REVENUE REGULATIONS NO. 4-2006 issued on February 21, 2006 implements the tax privileges provisions of Republic Act (RA) No. 9257, otherwise known as the “Expanded Senior Citizens Act of 2003” and prescribes the guidelines for the availment thereof. These Regulations are promulgated to prescribe the guidelines for the availment of the Income Tax exemption privilege granted to senior citizens, the tax benefit granted to benefactors taking care of senior citizens, the tax privilege granted to establishments giving discount on their sale of goods and services to senior citizens, as well as the tax privilege of those employing senior citizens. Senior citizens shall be entitled to the following tax benefits and privileges: a. Exemption from the payment of individual income tax provided that their annual taxable income does not exceed the poverty level as determined by the National Economic and Development Authority (NEDA) for the corresponding taxable year; b. 20% discount from all establishments relative to the utilization of services in hotels and similar lodging establishments, restaurants and recreation centers and purchase of medicines in all establishments for the exclusive use or enjoyment of senior citizens, including funeral and burial services for the death of senior citizens; c. 20% discount on admission fees charged by theaters, cinema houses and concert halls, circuses, carnivals, and other similar places of culture, leisure and amusement for the exclusive use or enjoyment of senior citizens; d. 20% discount on medical and dental services, professional fees of attending doctors and diagnostic and laboratory fees such as, but not limited to, x-rays, computerized tomography scans and blood tests in all private hospitals and medical facilities, in accordance with the rules and regulations to be issued by the Department of Health (DOH) in coordination with the Philippine Health Insurance Corporation (PHILHEALTH); e. 20% discount in fare for domestic air and sea travel for the exclusive use or enjoyment of senior citizens; and f. 20% discount in public railways, skyways and bus fare for the exclusive use and enjoyment of senior citizens. A senior citizen must comply with the following requirements before he can be exempted from the payment of individual income tax: a. A senior citizen must first be qualified as such by the Commissioner of Internal Revenue or his duly authorized representative (i.e. the Revenue District Officer (RDO) having jurisdiction over the place where the senior citizen resides) by submitting a certified true copy of his Senior Citizen Identification Card (OSCA ID) issued by the Office for Senior Citizens Affairs (OSCA) of the city or municipality where he resides; b. He must file an Annual Information Return indicating that his annual taxable income does not exceed the poverty level as determined by the NEDA through the National Statistical Coordinating Board (NSCB), through a formal written document sent to the Commissioner of Internal Revenue for this year and every year thereafter; and c. If qualified, his name shall be recorded by the RDO in his master list of tax exempt senior citizens for that particular year, which the RDO is mandatorily required to keep. However, a senior citizen who is a compensation income earner deriving from only one employer an annual taxable income exceeding the poverty level or the amount determined by the NEDA through the NSCB on a particular year, but whose income had been subjected to the withholding tax on compensation, shall, although not exempt from Income Tax, be entitled to the substituted filing of Income Tax return under Revenue Regulations No. 2-98, as amended. A senior citizen, however, shall be subject to the following Income Taxes: a. Individual Income Tax if it exceeds the poverty level as may be determined by the NEDA, thru the NSCB, for a certain taxable year; b. 20% final withholding tax on interest income from any currency bank deposit, yield and other monetary benefit from deposit substitutes, trust fund and similar arrangements; royalties (except on books, as well as other literary works and musical compositions, which shall be imposed a final withholding tax of 10%); prizes (except prizes amounting to P 10,000.00 or less which shall be subject to Income Tax and other winnings (except Philippine Charity Sweepstakes and Lotto winnings); c. 7 ½% final withholding tax on interest income from a depository bank under the expanded foreign currency deposit system; d. If the senior citizen will pre-terminate his 5-year long-term deposit or investment in the form of savings, common or individual trust funds, deposit substitutes, investment management accounts and other investments evidenced by certificates in such form prescribed by the Bangko Sentral ng Pilipinas (BSP) before the 5th year, he shall be subject to the final withholding tax imposed on the entire income based on the remaining maturity thereof, viz: Four years to less than five years – 5% Three years to less than four years – 12%; and Less than three years – 20% e. 10% final withholding tax on cash and/or property dividends actually or constructively received from a domestic corporation or from a joint stock company, insurance or mutual fund company and a regional operating headquarters of a multinational company, or on the share of an individual in the distributable net income after tax of a partnership (except a general professional partnership) of which he is a partner, or on the share of an individual in the net income after tax of an association, a joint account, or a joint venture or consortium taxable as a corporation of which he is a member or a co-venturer; f. Capital gains tax from sales of shares of stock not traded in the stock exchange; and g. 6% final withholding tax on presumed capital gains from sale of real property, classified as capital asset, except capital gains presumed to have been realized from the sale or disposition of principal residence. A senior citizen shall also be subject to the following internal revenue taxes imposed under the Tax Code: a. Value-Added Tax (VAT) or other percentage taxes, as the case may be. If he is self– employed or engaged in business or practice of profession, and his gross annual sales and/or receipts exceeds P 1,500,000.00 or such amount to which this may be adjusted, he shall be subject to VAT. Otherwise, he shall be subject to the 3% percentage tax; b. Donor’s Tax; c. Estate Tax; d. Excise Tax on certain goods; and e. Documentary Stamp Tax. A benefactor of a senior citizen shall be considered as head of family and shall be allowed to avail himself/herself of that status subject to the following conditions: a. The senior citizen, whose annual taxable income does not exceed the poverty level as determined by the NEDA for the corresponding taxable year, must be living with and dependent upon his benefactor for his chief support; b. It shall be the duty of the benefactor of a senior citizen to register the senior citizen as his dependent and himself/herself as benefactor in the RDO having jurisdiction over the place where he/she and the senior citizen reside. In that case, he/she will be granted the exclusive right to claim the senior citizen as dependent for Income Tax purposes; c. The benefactor shall be entitled only to the basic personal exemption equivalent to P 25,000.00 or as allowed under the Tax Code for head of family; d. If required to file an Income Tax return, the benefactor shall state therein the name, birthday and OSCA ID number of the dependent senior citizens. The benefactor of a senior citizen shall not, however, be entitled to claim the additional exemption of P 8,000.00 per dependent (not exceeding 4) allowable only to a married individual or head of family with qualified dependent child/children. Establishments granting sales discounts to senior citizens on the sale of goods and/or services are entitled to deduct the said discount from gross income subject to the following conditions: a. Only that portion of the gross sales exclusively used, consumed or enjoyed by the senior citizen shall be eligible for the deductible sales discount; b. 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; c. Only the actual amount of the discount granted or a sales discount not exceeding 20% of the gross selling price can be deducted from the gross income, net of VAT, if applicable, for Income Tax purposes, and from gross sales or gross receipts of the business enterprise concerned, for VAT or other percentage tax purposes; d. The discount can only be allowed as deduction from gross income for the same taxable year that the discount is granted; e. The business establishment giving sales discounts to qualified senior citizens is required to keep separate and accurate record of sales, which shall include the name of the senior citizen, Taxpayer Identification Number, OSCA ID, gross sales/receipts, sales discount granted, dates of transactions and invoice number for every sale transaction to senior citizen; f. Only the business establishments stated in the Regulations which granted sales discount to senior citizens on their sale of goods and/or services may claim the said discount granted as deduction from gross income. Private establishments employing senior citizens shall be entitled to additional deduction from their gross income equivalent to 15% of the total amount paid as salaries and wages to senior citizens provided that the following conditions are met: a. The employment shall have to continue for a period of at least 6 months; b. The annual taxable income of the senior citizen does not exceed the poverty level as may be determined by the NEDA through the NSCB. For this purpose, the senior citizen shall submit to his employer a sworn certification that his annual taxable income does not exceed the poverty level. Any person who violates any provision of the Regulations shall suffer the following penalties: a. For the first violation, a fine of not less than P 50,000.00 but not exceeding P 100,000.00 and imprisonment of not less than 6 months but not more than 2 years; and b. For any subsequent violation, a fine of not less than P 100,000.00 but not exceeding P 200,000.00 and imprisonment for not less than 2 years but not less than 6 years. Any person who abuses the privileges granted herein shall be punished with a fine of not less than P 5,000.00, but not more than P 50,000.00 and imprisonment of not less than 6 months. If the offender is an alien or a foreigner, he shall be deported immediately after service of sentence without further deportation proceedings. If the offender is a corporation, organization or any similar entity, the official/s thereof directly involved shall be liable therefore. Upon filing an appropriate complaint and after due notice and hearing, the proper authorities may also cause the cancellation or revocation of the business permit, permit to operate, franchise and other similar privileges granted to any business entity that fails to abide by the provisions of RA No. 9257 and its Implementing Rules and Regulations and these Regulations.