Revenue Memorandum Circular-38-2012
Frequently Asked Questions
Q21. If the Senior Citizen used his privilege card/promotional discount which is higher than the 20% SC discount, is the sale exempt from VAT?
A21.Yes, the sale of goods and services on promotional discount is still exempt from VAT.(Section 10 of RR No. 7-2010)
Q22. Is there an additional expense or loss on the part of the retailers arising from the 20% discount and VAT exemption on the purchases by Senior Citizens?
A22.Any additional expense or loss arising from the 20% discount and VAT exemption on the purchases of the Senior Citizens shall be shouldered by the State. The 20% discount given by business establishments are deductible from their gross income during the same taxable year when the said discounts are given and 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 sellers claim deductions arising from the discounts and VAT-exempt sale to Senior Citizens. Moreover, RA 9994 is a social legislation which entails a moral obligation upon the society to contribute on the policies of the State.
Q23. In case of business establishments which are not subject to VAT but to Percentage Tax because their gross annual sales/receipts do not reach the threshold amount of P1,919,500.00 under RR 16-2005, as amended by RR 16-2011, are Senior Citizens also exempt from the payment of the percentage tax on their purchases of goods and/or services which are otherwise exempt from VAT?
A23.No. While RA 9994 expressly provides for the VAT exemption of Senior Citizens on their purchase of certain goods and services, the law does not include exemption from the payment of Percentage Tax. It is a settled rule that tax exemption must be clear and unequivocal. It cannot arise from vague inference. A taxpayer claiming a tax exemption must point to a specific provision of law conferring on the taxpayer, in clear and plain terms, exemption from a common burden. Any doubt whether a tax exemption exists is resolved against the taxpayer. (Digital Telecommunications, Inc. v. City Government of Batangas, GR No. 156040 dated December 11, 2008)
Thus, the exemption does not cover other indirect taxes that may be passed on by the seller to a Senior Citizen buyer, such as percentage tax. In such a case, the discount must be on the total cost of the goods or services charged by the seller exclusive of the tax. (Section 10 of RR No. 7-2010)
Q24. For CRM/POS machine, is there a need to apply for a new accreditation of the System?
A24.No. Accreditation of the POS/CRM machine is necessary only if the system will be changed in order to comply with the provisions of RR 7-2010, as amended by RR 8-2010.
Q25. How do establishments present the discount and VAT exemption of their sales to Senior Citizens in the tape receipt (for POS machines and CRM)?
A25.The amount of sales that must be reported for tax purposes is the undiscounted selling price and not the amount of sales net of the discount. The gross selling price and the sales discount must be separately indicated in the official receipt or sales invoice issued by the establishment for the sale of goods or services to the Senior Citizen. With regard to the VAT exemption, the machine tape must properly segregate the VAT exempt sales from the taxable sales. (Sections 7 and 10 of RR No. 7-2010)
Q26. What would be the new format or itemized breakdown that should be reflected in the official receipts or sales invoices to be issued to Senior Citizens?
A26.If the seller uses a POS or CRM, the machine tape should be able to segregate the exempt sale from the taxable sale. If the POS or CRM is incapable of segregation, they should be re-programmed to comply with the requirement. In the meantime, a manual invoice/receipt shall be issued by the seller.
The seller of qualified goods or services may opt to issue a separate invoice/receipt on its sale to Senior Citizens. The separate invoice/receipt will reflect the amount of discount and the total amount payable. The word “VAT Exempt Sale” must be written or printed prominently on the face of the invoice/receipt.
If the merchandise/service sold under a single transaction is comprised of a sale to a Senior Citizen and a sale to a Non-senior citizen, the seller may issue one invoice/receipt for the entire transaction providing for a proper breakdown of the exempt sale and the taxable sale. The invoice must properly reflect the discount on the exempt sale. The VAT due on the taxable sale must be separately billed in the invoice/receipt.
Q27. How do establishments present the Senior Citizen Discount in the Income Statements?
A27.The income statement of the seller must reflect the discount, not as a reduction of sales to arrive at net sales, but as a deduction from its gross income (sales less cost of sales). Thus, the 20% Senior Citizen Discount shall be treated as a necessary and ordinary expense duly deductible from the gross income, provided that the seller does not opt for the Optional Standard Deduction during the taxable quarter/year. (Section 7 of RR No. 7-2010).
Q28. Can the input tax attributable to VAT-exempt sales to Senior Citizens be claimed as tax credit?
A28.No, the input tax attributable to the exempt sale shall not be allowed as an input tax credit but must be treated as a cost or an expense account by the seller. (Section 10 of RR No. 7-2010)
Q29. What is the bookkeeping and invoicing requirement for sales to Senior Citizens?
A29.The business establishment giving sales discounts to qualified Senior Citizens is required to keep a separate and accurate record of sales, which shall include the name of the Senior Citizen-purchaser, OSCA ID, gross sales/receipts, sales discounts granted, dates of transactions and invoice/OR number for every sale transaction to Senior Citizens. The invoicing requirements in Section 4.113-1 of Revenue Regulations No. 16-2005 must also be complied with. (Sections 7 and 10 of RR No. 7-2010)
Q30. How is the discount and exemption from payment of 12% VAT on the purchases and sales of goods and services by and for the Senior Citizens computed?
A30.To compute for the discount and exemption from VAT, the following manner of computation is prescribed.
Machine Accreditation Number: 000-000000000-00000 Date: 08/05/2010 08:05:10 PM Invoice No.: 000123456789
THIS SERVES AS YOUR SALES INVOICE Based on this example, the amount of P844.75 is inclusive of 12% VAT. In order to compute for the sales price which is the basis of the 20% discount, we need to remove the 12% VAT first to determine the amount net of VAT. 1.12 To compute for the 20% discount, the amount net of VAT should be the basis: Under RR No. 7-2010, the VAT Exempt Sales should include the discount. Hence, the amount in the Sales Invoice above under “VAT Exempt Sale” is P 754.24.
On the five percent (5%) special discount on the sale of prime Commodities and basic necessities to senior citizens The 5% Special Discount granted to Senior Citizens on the sale of prime commodities and basic necessities are discount privileges subject to the guidelines of Department of Trade
and Industry (DTI) and Department of Agriculture (DA).
MEI LI’S BOTICA
888 Quezon Ave., Quezon City
VAT Reg. TIN: 123-456-789-001
XXX Tablet
XXX Tablet 15 @ 563166
₱ 844.75
Amount of Sale with VAT
₱ 844.75
Less: 12% VAT
₱ 90.51
TOTAL AMOUNT
₱ 754.24
Less: 20% Sales Discount
₱ 150.85
TOTAL AMOUNT
₱ 603.39
Amount Tendered Cash
₱ 603.39
Change
VATable
(T)
₱ 0.00
VAT-Exempt Sale
(X)
₱ 754.24
VAT Zero Rated Sale
(Z)
₱ 0.00
VAT – 12%
₱ 0.00
Amount due
₱ 603.39
Thank you and Come Again!
₱ 844.75
=
₱ 754.24
+ ₱ 90.51
₱ 844.75Amount net of VAT
VAT amount (P 754.24 x 12% VAT)
Total Amount
₱ 754.24 x 20%
=
₱ 150.85
SC Discount
Hence, the selling price net of VAT is
Less: 20% SC discount
Net amount payable by a Senior Citizen₱ 754.24
₱ 150.85
₱ 603.39