#ThisAbility Tax

LAST week, on May 7, I did my 10th 42-kilometer run as part of the 10th anniversary celebration of the United Nations Children’s Fund (UNICEF) Borneo International Marathon, which raises awareness regarding children with disabilities. The marathon run, themed

ability, is aimed at supporting the rights of all children to play, indulge in recreational activities and participate in sports. Throughout the race course, I saw pictures of kids with disabilities and it got me thinking about the privileges they enjoy aside from parking spaces near the entrance of establishments.

So I did some research and found out that we have long-standing laws and regulations protecting these citizens, about which most of us are not aware. I also found out that even the Bureau of Internal Revenue (BIR) issued Regulations as Implementing Rules of Republic Acts (RAs) 9442, “An Act Amending Republic Act No. 7277,” otherwise known as the “Magna Carta for Disabled Persons, and for Other Purposes;” and 10754, entitled “An Act Expand Persons with Disability (PWD).”

As a tax professional, I am more curious about the tax incentives granted to PWDs and their benefactors. Fortunately, the BIR issued Rev- enue Regulation No. (RR) 5 -2017 on April 11, just last month, relative to the tax privileges of PWDs and tax incentives for establishments granting sales discounts and prescribing the guidelines for the availment thereof, amending RR 1-2009.

Under the said regulation, qualified PWDs shall be entitled to claim at least a 20 percent discount from the following establishments relative to the sale of goods and services for their exclusive use and enjoyment or availment:

• Hotels and similar lodging establishments, restaurants and recreation centers

• Theaters, cinema houses, concert halls, circuses, carnivals and other similar places of culture, leisure and amusement

• All drugstores regarding purchase of generic and branded medicine

• Medical and dental services, including diagnostic and laboratory fees (e.g., x-rays, computerized tomography scans, and blood tests) and professional fees of attending doctors in all government facilities or all private hospitals and medical facilities, subject to the guidelines to be issued by the Department of Health (DOH), in coordination with the Philippine Health Insurance Corporation (PhilHealth)

• Domestic air and sea transportation based on the actual fares. For promotional fares, the PWD can avail of the establishment’s offered discount, or the 20 percent discount provided therein, whichever is higher and more favorable.

• Land transportation privileges based on the actual fares, such as public utility buses or jeepneys (PUBs/PUJs), taxis, Asian Utility Vehicles (AUVs), shuttle services and public railways, such as Light Rail Transit (LRT), Metro Rail Transit ( MRT), Philippine National Railways (PNR) and such other similar infrastructure that will be constructed, established and operated by public or private entity

• Funeral and burial services for the death of the PWD, provided who shall shoulder the funeral and burial expenses of the deceased PWD shall claim the discount under this rule for the deceased PWD upon presentation of the death certificate and PWD Identification Card (ID), or, in its absence, the proof of registration from the issuing local government unit. Such expenses shall cover the purchase of casket or urn, embalming, hospital morgue, transport of the body to intended burial site from the place of origin, but shall exclude obituary publication and the cost of the memorial lot.

All other goods and services sold by the foregoing establishments not included in the above enumeration expressly provided by law shall not be considered for the 20 percent discount privilege, notwithstanding that the same are for the exclusive use and enjoyment or availment of the PWD.

Establishments granting sales discounts to PWD on their sale of goods and/or services shall be entitled to deduct the said sales discount from their gross income subject to the following conditions:

• All establishments that grant sales discounts on their sale of goods and/or services to PWD may claim the said discount as deduction from the gross income for the same taxable year that the discount is granted, provided that the name of the PWD and the PWD ID Number of sales for PWD.

As expressly provided by law, the total amount of the claimed tax deduction net of value-added tax (VAT), if applicable, shall be included in the establishment’s gross sales receipt for tax purposes and shall be subject to proper documentation and to the provisions of the National Internal Revenue Code (NIRC), as amended. Thus, if there are no names and ID Numbers of PWDs in the records of sales, the sales discount claimed as deduction by business establishments shall be disallowed.

For a percentage tax taxpayer, the amount of sales discounts shall be excluded for purposes of computing the 3 percent percentage tax, but shall be included as part of the gross sales/receipts for income tax purposes. The sales discount granted shall then be accounted as deduction from the gross income of the establishment for the same taxable year when the discount was granted.

• Only that portion of the gross sales exclusively used, consumed, or enjoyed by the PWD shall be eligible for the deductible sales discount.

• The seller must record its sales inclusive of the discount granted not as a reduction of sales to arrive at net sales, but as a deduction from its gross income (sales less cost of sales).

• The sales discount shall be treated as a necessary and ordinary expense duly deductible from the gross income of the seller falling under the category of itemized deductions.

• The gross selling price and the sales discount must be separately sales invoice issued by the establishment for the sale of goods or services to the PWD.

• Only the actual amount of the sales discount granted or a sales discount not exceeding 20% of the gross selling price or gross receipts can be deducted from the gross income, net of VAT, if applicable, and shall be subject to proper documentation under pertinent provisions of the Tax Code of 1997, as amended.

• The business establishment PWD is required to keep separate and accurate records of sales, which shall include the name of the PWD and the corresponding PWD ID Number, gross sales/receipts, sales discount granted, date of transactions, and invoice number for every sales transaction to a PWD

The foregoing privileges granted to PWD shall not be claimed if the said PWD claims a higher discount as may be granted by the commercial establishment and/or under other existing laws or in combination with other discount program/s. Thus, a PWD who is at the same time a senior citizen can only claim one 20 percent discount on a particular sales transaction.

Under Section 3 of these Regulations, sales of any goods and services to the PWD shall be exempt from VAT. To ensure the full entitlement of the PWD to the discount prescribed in the Act, the sellers are precluded from billing any VAT to the PWD.