Persons with disability: Tax benefits and privileges

In light of the declared policy of the State to give full support to the improvement of the well-being and integration into the mainstream society of persons with disability, the Bureau of Internal Revenue (BIR) recently issued Revenue Regulations (RR) 5-2017 which deals with the expanded rules and regulations relative to the tax privileges of PWDs, their benefactors and the establishments giving sales discounts and exemptions to PWDs.

Under RR 5-2017, qualified PWDs shall be entitled to claim at least 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 and professional fees of attending doctors in all government facilities or all private hospitals and medical facilities

•    Domestic air and sea transportation based on actual fare. For promotional fares, the PWDs can avail the establishment’s offered discount or the 20 percent provided in this RR, whichever is higher and more favorable

•    Land transportation privileges based on the actual fare

•    Funeral and burial services for the death of the PWD.

The RR also provides that all other goods and services sold by the foregoing establishments not included in the above enumeration shall not be required to grant the 20 percent discount privilege regardless of whether the said goods and services will be for the exclusive use and enjoyment or availment of the PWDs. It can be gleaned from the provision that the above enumeration is exclusive.

RR 5-2017 also reiterates that establishments granting sales discounts on their sale of goods and/or services to PWDs shall be entitled to deduct the said sales discounts from their gross income. However, in order for sales discount to be deductible from the gross income for the taxable year that the discount is granted, the name of the PWD and the PWD identification card must be reflected in the required record of sales for PWDs. In other words, the said claim for deduction must be properly documented/detailed to ensure that such claim will not be disallowed by the BIR.

The prohibition on availment of double discounts indicated in other relevant issuances was also reiterated in this RR. As an example, a PWD who is at the same time a senior citizen can only claim one 20 percent discount on a particular transaction.

It should also be noted that both RR 1-2009 and RR 5-2017 mentioned tax incentives to benefactors or those who care, support, and live with a PWD as a dependent. It is worthy to note, however, that RR 1-2009 defines a benefactor as any person, whether related or not to the person with disability, who takes care of him/her as a dependent while under RR 5-2017, a benefactor shall refer to a Filipino citizen or resident alien, caring for, giving chief support and living with the PWD, who is in the fourth civil degree of consanguinity or affinity. To reiterate, under RR 5-2017, in order for a benefactor to claim additional exemptions of a qualified PWD, one of the requirements is that the PWD must be within the fourth civil degree of consanguinity or affinity of the benefactor.

RR 5-2017 enumerated some of the requisites that must be complied with for the benefactor’s availment of the additional tax exemptions for PWDs, which shall include but shall not be limited to the following:

•      The additional exemptions for qualified dependent PWDs shall be claimed only by one taxpayer or by one of the spouses in the case of married individuals

•      The total number of dependent (qualified dependent children and/or qualified dependent PWDs) for which additional exemptions may be claimed by the taxpayer/benefactor shall not exceed four

•      In the case of legally separated spouses, additional exemptions may be claimed only by the spouse who has custody of the child or children or PWD. The number of additional exemptions that may be claimed by both shall not exceed the maximum additional exemptions of four

•      The taxpayer/benefactor of the PWDs shall submit the necessary documents/records to the Revenue District Office (RDO) where he is registered in order to claim the additional exemption

•      The taxpayer/benefactor must renew such records after three years or upon renewal of the PWD ID whichever comes first.

In the case of Drugstores Association of the Philippines, Inc. and Northern Luzon Drug Corporation vs. National Council on Disability Affairs, et.al, G.R. No. 194561 dated Sept. 14, 2016, the Supreme Court upheld that the mandated PWDs discount is a legitimate exercise of police power.

Moreover, in the same case, the SC enunciated that the priority given to PWDs finds its basis in our Constitution. Under the 1987 Philippine Constitution, “xxx The State shall adopt an integrated and comprehensive approach to health development which shall endeavor to make essential goods, health and other social services available to all the people at affordable cost. There shall be priority for the needs of the underprivileged, sick, elderly, disabled, women and children. x x x”

From the foregoing, it can be gleaned that the issuance of RR 5-2017 is clearly consistent with the policy of the State to ensure the rehabilitation, self-development and self-reliance and to promote general welfare of PWDs.

Chandine Kaye P. Villegas is a supervisor from the Tax Group of KPMG R.G. Manabat & Co. (KPMG RGM&Co.), the Philippine member firm of KPMG International. KPMG RGM&Co. has been recognized as a Tier 1 tax practice, Tier 1 transfer pricing practice, Tier 1 leading tax transactional firm and the 2016 National Transfer Pricing Firm of the Year in the Philippines by the International Tax Review.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or KPMG RGM&Co. For comments or inquiries, please email [email protected] or [email protected].