• Enabling PWDs through tax exemptions

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    OLIVER BELTRAN

    OLIVER BELTRAN

    The policy of social justice as enshrined in our Constitution serves as a benchmark for the government, and for us Filipinos, to constantly seek ways to improve and develop our society.

    As aptly put by Justice Jose P. Laurel in the landmark case Calalang vs. Williams (70 Phil 726), social justice is the “humanization of laws and the equalization of social and economic forces by the State so that justice in the rational and objectively secular conception may at least be approximated.”

    In a notable development, President Benigno Aquino 3rd signed into law Republic Act (RA) 10754, which amended Section 32 of RA 7277, otherwise known as the Magna Carta for Persons with Disability (PWD).

    Under RA 10754, PWDs are now entitled to at least 20 percent discount and exemption from value-added tax (VAT), if applicable, on the following sale of goods and services for the exclusive use and enjoyment or availment of the PWD:

    1. On the fees and charges relative to the utilization of all services in hotels and similar lodging establishments; restaurants and recreation centers;

    2. On admission fees charged by theaters, cinema houses, concert halls, circuses, carnivals and other similar places of culture, leisure and amusement;

    3. On the purchase of medicines in all drugstores;

    4. On medical and dental services, including diagnostic and laboratory fees such as, but not limited to, X-rays, computerized tomography scans and blood tests, and professional fees of attending doctors in all government facilities, subject to the guidelines to be issued by the Department of Health (DOH), in coordination with the Philippine Health Insurance Corporation (PhilHealth);

    5. On medical and dental services, including diagnostic and laboratory fees, and professional fees of attending doctors in private hospitals and medical facilities, in accordance with the rules and regulations to be issued by the DOH, in coordination with PhilHealth;

    6. On fares for domestic and sea travel;

    7. On actual fares for land transportation travel such as, but not limited to, public utility buses or jeepneys (PUBs/PUJs), taxis, Asian utility vehicles (AUVs), shuttle services, and public railways, including Light Rail Transit (LRT), Metro Rail Transit (MRT), and Philippine National Railways (PNR); and

    8. On funeral and burial services for the death of the PWD, provided that the beneficiary or any person 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. Such expenses shall cover the purchase of casket or urn, embalming, hospital morgue, transport of the body to intended burial site in the place of origin, but shall exclude obituary publication and the cost of the memorial lot.

    It is noteworthy that the abovementioned benefits granted to PWDs under RA 10754 are basically similar to those granted to senior citizens under the Expanded Senior Citizens Act (RA 7432, as amended).

    Nonetheless, RA 10754 specifically provided that the aforementioned tax benefits may not be claimed if the 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. PWDs who are likewise senior citizens may not simultaneously claim the benefits under RA 10754 and RA 7432, as amended.

    The establishments involved may claim the discounts granted to PWDs as tax deductions based on the net cost of goods sold or services rendered subject to the following conditions:

    a. that the cost of the discount shall be allowed as deduction from the gross income for the same taxable year that the discount is granted; and

    b. that the total amount of the claimed tax deduction net of VAT, if applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to proper documentation and to the provisions of the National Internal Revenue Code (NIRC), as amended.

    Moreover, under RA 10754, individual taxpayers caring for and living with a PWD are granted the additional incentive of claiming as dependent a PWD within the fourth civil degree of consanguinity or affinity, regardless of the age of the PWD, so long as the said PWD is not gainfully employed and chiefly dependent upon the taxpayer.

    Hopefully, this provision will not suffer the same fate of the similar benefit provided in the Expanded Senior Citizen Act, where the Bureau of Internal Revenue (BIR) decreed in Revenue Regulations No. 007-10 that although a senior citizen who is not gainfully employed, living with and dependent upon his benefactor for chief support, is considered a dependent, the benefactor is not entitled to claim additional personal exemption.

    According to the BIR, the entitlement to claim additional personal exemption per dependent is allowable only to individual taxpayers with a qualified dependent child or children.

    Another interesting feature of RA 10754 is that Section 3 thereof specifically provides that the failure of the government agencies tasked to promulgate the necessary Implementing Rules and Regulations shall not prevent the implementation of the said law upon its effectivity on 7 April 2016, which is 15 days after its publication in the Official Gazette on 23 March 2016.

    With this provision, it is clear that Congress has already learned from past instances where the government agency/ies mandated to promulgate the Implementing Rules and Regulations failed to issue the same, thereby causing delay in the availment of, and in some cases, outright deprivation in claiming incentives granted by law.

    It is interesting that tax exemptions can effectively serve as an implement of social justice that would particularly promote and advocate the well being of the marginalized sectors of our society. And the essence of social justice is actually realized when the branches of our government are inclined to favor the less fortunate in accordance with the compassionate objective that those who have less in life should have more in law.

    The author is a Manager with the Tax & Corporate Services division of Navarro Amper & Co., the local member firm of Deloitte Southeast Asia Ltd., a member firm of Deloitte Touche Tohmatsu Limited—comprising Deloitte practices operating in Brunei, Cambodia, Guam, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.

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    3 Comments

    1. May I ask to clarify the ‘additional tax incentive’ for taxpayers caring for a PWD.

      As a father of a 12 year old PWD, I am already entitled to a tax discount of 25K for having a dependent child (below the age of 21). Does the new law, R.A. 10754, provide me with an ‘additional’ discount of 25K because my child is a PWD?

      As the lone bread winner in my family trying to make ends meet, if the intent of this law is an ‘additional’ tax exemption for tax payers, the term ‘additional’ should be clarified by our law makers.

    2. I Am looking for a write up on tax exemption for working PWD.

      I am 55 years old and still working and deducted 32% tax from my salary. Can you help me on where can I find the additional amendments on tax exemption.