BDB Laws Tax Law For Business appears in the opinion section of Business Mirror every

Thursday.

On senior-citizen discount
The privileges granted to senior citizens under the Expanded Senior Citizens Act of 2010
are not actually new. Except for a few additions, these privileges are already provided
under the Senior Citizens Act of 2003.
But despite the fact that these privileges had been existing for years, some of our senior
citizens are still not enjoying these privileges either because they dont know about them
or they failed to provide the establishments extending the benefit the necessary proof
that they are entitled to such privileges.
One of the major benefits provided under the law is the 20% discount on certain
purchases made by senior citizens for their exclusive use and enjoyment. But does this
20% discount extend to all purchases made for the enjoyment of senior citizens? The
answer is no. This privilege is available on purchases of medicines and other essential
medical supplies; professional fees of attending physicians and licensed professional
health workers; medical and dental services; actual fare for land transportation; actual
transportation fare for domestic air transport services and sea shipping vessels;
utilization of services in hotels and similar lodging establishments, restaurants and
recreation centers; admission fees charged by theaters, cinema houses and concert
halls, circuses, carnivals and other places of culture, leisure and amusement; and
funeral and burial services for the death of senior citizens.
Other than these specified goods and services, other purchases for the use of senior
citizens are not entitled to the 20% discount. Purchases of food and other items and
services from grocery stores and somewhere else, other than those specified above, are
not entitled to the 20% discount. The law, however, provides that the government may
grant special discounts in special programs for senior citizens on purchase of basic
commodities. On this basis, the Department of Trade and Industry and the Department
of Agriculture granted special 5% discount of the regular retail price of specific items of
basic necessities and prime commodities. This privilege is limited to a specific amount
per week.

A major improvement introduced by the amendment of the Expanded Senior Citizens

Act of 2010 includes the exemption from value-added tax or VAT. Unfortunately, the
exemption from VAT pertains only to those purchases of goods and services by senior
citizens enjoying 20% discount. The exemption from VAT extends to the same items
enumerated above which are entitled to the 20% discount. It would have been better if
the VAT exemption covers all purchases made for the benefit of senior citizens.
On the part of the establishments extending the benefits, the discount accorded to senior
citizens are treated like any ordinary discount. Under the original law, the costs of the
discounts granted to senior citizens were treated as tax credits. The Expanded Senior
Citizens Act of 2003 changed the rule by treating the senior citizens discounts as tax
deductions.
There is a big difference between a tax credit and a tax deduction. In a tax credit, the
establishments granting the discount are entitled to claim the discounts as deductions
from the taxes due. In effect, there is a full reimbursement in the forms of deductions
from taxes due. On the other hand, a tax deduction is treated like any other ordinary
discount. The discount can only be allowed as deduction from gross income and not
from the taxes due. As a consequence, the establishment is only partially reimbursed to
the extent of the reduction in the income tax due as a result of the reduced taxable
income.
While the tax deduction method under the Expanded Senior Citizens Act of 2003 has
been ruled by the Supreme Court as constitutional, the fact remains that the scheme
shifts the responsibility for subsidizing the privileges granted to senior citizens to the
private sector.
Truly, it is the responsibility of everybody, both those in the private and government
sectors, to look after the welfare of its senior citizens. But private establishments are
already participating by providing avenues for the enjoyment of the privileges by senior
citizens. The financial costs of the program should be shouldered by the government.
The tax credit method answers this concern. The legislature could have remedied this
concern by returning to the provision of the old law. But as it is, the Expanded Senior
Citizens Act of 2010 carries the same provision as that of the 2003 law. Hence, the tax
deduction scheme remains as the applicable rule.

The author is a Senior Partner of Du-Baladad and Associates Law Offices (BDB Law). If
you have any comments or questions concerning the article, you can e-mail the author at
fulvio.dawilan@bdblaw.com.ph or call 403-2001 local 310.