Regulations Update: BIR Regulations Implementing Expanded Senior Citizens Act
The Bureau of Internal Revenue recently issued Revenue Regulations No. 07-10 (the “Regulations”), which implement Republic Act No. 9994, otherwise known as the Expanded Senior Citizens Act of 2010.
The major provisions of the Regulations include the following:
A. Income tax and other taxes
In general, Senior Citizens must file income tax returns and pay income tax. However, the Senior Citizen is exempt from paying income tax if his returnable income is in the nature of compensation income and he qualifies as a minimum wage earner under RA No. 9504. The Senior Citizen is also exempt from income tax if the aggregate amount of gross income earned by the Senior Citizen during the taxable year does not exceed the amount of his personal exemptions (basic and additional).
Under the Regulations, the Senior Citizen can avail of income tax exemption only upon compliance with certain requirements. These are:
1. the Senior Citizen must first be qualified as such by the Commissioner of Internal Revenue or his duly authorized representative (i.e., the Revenue District Officer (RDO)) having jurisdiction over the place where the Senior Citizen resides), by submitting a certified true copy of his Senior Citizen Identification Card (OSCA ID) issued by the OSCA of the city or municipality where he resides;
2. the Senior Citizen must file a Sworn Statement on or before January 31 of every year that his annual taxable income for the previous year does not exceed the poverty level as determined by the NEDA thru the NSCB; and
3. if qualified, his name shall be recorded by the RDO in the Master List of Tax-Exempt Senior Citizens for that particular year, which the RDO is mandatorily required to keep.
A Senior Citizen who is a compensation income earner deriving from only one employer an annual taxable income exceeding the poverty level or the amount determined by the NEDA thru the NSCB on a particular year, but whose income had been subjected to the withholding tax on compensation, shall, although not exempt from income tax, be entitled to the substituted filing of income tax return under Revenue Regulations No. 2-98, as amended.
Note that the income tax exemption does not extend to all types of income. Under section 8 of the Regulations, the Senior Citizen can still be held liable for the following taxes on income:
1. The 20% final withholding tax on interest income from any currency bank deposit, yield and other monetary benefit from deposit substitutes, trust fund and similar arrangements; royalties (except on books, as well as other literary works and musical compositions, which shall be imposed a final withholding tax of 10%); prizes (except prizes amounting to P10,000 or less which shall be subject to income tax at the rates prescribed under Sec. 24(A) of the Tax Code, and other winnings (except Philippine Charity Sweepstakes and Lotto winnings) (Sec. 24(B)(1), Tax Code);
2. The 7.5% final withholding tax on interest income from a depository bank under the expanded foreign currency deposit system (Sec. 24(B)(1), Tax Code);
3. If the Senior Citizen will pre-terminate his 5-year long-term deposit or investment in the form of savings, common or individual trust funds, deposit substitutes, investment management accounts and other investments evidenced by certificates in such form prescribed by the Bangko Sentral ng Pilipinas before the fifth year, he shall be subject to the final withholding tax imposed on the entire income depending on the holding period of the deposit or investment. If held for a period of:
• Four years to less than five years — 5%
• Three years to less than four years — 12%; and
• Less than three years — 20%
4. The 10% final withholding tax –
a. On cash and/or property dividends actually or constructively received from a domestic corporation or from a joint stock company, insurance or mutual fund company and a regional operating headquarters of a multinational company; or
b. On the share of an individual in the distributable net income after tax of a partnership (except a general professional partnership) of which he is a partner; or
c. On the share of an individual in the net income after tax of an association, a joint account, or a joint venture or consortium taxable as a corporation of which he is a member or a co-venturer (Sec. 24(B)(2), Tax Code).
5. Capital gains tax from sales of shares of stock not traded in the stock exchange (Sec. 24(C), Tax Code); and
6. The 6% final withholding tax on presumed capital gains from sale of real property, classified as capital asset, except capital gains presumed to have been realized from the sale or disposition of principal residence (Sec. 24(D), Tax Code).
A Senior Citizen remains liable for other internal revenue taxes. The Regulations provide:
SEC. 9. Liability for Other Internal Revenue Taxes. — A Senior Citizen shall also be subject to the following internal revenue taxes, among others, imposed under the Tax Code:
1. Value Added Tax (VAT) or other Percentages Taxes, as the case may be. If he is self-employed or engaged in business or practice of profession, and his gross annual sales and/or receipts exceeds P1,500,000 or such amount to which this may be adjusted pursuant to Sec. 109(1)(V) of the Tax Code, he shall be subject to VAT. Otherwise, he shall be subject to the 3% percentage tax;
2. Donor’s Tax – All donations made by a Senior Citizen during any calendar year, unless exempt under a specific provision of law, shall be subject to the donor’s tax imposed under Title III of the Tax Code;
3. Estate Tax – In the event of death, the estate of the Senior Citizen may also be subject to the estate tax following the rules enunciated under Title III of the Tax Code and its implementing Regulations;
4. Excise tax on certain goods;
5. Documentary stamp tax.
B. Discounts to senior citizens
The Regulations reiterate the expanded coverage of goods and services subject to the 20% discount granted to Senior Citizens. In order to avail of the 20% discount, the Senior Citizen may present any of the following:
1. an identification card 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 honored nationwide;
2. the passport of the Senior Citizen concerned; or
3. other documents that establish that the Senior Citizen is a citizen of the Republic and is at least sixty (60) years of age.
In the purchase of goods and services which are on promotional discount, the senior citizen can avail of the promotional discount or the 20% discount, whichever is higher.
The 20% discount applies to the following:
1. on the purchase of medicines, including the purchase of influenza and pnuemococcal vaccines, and such other essential medical supplies, accessories and equipment to be determined by the Department of Health (DOH).
Under the Regulations, the grant of discount shall be subject to guidelines that will be issued by the Bureau of Food and Drugs, Department of Health in coordination with the Philippine Health Insurance Corporation.
The Regulations define “medicine” as referring to “both prescription and nonprescription medicines, and articles approved by the BFAD-DOH, which are intended for use in the diagnosis, cure, mitigation, treatment or prevention of disease in man; but do not include food and devices or their components, parts, or accessories.”
2. on the professional fees of attending physician/s in all private hospitals, medical facilities, outpatient clinics and home health care services;
3. on the professional fees of licensed professional health providing home health care services as endorsed by private hospitals or employed through home health care employment agencies;
4. on medical and dental services, diagnostic and laboratory fees in all private hospitals, medical facilities, outpatient clinics, and home health care services, in accordance with the rules and regulations to be issued by the DOH, in coordination with the Philippine Health Insurance Corporation (PhilHealth);
The Regulations define: (1) “medical services” as “hospital services, professional services of physicians and other health care professionals and diagnostic and laboratory tests that are necessary for the diagnosis or treatment of an illness or injury; (2) “dental services” as “oral examination, cleaning, permanent and temporary filling extractions and gum treatments, restoration, replacement or repositioning of teeth, or alteration of the alveolar or periodontium process of the maxilla and the mandible that are necessary for the diagnosis or treatment of an illness or injury” and (3) “home health care service” as “health or supportive care provided to the Senior Citizen patient at home by licensed health care professionals to include but not limited to, physicians, nurses, midwives, physical therapists and caregivers.”
5. in actual fare for land transportation travel in public utility buses (PUBs), public utility jeepneys (PUJs), taxis, Asian utility vehicles (AUVs), shuttle services and public railways, including Light Rail Transit (LRT), Mass Rail Transit (MRT), and Philippine National Railways (PNR);
6. in actual transportation fare for domestic air transport services and sea shipping vessels and the like, based on the actual fare and advanced booking;
7. on the utilization of services in hotels and similar lodging establishments, restaurants and recreation centers;
The Regulations define the terms “hotel/hostels”, “lodging establishments,” “restraurants,” and recreation centers.”
8. on admission fees charged by theaters, cinema houses and concert halls, circuses, leisure and amusement; and
9. on funeral and burial services for the death of senior citizens;
The beneficiary or any person who shall shoulder the funeral and burial expenses of the deceased Senior Citizen shall claim the discount, such as casket, embalmment, cremation cost and other related services for the Senior Citizen upon payment and presentation of his death certificate.
C. Special discount on public utilities
The Regulations reiterate the requirement imposed under the Act that the monthly utilization of water and electricity by the Senior Citizen supplied by public utilities will be subject to a five percent (5%) discount upon concurrence of the following:
1. the individual meters for the said utilities are registered in the name of the Senior Citizen residing therein;
2. the monthly consumption does not exceed one hundred kilowatt hours (100kwh) of electricity and thirty cubic meters (30 m3) of water; and
3. the privilege is granted per household regardless of the number of Senior Citizens residing therein.