It’s official: VAT exemptions on senior citizens, PWDs retained

The Department of Finance (DOF) on Wednesday officially announced that the exemption from value-added tax (VAT) of senior citizens and persons with disabilities (PWDs) was retained in the revised first package of the government’s proposed tax reform program.

In a briefing of DOF officials before the House of Representatives committee on ways and means, Finance Undersecretary Karl Chua confirmed that, in House Bill No. 4774, it retracted its earlier pitch to remove the exemption on senior citizens’ non-essential purchases, limiting the tax perk to education, raw food, and health products and services.

“Senior citizens and PWDs’ exemption from the VAT will be retained. Our concern originally is the leakage that this creates. However, if we are able to pursue a national ID that will control the leakage, we will be amenable to keeping the exemptions,” Chua told lawmakers as he presented the revised tax reform package.

House Bill No. 4774, or an act amending sections of the National Internal Revenue Code of 1997, is the DOF-proposed tax reform package authored by Rep. Dakila Carlo Cua.

The DOF first submitted a draft of the bill to the Congress in September last year, but lawmakers particularly frowned upon the provision removing the VAT exemption of senior citizens and PWDs. The revised bill seeks to lower personal income taxes, broaden the VAT base, adjust excise tax on petroleum and automobile, and reduce excise and donor’s tax.

Sen. Sonny Angara, chairman of the Senate ways and means committee, said 7.5 million senior citizens and 1.4 million PWDs are currently entitled to the VAT exemption.

READ: Gov’t to retain Vat exemptions for seniors, PWDs–Angara

But while the exemption of senior citizens and PWDs will be retained, the following exemptions will be removed unless sold by firms whose gross sales fall below the VAT threshold: exemptions found in special laws, cooperatives (except those selling raw agriculture produce), low cost and socialized housing, lease of residential units, power transmission, domestic shipping importation, and boy scouts and girl scouts.

“Low-income and vulnerable households will be protected through a higher VAT threshold of P3 million (i.e., business with gross sales below P3 million, such as sari-sari stores will be exempt from VAT) and targeted transfers to poor and vulnerable households,” the DOF added. IDL