RR No. 4-2006: Implements the tax privileges provisions of RA No. 9257, otherwise known as the “Expanded Senior Citizens Act of 2003” and prescribes the guidelines for the availment thereof

Key points

1. Senior citizen benefits. Senior citizens are exempt from individual income tax if annual taxable income does not exceed the NEDA poverty level. They also get a 20% discount on services in hotels, restaurants, recreation centers, medicines, funeral and burial services, admissions, medical and dental services, and domestic air and sea, rail, skyway and bus fares, as listed in the Regulations.
2. Requirements for the exemption. The senior citizen is first qualified by the CIR or the RDO, on submitting a certified true copy of the OSCA ID. He files an Annual Information Return showing income not above the poverty level, and the RDO records his name in the master list of tax exempt senior citizens. A single-employer compensation earner above the poverty level whose income was subject to withholding is not exempt but may use substituted filing.
3. Taxes still due. Senior citizens remain subject to individual income tax above the poverty level, final withholding taxes on interest, royalties, prizes, winnings, dividends and presumed capital gains on real property, and capital gains tax on unlisted shares. If self-employed or in business or practice of profession, they pay VAT when gross annual sales or receipts exceed P1,500,000.00 or the adjusted amount, otherwise the 3% percentage tax. They also pay donor’s tax, estate tax, excise tax on certain goods and documentary stamp tax.
4. Benefactors. A benefactor is treated as head of family if the senior citizen, with income not above the poverty level, lives with and depends on the benefactor for chief support. The benefactor registers the senior citizen as dependent with the RDO and gets only the basic personal exemption of P25,000.00 or as allowed for head of family. The additional exemption of P8,000.00 per dependent is not available.
5. Establishments giving discounts. Establishments may deduct the senior citizen discount from gross income, covering only the portion of gross sales used by the senior citizen. The deduction is the actual discount or up to 20% of the gross selling price, in the same taxable year, with the price and discount shown separately on the receipt or invoice and separate records kept.
6. Employers and penalties. Private establishments employing senior citizens get an additional deduction of 15% of salaries and wages paid, if employment lasts at least 6 months and the senior citizen’s income does not exceed the poverty level. A first violation carries a fine of not less than P50,000.00 but not more than P100,000.00 and imprisonment of not less than 6 months but not more than 2 years.

Who is affected

• Senior citizens
• Benefactors of senior citizens
• Establishments giving discounts to senior citizens
• Private establishments employing senior citizens

Deadlines and effectivity

• Annual Information Return filed each year
• Employment of at least 6 months for the employer deduction