My balikbayan aunt, who owns two Senior Citizen IDs (one issued in the U.S. and another issued by the OSCA at the Quezon City Hall), had a puzzling experience at a fast food chain last week. She saw the ad on specialty burgers being sold at half the price as a promotional offering of the decades-old burger chain and decided to buy some for takeout. After placing her order, she presented her QC Senior Citizen ID and started counting her bills, already having computed the total amount she needs to pay: the discounted price less her Senior Citizen discount. After the cashier rang up her purchase, she was surprised to find that the only discount applied on her purchase was the advertised 50% off of the selling price. When she inquired how come her Senior Citizen discount was not applied, the cashier replied: “Naka promo na po yung burgers.”
My aunt reviewed her receipt one more time and realized that even the 12% VAT exemption (which all Senior Citizens are entitled to) is not applied as well. The cashier stood her ground and insisted that since the products that my aunt bought were already on promo price, any other discounts are no longer applicable – including the VAT exemption of Senior Citizens.
Unfazed by her experience, my aunt had me scour all available documents online that will shed light on these questions that most Senior Citizens probably want to ask:
a. If a product or service is on promo, does it automatically mean that the 20% SC discount is no longer applicable?
b. In cases when the 20% SC discount is in fact, waived, because the service or product being sold is at a discounted price, should the 12% VAT exemption be waived as well?
Before we go further into this discussion, allow me to present the correct and detailed computation of for Senior Citizen’s discount. For purposes of computation, let us assume the product’s amount is Php 100.00.
1.Determine the VAT amount:
Amount of VAT = (Selling Price x 12%) / 1.12
Amount of VAT = (Php 100 x 12%) / 1.12
Amount of VAT = (12) / 1.12
Amount of VAT = Php 10.71
2. Deduct the VAT amount from the selling price to get the Sales Net of VAT:
Sales Net of VAT = Selling Price – Amopunt of VAT
Sales Net of VAT = Php 100 – Php 10.71
Sales Net of VAT = Php 89.29
3. Determine the discount to be applied:
Amount of Discount = Sales Net of VAT x 20%
Amount of Discount = Php 89.29 x 20%
Amount of Discount = Php 17.86
4. Determine the amount to be paid by the Senior Citizen
Amount to be paid by the SC = Sales Net of VAT – Amount of Discount
Amount to be paid by the SC = Php 89.29 – Php 17.86
Amount to be paid by the SC = Php 71.43
Given the above computation, Senior Citizen discounts are composed of two major considerations: the VAT exempted amount and the amount after the Senior Citizen discount has been applied. And that in order to arrive at the latter, one would have to have already determined how much the item should be priced AFTER the VAT has been removed.
If the purchased goods or services are on promotional discount, can the Senior Citizen still avail of the 20% discount?
According to the BIR (and based on Memorandum Circular No. 38-2012), the answer is No.
In the purchase of goods and services which are on promotional discount, the Senior Citizen shall avail of either the promotional discount or the 20% discount, whichever is higher. However, the discount that must be given to the Senior Citizen shall in no case be less than 20%. (Section 5 of RR No. 7-2010).
If the Senior Citizen used his privilege card or purchased an item that is on promotional discount which is higher than the 20% SC discount, is the sale exempt from VAT?
Again, based on Memorandum Circular No. 38-2012, the answer is Yes.
The sale of goods and services on promotional discount is still exempt from VAT. (Section 10 of RR No. 7-2010).
So the answer is, my aunt, being a Senior Citizen, is entitled to a VAT exempted sale regardless if the items or services she purchased were on regular price or at discounted rates.
Tomorrow, we shall feature the different policies covered by the Expanded Senior Citizens Act of 2010. Meantime, share this to your friends and families so everyone would be informed. I am certainly sharing this with my aunt.