant of Senior Citizen discounts

Establishments supplying covered goods and services to Senior Citizens must give a discount of twenty (20%) per cent for the listed goods/services for exclusive use and enjoyment or availment.
Discount coverage under Section 4 includes:
- Medicines (including influenza and pneumococcal vaccines) and other essential medical supplies, accessories and equipment determined by the DOH.
- Discount on medicines at drug stores, hospital pharmacies, medical and optical clinics, and similar establishments, following guidelines issued by BFAD-DOH in coordination with PHILHEALTH; medicines include both prescription and non-prescription medicines and BFAD-DOH approved articles intended for diagnosis/cure/mitigation/treatment/prevention, but do not include food or devices or components/parts/accessories.
- Professional fees of attending physician/s in private hospitals/medical facilities/outpatient clinics/home health care services, based on the compensation for services charged.
- Professional fees of licensed professional health workers providing home health care services endorsed by private hospitals or employed through home health care employment agencies, based on fees charged.
- Medical and dental services and diagnostic and laboratory fees in private hospitals/medical facilities/outpatient clinics/home health care services, under DOH rules in coordination with PHILHEALTH.
- Definitions are established for medical services, dental services, and home health care service for these discount rules.
- Discount on actual fare for land transportation in PUBs, PUJs, taxis, AUVs, shuttle services and public railways, including LRT, MRT, and PNR.
- Discount on actual transportation fare for domestic air and sea shipping vessels and the like, based on actual fare and advanced booking.
- Discount on utilization of services in hotels and similar lodging establishments, restaurants and recreation centers, with specific scopes for hotel amenities, lodging types, restaurant items, and recreation center sports/equipment/venues.
- Discount on admission fees charged by theaters, cinema houses, concert halls, circuses, carnivals, and similar places of culture/leisure/amusement.
- Discount on funeral and burial services: the beneficiary or person who shoulders funeral and burial expenses claims the discount upon payment and presentation of the death certificate, for items such as casket, embalmment, cremation cost, and other related services for the Senior Citizen.
Section 5 grants special discounts for utilities:
- Monthly water and electricity by a Senior Citizen supplied by public utilities is subject to a five percent (5%) discount if: meters are registered in the Senior Citizen’s name; monthly electricity use does not exceed 100 kwh and monthly water use does not exceed 30 cubic meters (30 m³); and the privilege is granted per household regardless of number of Senior Citizens.
- Public utilities grant at least fifty percent (50%) discount on consumption by a Senior Citizens Center and residential care/group homes run by the Government or by a non-stock, non-profit domestic corporation organized and operated primarily to promote the well-being of abandoned/neglected/unattached/homeless Senior Citizens, subject to DSWD guidelines.
Minimum-discount and promotional-discount rule: if an eligible good/service is offered at a promotional discount, the Senior Citizen receives the promotional discount or the minimum discount prescribed, and in no case is the discount less than 20%, or for water/electricity from public utilities less than 5%; the seller must increase the discount to meet the minimum if promotional discount is lower, and the minimum does not become an addition to the promotional discount.
Section 6 limits the discount to purchases of enumerated goods and services for the exclusive use and enjoyment or availment of the Senior Citizen.
Medical-related rules under Section 6:
- The 20% discount and VAT exemption apply to purchases of generic or branded medicines and drugs, including influenza and pneumococcal vaccines.
- The 20% discount and VAT exemption extend to vitamins and mineral supplements medically prescribed by an attending physician for prevention and treatment, with prescription in the Senior Citizen’s name.
- Discount/VAT exemption apply to purchases of essential medical supplies/accessories/equipment, including eyeglasses, hearing aids, dentures, prosthetics, artificial bone replacements, walkers, crutches, wheelchairs (manual or electric-powered), canes/quad canes, geriatric diapers, and other essential medical supplies/accessories/equipment.
- DOH guidelines within thirty (30) days from effectivity (in coordination with FDA and PHILHEALTH) define what constitutes discounted essential supplies and require regular review; DOH establishes mechanisms of compulsory rebates among retailers, manufacturers, and distributors considering margins, and DOF and BIR issue appropriate Revenue Regulations when necessary.
- Medical and dental services and diagnostic/laboratory tests requested by a physician as necessary for diagnosis/treatment are subject to 20% discount and VAT exemption.
- Professional fees of attending physicians and licensed health workers providing home health care services are subject to 20% discount and VAT exemption, with the discount burden borne solely by the employment agency for the specific home health care scenario.
Transportation-related rules under Section 6:
- Relevant transport agencies issue required circulars/directives within thirty (30) days from effectivity for air/sea advanced booking and domestic transportation privileges, subject to 20% discount and VAT exemption if applicable.
Hotels, restaurants, recreation, admission, and funeral rules under Section 6:
- The 20% discount for hotels covers room accommodation and other amenities (examples listed), and “hotel” includes beach and mountain resorts.
- The 20% discount for restaurants covers purchase of food, drinks, dessert, and other consumable items served for general public consumption.
- The privilege for dine-in services and relevant coverage must be personally availed of by the Senior Citizen, and no proxies or authorization for a non-Senior Citizen are honored.
- “Exclusive use and enjoyment” means personal consumption only; the discount does not apply to children’s meals primarily prepared and marketed for children, and does not apply to pre-contracted party packages or bulk orders.
- Foods and consumables purchased by the Senior Citizen must be processed separately from non-eligible companions to ensure exclusive consumption, VAT exemption computation, and discount entitlement; if all diners are senior citizens presenting valid Senior Citizen IDs, each is entitled to 20% discount and VAT exemption.
- The 20% discount applies to take-out/take-home/drive-thru if the Senior Citizen is present and personally ordering and can show valid ID; for delivery orders, the discount applies if the ID number is given at order and the ID is presented upon delivery to verify identity; delivery fees separately charged are not discounted and are subject to tax.
- The Most Expensive Meal Combination (MEMC) applies to food purchases by Senior Citizens for eligible take-out/delivery transactions (excluding bulk orders).
- Recreation center discount applies to fees/charges/rental for sports facilities/equipment and listed venues.
- Non-profit, stock golf and country clubs closed to the public are not mandated to give the 20% Senior Citizen discount; however, restaurants/food establishments inside such clubs operated as independent concessionaires must grant the discount if food sold is not consumable items under club membership dues.
- Admission fee privilege discount applies to admission fees charged by theaters/cinema/concert halls/circuses/carnivals and similar places, including museums and parks.
- Funeral and burial expenses: the beneficiary/person who shoulders funeral and burial expenses claims the discount upon presentation of the death certificate; covered expenses include casket/urn, embalming, cremation cost, and related services such as viewing/wake cost, hospital morgue pick-up, body transport to intended burial site in place of origin; it excludes obituary publication and memorial lot cost.

VAT exemption for Senior Citizen sales

Sales of eligible goods and services to Senior Citizens are exempt from value-added tax (VAT).
Sellers are precluded from billing any VAT to the Senior Citizen.
The sale must follow invoicing requirements under Revenue Regulations No. 16-2005; if POS or cash register machines are used, the machine tape must properly segregate exempt sales from taxable sales.
Input tax attributable to exempt sales is not allowed as an input tax credit and must be closed to cost or expense account.
The VAT exemption does not cover other indirect taxes that may be passed on to the Senior Citizen (e.g., percentage tax, excise tax); in that case, the discount must be on the total cost charged by the seller exclusive of the tax.

Tax treatment and deduction for establishments

Establishments supplying covered goods and services may claim the discounts as a tax deduction based on the cost of the goods sold or services rendered to Senior Citizens.
The selling price charged to Senior Citizens must be net of VAT because the sale to Senior Citizens is VAT-exempt.
The cost of the discount is allowed as a deduction from gross income for the same taxable year the discount is granted, provided the total amount of the claimed tax deduction net of VAT, if applicable, is included in the establishment’s gross sales receipts for tax purposes and is supported by proper documentation under the Tax Code.
For deduction computation/reporting, the establishment reports the sales for tax purposes as the undiscounted selling price, not the amount net of the discount.
Discounts granted by the seller (promotional discount, 20% discount, 5% discount on water/electricity, and 50% discount on water/electricity/telephone by Senior Citizens Centers) are treated as ordinary and necessary expenses deductible as itemized deductions, and the claim is available only if the seller does not opt for the Optional Standard Deduction for the taxable quarter/year.
The additional deduction is subject to these conditions:
1. Only the portion of gross sales exclusively used, consumed or enjoyed by the Senior Citizen is eligible.
2. The gross selling price and the sales discount must be separately indicated in the official receipt or sales invoice.
3. Only the actual discount amount or a sales discount not less than the statutory rate (20%, 5%, or 50% when applicable), whichever is higher, based on gross selling price, can be deducted (net of VAT, if applicable) for income tax purposes and from gross sales/receipts for VAT or other percentage tax purposes.
4. The seller must record sales inclusive of the discount.
5. The discount is allowed as a deduction only for the same taxable year the discount is granted.
6. The establishment must keep separate and accurate records including: name of Senior Citizen, OSCA ID, gross sales/receipts, sales discount granted, transaction dates, and invoice numbers.
7. Only establishments where an actual discount was granted may claim the deduction.
8. The seller must not claim the Optional Standard Deduction during the taxable year.

Benefactor exemptions and employment incentives

Section 11 establishes that a Benefactor is entitled to claim the basic personal exemption of fifty thousand pesos (P50,000.00) under Republic Act No. 9504.
A Senior Citizen who is not gainfully employed, living with, and dependent upon the benefactor for chief support, while treated as dependent under the Act, does not entitle the benefactor to claim the additional personal exemption of twenty five thousand pesos (P25,000.00).
The additional personal exemption per dependent (not exceeding four (4)) is available only to individual taxpayers with a qualified dependent child or children subject to conditions under Section 35(B) of the Tax Code, as amended.
If the benefactor is required to file an income tax return, the benefactor states the name, birthday, and OSCA ID number of the dependent Senior Citizen.
Section 12 grants private establishments an additional deduction for employing Senior Citizens: an amount equal to fifteen percent (15%) of total salaries and wages paid to Senior Citizens, subject to Section 34 of the Tax Code and implementing rules, if:
1. Employment continues for at least six (6) months.
2. The Senior Citizen’s annual taxable income does not exceed the poverty level determined by NEDA through NSCB, evidenced by a sworn certification submitted by the Senior Citizen to the employer.

Penalties and enforcement consequences

Section 13 imposes that any person who violates any provision of the Regulations suffers the penalties provided in the Tax Code.
For violation of the Act’s Implementing Rules and Regulations and these Regulations, penalties include:
- First violation: fine of not less than P50,000 but not exceeding P100,000, and imprisonment of not less than two (2) years but not more than six (6) years.
- Subsequent violation: fine of not less than P100,000 but not exceeding P200,000, and imprisonment of not less than two (2) years but not less than six (6) years.
Abuse of the privileges granted is punishable by fine of not less than P50,000 but not more than P100,000, and imprisonment of not less than six (6) months.
If the offender is an alien or foreigner, the offender is deported immediately after service of sentence without further deportation proceedings.
If the offender is a corporation, organization, or similar entity, the official/s directly involved are liable.
Upon filing an appropriate complaint and after due notice and hearing, proper authorities may cancel or revoke the business permit, permit to operate, franchise, and other similar privileges of a business entity that fails to abide by the Act and its IRR and these Regulations.

Repeal of inconsistent rules

Section 14 modifies, repeals, or revokes Revenue Regulations Nos. 4-2006, 1-2007, and all existing rules, regulations, and other issuances or portions inconsistent with these Regulations.