Senior Citizens Law clarified
THE Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular No. 38-2012 dated Aug. 3 clarifying the provisions of Revenue Regulations (RR) No. 7-2010, as amended by RR No. 8-2010, implementing the tax privileges provisions of Republic Act No. 9994, otherwise known as the “Expanded Senior Citizens Act of 2010”.
For restaurants, the discount shall be for the sale of food, drinks, dessert, and other consumable items served by the establishments, including value meals and promotional meals, offered for the consumption of the general public. Condiments and side products fall within the scope of “other consumable items served by the establishments”.
The 20 percent discount shall apply to dine in, take-out, and take-home orders excluding bulk orders as long as it is the senior citizen himself/herself who is present and personally ordering and can show a valid Senior Citizen ID card.
Meals primarily prepared and intentionally marketed for children ( i.e. happy meals or kiddie meals) and not for senior citizens’ personal consumption are not entitled to the discount.
“Pasalubong” food items which are single-serving/solo meal for the personal and exclusive consumption of the senior citizen are entitled to the 20 percent discount and exempted from VAT (value-added tax). However, other “pasalubong” food items (e.g. box of biscocho, bottles or jars of ginamos, several packets of mango preserves, etc.) which are not for the personal and exclusive consumption of the senior citizen are not entitled to the 20 percent discount and the VAT exemption.
This limitation extends to “novelty items” or non-consumables sold in restaurants.
Called-in or phoned-in orders are actually delivery orders entitled to the discount and VAT exemption. Hence, they are likewise subject to certain conditions; i.e. senior citizen ID card number must be given while making the order over the telephone the senior citizen ID card must also be presented upon delivery to verify the identity of the senior citizen entitled to the discount and VAT exemption.
In case of called-in or phoned-in orders of grouped meals, the food establishment must determine the number of senior citizens in the group and the 20 percent discount shall be computed based on the value of the food attributable to the qualified senior citizens.
Likewise, the senior citizen ID card/s must be given while making the order over the telephone and the senior citizen ID card/s must be presented upon delivery to verify the identity of the senior citizen/s entitled to the discount and VAT exemption.
Generally, alcoholic beverages are not subject to the discount and VAT exemption especially if they’re purchased “in bulk”, “in buckets” or “in cases”. But if it’s served as a single serving drink, then the senior citizen, who bought it, is entitled to the discount and VAT exemption.
Alcoholic beverages purchased in a bar, club, or cabaret are exempt from VAT but subject to the 18 percent amusement tax under Section 125 of the Tax Code. A senior citizen may still avail of the 20 percent discount when he or she buys an alcoholic drink but the benefit will only be limited to a single serving of an alcoholic beverage.
There’s no fixed, maximum amount or cap which will limit the discount below the rate of 20 percent. The discount shall be given to goods purchased by Senior Citizens based on the selling price exclusive of the value added tax (VAT).
A clarification shows that cigarettes and cigars are not subject to the 20 percent discount because they are considered not food or essential items.
Medicines purchased from drug stores, hospital pharmacies, medical and optical clinics and similar establishments including non-traditional outlets dispensing medicines are covered by the discount and VAT exemption.
As to delivery fees/charges, if it’s not billed separately, it’s covered by the 20 percent discount. But, if the delivery fees/charges are billed separately, then they’re not covered with the 20 percent discount and are subject to VAT. Toll fees are however not subject to the 20 percent Senior Citizen Discount. Taxi fares are subject to the discount.
Any additional expense or loss arising from the discount and VAT exemption on the purchases of the senior citizens shall be shouldered by the State. The discounts given by the business establishments are deductible from their gross income during the same taxable year when they’re given.
The input tax attributable to the VAT exempt sale is considered as cost or an expense account by business establishments. Hence, both the discount and input VAT that are treated as cost or expense accounts are being absorbed by the state.
It is a loss of revenue on the part of the State when the seller claim deductions arising from the discounts and VAT-exempt sale to senior citizens.
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