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PART II
BASIC CONCEPTS IN INCOME
Definition of Income Tax:

Income Taxation is in the nature of an excise taxation system, or taxation on
the exercise of privilege, the privilege to earn yearly profits from various
sources. It is a system that does not provide for the taxation of property.
Income Tax is defined as tax on all yearly profits arising from property,
professions, trades, or offices, or as a tax on the person’s income,
emoluments, profits and the like. It may be succinctly defined as a tax on
income, whether gross or net, realized in one taxable year.
Income may be defined as an amount of money coming to a person or
corporation within a specified time, whether as payment for services, interest
or profit from investment. Unless otherwise specified, it means cash or its
equivalent. 4 Income can also be though of as flow of the fruits of one's labor.
(Conwi vs CTA)
Nature of Income Tax : (direct, progressive and excise)

1. Direct Tax- the tax burden is borne by the income recipient upon whom the
tax is imposed.
2. Progressive- tax rate increases as the tax base increases. It is founded on
the ability to pay principle and is consistent with Section 28, Art VI, 1987
Constitution.
[Sec. 28. The rule of taxation shall be uniform and equitable. The Congress
shall evolve a progressive system of taxation.]
3. Excise- income tax is generally classified as an excise tax. It is levied upon
the right of a person to receive income or profits.
4. Comprehensive
5. Semi-Schedular or Semi-Global Tax System
Purpose of Income Taxes:

1. Fiscal
2. Non-Fiscal
Definition of Income:
Page 1 of 108 Pray, hope and don’t worry… Prepared by: Szia Darene Martin
Income means all wealth which flows to the taxpayer other than a mere
return of capital. It includes gain derived from the sale or other disposition of
capital assets. Income is a gain derived from labor or capital, or both labor
and capital and includes the gain derived from the sale or exchange of
capital assets.
Income may be received in the form of cash, property, service, or a
combination of the three.
Requisites of income to be taxable:

1. There is income, gain or profit
2. Received or realized during the taxable year
3. Not exempt from income tax
CASE: Conwi v. Court of Tax Appeals, G.R. No. 48532, August 31, 1992
HERNANDO B. CONWI vs. THE HONORABLE COURT OF TAX APPEALS and

COMMISSIONER OF INTERNAL REVENUE
Petitioners pray that his Court reverse the Decision of the public respondent
Court of Tax Appeals, promulgated September 26, 1977 denying petitioners' claim for
tax refunds, and order the Commissioner of Internal Revenue to refund to them their
income taxes which they claim to have been erroneously or illegally paid or collected.
As summarised by the Solicitor General, the facts of the cases are as follows:
Petitioners are Filipino citizens and employees of Procter and Gamble, Philippine
Manufacturing Corporation, with offices at Sarmiento Building, Ayala Avenue, Makati,
Rizal. Said corporation is a subsidiary of Procter & Gamble, a foreign corporation based
in Cincinnati, Ohio, U.S.A. During the years 1970 and 1971 petitioners were assigned,
for certain periods, to other subsidiaries of Procter & Gamble, outside of the Philippines,
during which petitioners were paid U.S. dollars as compensation for services in their
foreign assignments. (Paragraphs III, Petitions for Review, C.T.A. Cases Nos. 2511 and
2594, Exhs. D, D-1 to D-19). When petitioners in C.T.A. Case No. 2511 filed their
income tax returns for the year 1970, they computed the tax due by applying the dollar-
to-peso conversion on the basis of the floating rate ordained under B.I.R. Ruling No.
70-027 dated May 14, 1970, as follows:
From January 1 to February 20, 1970 at the conversion rate of P3.90 to U.S. $1.00;
From February 21 to December 31, 1970 at the conversion rate of P6.25 to U.S. $1.00
Petitioners in C.T.A. Case No. 2594 likewise used the above conversion rate in
converting their dollar income for 1971 to Philippine peso. However, on February 8,
1973 and October 8, 1973, petitioners in said cases filed with the office of the
respondent Commissioner, amended income tax returns for the above-mentioned years,
this time using the par value of the peso as prescribed in Section 48 of Republic Act No.
265 in relation to Section 6 of Commonwealth Act No. 265 in relation to Section 6 of
Commonwealth Act No. 699 as the basis for converting their respective dollar income
into Philippine pesos for purposes of computing and paying the corresponding income
tax due from them. The aforesaid computation as shown in the amended income tax
returns resulted in the alleged overpayments, refund and/or tax credit. Accordingly,
claims for refund of said over-payments were filed with respondent Commissioner.
Without awaiting the resolution of the Commissioner of the Internal Revenue on their
claims, petitioners filed their petitioner for review in the above-mentioned cases.
Respondent Commissioner filed his Answer to petitioners' petition for review in C.T.A.
Case No. 2511 on July 31, 1973, while his Answer in C.T.A. Case No. 2594 was filed on
August 7, 1974.
Upon joint motion of the parties on the ground that these two cases involve
common question of law and facts, that respondent Court of Tax Appeals heard the
cases jointly. In its decision dated September 26, 1977, the respondent Court of Tax
Appeals held that the proper conversion rate for the purpose of reporting and paying the
Philippine income tax on the dollar earnings of petitioners are the rates prescribed
under Revenue Memorandum Circulars Nos. 7-71 and 41-71. Accordingly, the claim for
refund and/or tax credit of petitioners in the above-entitled cases was denied and the
petitions for review dismissed, with costs against petitioners. Hence, this petition for
review on certiorari.
Petitioners claim that public respondent Court of Tax Appeals erred in holding:
1. That petitioners' dollar earnings are receipts derived from foreign exchange
transactions.
2. That the proper rate of conversion of petitioners' dollar earnings for tax purposes in
the prevailing free market rate of exchange and not the par value of the peso; and
3. That the use of the par value of the peso to convert petitioners' dollar earnings for tax
purposes into Philippine pesos is "unrealistic" and, therefore, the prevailing free market
rate should be the rate used.
Respondent Commissioner of Internal Revenue, on the other hand, refutes

petitioners' claims as follows:
At the outset, it is submitted that the subject matter of these two cases are
Philippine income tax for the calendar years 1970 (CTA Case No. 2511) and 1971 (CTA
Case No. 2594) and, therefore, should be governed by the provisions of the National
Internal Revenue Code and its implementing rules and regulations, and not by the
provisions of Central Bank Circular No. 42 dated May 21, 1953, as contended by
petitioners.
Section 21 of the National Internal Revenue Code, before its amendment by

Presidential Decrees Nos. 69 and 323 which took effect on January 1, 1973 and
January 1, 1974, respectively, imposed a tax upon the taxable net income received
during each taxable year from all sources by a citizen of the Philippines, whether
residing here or abroad.
Petitioners are citizens of the Philippines temporarily residing abroad by virtue of

their employment. Thus, in their tax returns for the period involved herein, they gave
their legal residence/address as c/o Procter & Gamble PMC, Ayala Ave., Makati, Rizal
(Annexes "A" to "A-8" and Annexes "C" to "C-8", Petition for Review, CTA Nos. 2511 and
2594).
Petitioners being subject to Philippine income tax, their dollar earnings should be
converted into Philippine pesos in computing the income tax due therefrom, in
accordance with the provisions of Revenue Memorandum Circular No. 7-71 dated
February 11, 1971 for 1970 income and Revenue Memorandum Circular No. 41-71
dated December 21, 1971 for 1971 income, which reiterated BIR Ruling No. 70-027
dated May 4, 1970, to wit:
For internal revenue tax purposes, the free marker rate of conversion (Revenue
Circulars Nos. 7-71 and 41-71) should be applied in order to determine the true and
correct value in Philippine pesos of the income of petitioners.
After a careful examination of the records, the laws involved and the
jurisprudence on the matter, We are inclined to agree with respondents Court of Tax
Appeals and Commissioner of Internal Revenue and thus vote to deny the petition.
This basically an income tax case. For the proper resolution of these cases
income may be defined as an amount of money coming to a person or
corporation within a specified time, whether as payment for services, interest or
profit from investment. Unless otherwise specified, it means cash or its
equivalent. 4 Income can also be though of as flow of the fruits of one's labor.
Petitioners are correct as to their claim that their dollar earnings are not receipts
derived from foreign exchange transactions. For a foreign exchange transaction is
simply that — a transaction in foreign exchange, foreign exchange being "the
conversion of an amount of money or currency of one country into an equivalent amount
of money or currency of another." 6 When petitioners were assigned to the foreign
subsidiaries of Procter & Gamble, they were earning in their assigned nation's currency
and were ALSO spending in said currency. There was no conversion, therefore, from
one currency to another.
Public respondent Court of Tax Appeals did err when it concluded that the dollar
incomes of petitioner fell under Section 2(f)(g) and (m) of C.B. Circular No. 42.
The issue now is, what exchange rate should be used to determine the peso
equivalent of the foreign earnings of petitioners for income tax purposes.
Petitioners claim that since the dollar earnings do not fall within the classification of
foreign exchange transactions, there occurred no actual inward remittances, and,
therefore, they are not included in the coverage of Central Bank Circular No. 289 which
provides for the specific instances when the par value of the peso shall not be the
conversion rate used. They conclude that their earnings should be converted for income
tax purposes using the par value of the Philippine peso.
Respondent Commissioner argues that CB Circular No. 289 speaks of receipts

for export products, receipts of sale of foreign exchange or foreign borrowings and
investments but not income tax. He also claims that he had to use the prevailing free
market rate of exchange in these cases because of the need to ascertain the true and
correct amount of income in Philippine peso of dollar earners for Philippine income tax
purposes.
A careful reading of said CB Circular No. 2898 shows that the subject
matters involved therein are export products, invisibles, receipts of foreign
exchange, foreign exchange payments, new foreign borrowing and investments
— nothing by way of income tax payments. Thus, petitioners are in error by
concluding that since C.B. Circular No. 289 does not apply to them, the par value of the
peso should be the guiding rate used for income tax purposes.
The dollar earnings of petitioners are the fruits of their labors in the foreign
subsidiaries of Procter & Gamble. It was a definite amount of money which came to
them within a specified period of time of two yeas as payment for their services.
Section 21 of the National Internal Revenue Code, amended up to August 4,

1969, states as follows:
Sec. 21. Rates of tax on citizens or residents. — A tax is hereby imposed upon
the taxable net income received during each taxable year from all sources by every
individual, whether a citizen of the Philippines residing therein or abroad or an alien
residing in the Philippines, determined in accordance with the following schedule:
xxx xxx xxx
And in the implementation for the proper enforcement of the National Internal
Revenue Code, Section 338 thereof empowers the Secretary of Finance to "promulgate
all needful rules and regulations" to effectively enforce its provisions. 9
Pursuant to this authority, Revenue Memorandum Circular Nos. 7-71 10 and

41-71 11 were issued to prescribed a uniform rate of exchange from US dollars to
Philippine pesos for INTERNAL REVENUE TAX PURPOSES for the years 1970 and
1971, respectively. Said revenue circulars were a valid exercise of the authority given to
the Secretary of Finance by the Legislature which enacted the Internal Revenue Code.
And these are presumed to be a valid interpretation of said code until revoked by the
Secretary of Finance himself.
Petitioners argue that since there were no remittances and acceptances of

their salaries and wages in US dollars into the Philippines, they are exempt from
the coverage of such circulars. Petitioners forget that they are citizens of the
Philippines, and their income, within or without, and in these cases wholly without, are
subject to income tax. Sec. 21, NIRC, as amended, does not brook any exemption.
Since petitioners have already paid their 1970 and 1971 income taxes under
the uniform rate of exchange prescribed under the aforestated Revenue
Memorandum Circulars, there is no reason for respondent Commissioner to
refund any taxes to petitioner as said Revenue Memorandum Circulars, being of
long standing and not contrary to law, are valid.
Although it has become a worn-out cliche, the fact still remains that "taxes are
the lifeblood of the government" and one of the duties of a Filipino citizen is to pay his
income tax.”
WHEREFORE, the petitioners are denied for lack of merit. The dismissal by the
respondent Court of Tax Appeals of petitioners' claims for tax refunds for the income tax
period for 1970 and 1971 is AFFIRMED. Costs against petitioners.
SO ORDERED.
CASE: Madrigal vs Rafferty, G.R. No. L-12287 August 7, 1918
VICENTE MADRIGAL and his wife, SUSANA PATERNO vs. JAMES J. RAFFERTY,
Collector of Internal Revenue
This appeal calls for consideration of the Income Tax Law, a law of American
origin, with reference to the Civil Code, a law of Spanish origin.
STATEMENT OF THE CASE:
Vicente Madrigal and Susana Paterno were legally married prior to January 1,
1914. The marriage was contracted under the provisions of law concerning conjugal
partnerships (sociedad de gananciales). On February 25, 1915, Vicente Madrigal filed
sworn declaration on the prescribed form with the Collector of Internal Revenue,
showing, as his total net income for the year 1914, the sum of P296,302.73.
Subsequently Madrigal submitted the claim that the said P296,302.73 did not represent
his income for the year 1914, but was in fact the income of the conjugal partnership
existing between himself and his wife Susana Paterno, and that in computing and
assessing the additional income tax provided by the Act of Congress of October 3,
1913, the income declared by Vicente Madrigal should be divided into two equal parts,
one-half to be considered the income of Vicente Madrigal and the other half of Susana
Paterno. The general question had in the meantime been submitted to the Attorney-
General of the Philippine Islands who in an opinion dated March 17, 1915, held with the
petitioner Madrigal. The revenue officers being still unsatisfied, the correspondence
together with this opinion was forwarded to Washington for a decision by the United
States Treasury Department. The United States Commissioner of Internal Revenue
reversed the opinion of the Attorney-General, and thus decided against the claim of
Madrigal.
After payment under protest, and after the protest of Madrigal had been decided
adversely by the Collector of Internal Revenue, action was begun by Vicente Madrigal
and his wife Susana Paterno in the Court of First Instance of the city of Manila against
Collector of Internal Revenue and the Deputy Collector of Internal Revenue for the
recovery of the sum of P3,786.08, alleged to have been wrongfully and illegally
collected by the defendants from the plaintiff, Vicente Madrigal, under the provisions of
the Act of Congress known as the Income Tax Law. The burden of the complaint was
that if the income tax for the year 1914 had been correctly and lawfully computed there
would have been due payable by each of the plaintiffs the sum of P2,921.09, which
taken together amounts of a total of P5,842.18 instead of P9,668.21, erroneously and
unlawfully collected from the plaintiff Vicente Madrigal, with the result that plaintiff
Madrigal has paid as income tax for the year 1914, P3,786.08, in excess of the sum
lawfully due and payable.
The answer of the defendants, together with an analysis of the tax declaration,
the pleadings, and the stipulation, sets forth the basis of defendants' stand in the
following way: The income of Vicente Madrigal and his wife Susana Paterno of the year
1914 was made up of three items: (1) P362,407.67, the profits made by Vicente
Madrigal in his coal and shipping business; (2) P4,086.50, the profits made by Susana
Paterno in her embroidery business; (3) P16,687.80, the profits made by Vicente
Madrigal in a pawnshop company. The sum of these three items is P383,181.97, the
gross income of Vicente Madrigal and Susana Paterno for the year 1914. General
deductions were claimed and allowed in the sum of P86,879.24. The resulting net
income was P296,302.73. For the purpose of assessing the normal tax of one per cent
on the net income there were allowed as specific deductions the following: (1)
P16,687.80, the tax upon which was to be paid at source, and (2) P8,000, the specific
exemption granted to Vicente Madrigal and Susana Paterno, husband and wife. The
remainder, P271,614.93 was the sum upon which the normal tax of one per cent was
assessed. The normal tax thus arrived at was P2,716.15.
The dispute between the plaintiffs and the defendants concerned the additional
tax provided for in the Income Tax Law. The trial court in an exhausted decision found in
favor of defendants, without costs.
ISSUES:
The contentions of plaintiffs and appellants having to do solely with the additional
income tax, is that is should be divided into two equal parts, because of the conjugal
partnership existing between them. The learned argument of counsel is mostly based
upon the provisions of the Civil Code establishing the sociedad de gananciales. The
counter contentions of appellees are that the taxes imposed by the Income Tax Law are
as the name implies taxes upon income tax and not upon capital and property; that the
fact that Madrigal was a married man, and his marriage contracted under the provisions
governing the conjugal partnership, has no bearing on income considered as income,
and that the distinction must be drawn between the ordinary form of commercial
partnership and the conjugal partnership of spouses resulting from the relation of
marriage.
DECISION:
From the point of view of test of faculty in taxation, no less than five answers
have been given the course of history. The final stage has been the selection of income
as the norm of taxation. (See Seligman, "The Income Tax," Introduction.) The Income
Tax Law of the United States, extended to the Philippine Islands, is the result of an
effect on the part of the legislators to put into statutory form this canon of taxation and of
social reform. The aim has been to mitigate the evils arising from inequalities of wealth
by a progressive scheme of taxation, which places the burden on those best able to
pay. To carry out this idea, public considerations have demanded an exemption roughly
equivalent to the minimum of subsistence. With these exceptions, the income tax is
supposed to reach the earnings of the entire non-governmental property of the country.
Such is the background of the Income Tax Law.
Income as contrasted with capital or property is to be the test. The essential

difference between capital and income is that capital is a fund; income is a flow. A fund
of property existing at an instant of time is called capital. A flow of services rendered by
that capital by the payment of money from it or any other benefit rendered by a fund of
capital in relation to such fund through a period of time is called an income. Capital is
wealth, while income is the service of wealth. (See Fisher, "The Nature of Capital and
Income.") The Supreme Court of Georgia expresses the thought in the following
figurative language: "The fact is that property is a tree, income is the fruit; labor is a tree,
income the fruit; capital is a tree, income the fruit." (Waring vs. City of Savannah [1878],
60 Ga., 93.) A tax on income is not a tax on property. "Income," as here used, can be
defined as "profits or gains." (London County Council vs. Attorney-General [1901], A. C.,
26; 70 L. J. K. B. N. S., 77; 83 L. T. N. S., 605; 49 Week. Rep., 686; 4 Tax Cas., 265.
See further Foster's Income Tax, second edition [1915], Chapter IV; Black on Income
Taxes, second edition [1915], Chapter VIII; Gibbons vs. Mahon [1890], 136 U.S., 549;
and Towne vs. Eisner, decided by the United States Supreme Court, January 7, 1918.)
A regulation of the United States Treasury Department relative to returns by the
husband and wife not living apart, contains the following:
The husband, as the head and legal representative of the household and general
custodian of its income, should make and render the return of the aggregate income of
himself and wife, and for the purpose of levying the income tax it is assumed that he
can ascertain the total amount of said income. If a wife has a separate estate managed
by herself as her own separate property, and receives an income of more than $3,000,
she may make return of her own income, and if the husband has other net income,
making the aggregate of both incomes more than $4,000, the wife's return should be
attached to the return of her husband, or his income should be included in her return, in
order that a deduction of $4,000 may be made from the aggregate of both incomes. The
tax in such case, however, will be imposed only upon so much of the aggregate income
of both shall exceed $4,000. If either husband or wife separately has an income equal to
or in excess of $3,000, a return of annual net income is required under the law, and
such return must include the income of both, and in such case the return must be made
even though the combined income of both be less than $4,000. If the aggregate net
income of both exceeds $4,000, an annual return of their combined incomes must be
made in the manner stated, although neither one separately has an income of $3,000
per annum. They are jointly and separately liable for such return and for the payment of
the tax. The single or married status of the person claiming the specific exemption shall
be determined as one of the time of claiming such exemption which return is made,
otherwise the status at the close of the year."
With these general observations relative to the Income Tax Law in force in the
Philippine Islands, we turn for a moment to consider the provisions of the Civil Code
dealing with the conjugal partnership. Recently in two elaborate decisions in which a
long line of Spanish authorities were cited, this court in speaking of the conjugal
partnership, decided that "prior to the liquidation the interest of the wife and in case of
her death, of her heirs, is an interest inchoate, a mere expectancy, which constitutes
neither a legal nor an equitable estate, and does not ripen into title until there appears
that there are assets in the community as a result of the liquidation and
settlement." (Nable Jose vs. Nable Jose [1916], 15 Off. Gaz., 871; Manuel and
Laxamana vs. Losano [1918], 16 Off. Gaz., 1265.)
Susana Paterno, wife of Vicente Madrigal, has an inchoate right in the property of
her husband Vicente Madrigal during the life of the conjugal partnership. She has an
interest in the ultimate property rights and in the ultimate ownership of property acquired
as income after such income has become capital. Susana Paterno has no absolute right
to one-half the income of the conjugal partnership. Not being seized of a separate
estate, Susana Paterno cannot make a separate return in order to receive the benefit of
the exemption which would arise by reason of the additional tax. As she has no estate
and income, actually and legally vested in her and entirely distinct from her husband's
property, the income cannot properly be considered the separate income of the wife for
the purposes of the additional tax. Moreover, the Income Tax Law does not look on the
spouses as individual partners in an ordinary partnership. The husband and wife are
only entitled to the exemption of P8,000 specifically granted by the law. The higher
schedules of the additional tax directed at the incomes of the wealthy may not be
partially defeated by reliance on provisions in our Civil Code dealing with the conjugal
partnership and having no application to the Income Tax Law. The aims and purposes of
the Income Tax Law must be given effect.
The point we are discussing has heretofore been considered by the Attorney-
General of the Philippine Islands and the United States Treasury Department. The
decision of the latter overruling the opinion of the Attorney-General is as follows:
TREASURY DEPARTMENT, Washington.
Income Tax.
FRANK MCINTYRE,
Chief, Bureau of Insular Affairs, War Department, 
Washington, D. C.
SIR: This office is in receipt of your letter of June 22, 1915, transmitting copy of
correspondence "from the Philippine authorities relative to the method of submission of
income tax returns by marred person."
You advise that "The Governor-General, in forwarding the papers to the Bureau,
advises that the Insular Auditor has been authorized to suspend action on the warrants
in question until an authoritative decision on the points raised can be secured from the
Treasury Department."
From the correspondence it appears that Gregorio Araneta, married and living
with his wife, had an income of an amount sufficient to require the imposition of the net
income was properly computed and then both income and deductions and the specific
exemption were divided in half and two returns made, one return for each half in the
names respectively of the husband and wife, so that under the returns as filed there
would be an escape from the additional tax; that Araneta claims the returns are correct
on the ground under the Philippine law his wife is entitled to half of his earnings; that
Araneta has dominion over the income and under the Philippine law, the right to
determine its use and disposition; that in this case the wife has no "separate estate"
within the contemplation of the Act of October 3, 1913, levying an income tax.
It appears further from the correspondence that upon the foregoing explanation,
tax was assessed against the entire net income against Gregorio Araneta; that the tax
was paid and an application for refund made, and that the application for refund was
rejected, whereupon the matter was submitted to the Attorney-General of the Islands
who holds that the returns were correctly rendered, and that the refund should be
allowed; and thereupon the question at issue is submitted through the Governor-
General of the Islands and Bureau of Insular Affairs for the advisory opinion of this
office.
By paragraph M of the statute, its provisions are extended to the Philippine
Islands, to be administered as in the United States but by the appropriate internal-
revenue officers of the Philippine Government. You are therefore advised that upon the
facts as stated, this office holds that for the Federal Income Tax (Act of October 3,
1913), the entire net income in this case was taxable to Gregorio Araneta, both for the
normal and additional tax, and that the application for refund was properly rejected.
The separate estate of a married woman within the contemplation of the Income
Tax Law is that which belongs to her solely and separate and apart from her husband,
and over which her husband has no right in equity. It may consist of lands or chattels.
The statute and the regulations promulgated in accordance therewith provide that
each person of lawful age (not excused from so doing) having a net income of $3,000 or
over for the taxable year shall make a return showing the facts; that from the net income
so shown there shall be deducted $3,000 where the person making the return is a
single person, or married and not living with consort, and $1,000 additional where the
person making the return is married and living with consort; but that where the husband
and wife both make returns (they living together), the amount of deduction from the
aggregate of their several incomes shall not exceed $4,000.
The only occasion for a wife making a return is where she has income from a
sole and separate estate in excess of $3,000, but together they have an income in
excess of $4,000, in which the latter event either the husband or wife may make the
return but not both. In all instances the income of husband and wife whether from
separate estates or not, is taken as a whole for the purpose of the normal tax. Where
the wife has income from a separate estate makes return made by her husband, while
the incomes are added together for the purpose of the normal tax they are taken
separately for the purpose of the additional tax. In this case, however, the wife has no
separate income within the contemplation of the Income Tax Law.
Respectfully,
DAVID A. GATES.
Acting Commissioner.
In connection with the decision above quoted, it is well to recall a few basic
ideas. The Income Tax Law was drafted by the Congress of the United States and has
been by the Congress extended to the Philippine Islands. Being thus a law of American
origin and being peculiarly intricate in its provisions, the authoritative decision of the
official who is charged with enforcing it has peculiar force for the Philippines. It has
come to be a well-settled rule that great weight should be given to the construction
placed upon a revenue law, whose meaning is doubtful, by the department charged with
its execution. (U.S. vs. Cerecedo Hermanos y Cia. [1907], 209 U.S., 338; In re Allen
[1903], 2 Phil., 630; Government of the Philippine Islands vs. Municipality of Binalonan,
and Roman Catholic Bishop of Nueva Segovia [1915], 32 Phil., 634.) We conclude that
the judgment should be as it is hereby affirmed with costs against appellants. So
ordered.
NOTES:
Income vs Capital
“The fact is that property is a tree, income is the fruit; labor is a tree,
insome is the fruit; capital is a tree, income the fruit.” A tax on income is not a tax
on property. “Income”, as here used, can be defines as “profits or
gains.” (Madrigal v. Rafferty)
INCOME CAPITAL
Denotes a flow of wealth during a definite period Fund or property existing at on distinct point in
of time time. (FUND)
Service of wealth Wealth itself
Subject to tax Return of capital is not subject to tax
Fruit Tree
Classifications of Income Subject to Philippine Income Tax
1. Compensation Income- tall remunerations for services performed by an employee

for his employer under an employment/employer-employee relationship, unless
excepted under the provisions of the NIRC are considered as compensation income.
[RR 02-98, Sec 2.78.1] It includes but not limited to salaries, wages, and
commissions.
General Rule: every form of compensation income is taxable regardless how it is

earned, by whom it is paid, the label by which it is designated, the basis upon which it is
determined, or the form in which it is received. The basis upon which renumeration is
paid is immaterial. It may be paid on the basis of piece of work, percentage of profits,
hourly, weekly, monthly, or annually.
2. Professional Income- refers to fees received by a professional from the practice of
his profession, provided that there is NO EMPLOYER-EMPLOYEE relationship
between him and his clients. Services rendered, practice of profession.
It includes the fees derived from engaging in an endeavour requiring special
training as professional as means of livelihood, which includes, but it is not limited to,
the fees of CPAs, doctors, lawyers, engineers and the like (RR No. 2-98).
The existence of employer-employee relationship is the distinguishing factor
between compensation income versus professional income.
3. Business Income- any income derived from doing business.

Doing business: the term implies a continuity of commercial dealings and
arrangements, and contemplates to that extent, the performance of acts or works or the
exercise of some of the functions normally incident to, and in progressive prosecution
of, the purpose and object of its organization. (e.g. net income from business and gain
from the sale of assets used in trade or business)
4. Passive Income- under Section 24 (B) of the Tax Code, a final tax is imposed upon
gross passive income of citizen and resident aliens. An income is considered passive of
the taxpayer merely waits for it to be realized. (e.g. royalty, interest, prizes and winnings,
dividends, capital gains) CASE 1: PRIZES, P100,000
TAX TREATMENT:
Passive income may be subject to either schedular rate or final tax rate.
1. Subject to schedular rates such as dividend income received by a domestic
corporation from non-resident foreign corporation; and
2. Subject to final tax rate such as interest, income from foreign currency bank
deposits by a resident citizen.
SOURCES:
The following are the sources of passive income subject to tax
a. Interest income- earning derived from depositing or lending of money, goods

or credits. (e.g. Treasury Bills).
b. Dividend income- form of earnings derived from the distribution made by a

corporation out of its earnings or profits and payable to its stockholders, whether in
money or in property.
The following are classification of dividends:
1. Cash dividends;
2. Stock dividends;
3. Property dividends;
4. Liquidating dividends.
In general, dividends are subject to final tax under the Tax Code.
c. Royalty income- royalty is a valuable property that can be developed and

sold on a regular basis for a consideration; in which case, any gain derived therefrom is
considered as an active business income subject to the normal corporate tax.
Where a person pays royalty to another for the use of its intellectual property,
such royalty is generally a passive income of the owner thereof subject to withholding
tax.
d. Rental income- refers to earnings derived from leasing real estate as well as
personal property. Aside from the regular amount of payment for using the property, it
also includes all other obligations assumed to be paid by the lessee to the third party in
behalf of the lessor (e.g. interest, taxes, loans, insurance premiums, etc). [RR 19-86]
Note that these income are NOT added to other income in determination of ordinary
income tax liability.
5. Capital Gain - income derived from sale of capital assets not used in trade or
business. Examples are sale of family home and other capital assets.
B. TAX ON INDIVIDUALS
Kinds of Individual Tax Payers (Sections 23, 24, 25, NIRC)
Definition of each kind of taxpayer:
I. Citizens (of the PH)-

ARTICLE IV
CITIZENSHIP
Section 1. The following are citizens of the Philippines:
[1] Those who are citizens of the Philippines at the time of the adoption of this
Constitution;
[2] Those whose fathers or mothers are citizens of the Philippines;
[3] Those born before January 17, 1973, of Filipino mothers, who elect Philippine
citizenship upon reaching the age of majority; and
[4] Those who are naturalized in accordance with law.
FOR TAXATION PURPOSES: RESIDENTS AND NON-RESIDENTS
1. Resident
2. Non-resident (Section 22E, NIRC)
(E) The term "nonresident citizen" means:
(1) A citizen of the Philippines who establishes to the satisfaction of the

Commissioner the fact of his physical presence abroad with a definite intention to reside
therein.
(2) A citizen of the Philippines who leaves the Philippines during the taxable year
to reside abroad, either as an immigrant or for employment on a permanent basis.
(3) A citizen of the Philippines who works and derives income from abroad and
whose employment thereat requires him to be physically present abroad most of the
time during the taxable year.
(4) A citizen who has been previously considered as nonresident citizen and who
arrives in the Philippines at any time during the taxable year to reside permanently in
the Philippines shall likewise be treated as a nonresident citizen for the taxable year in
which he arrives in the Philippines with respect to his income derived from sources
abroad until the date of his arrival in the Philippines.
(5) The taxpayer shall submit proof to the Commissioner to show his intention of
leaving the Philippines to reside permanently abroad or to return to and reside in the
Philippines as the case may be for purpose of this Section.
3. Overseas Filipino Workers (Section 23C, NIRC, RR No. 1-79)
-immigrants
-permanently working abroad
-contract renewed
Non-residents taxable lang pag within

Residents within and outside PH
Sec 23 (C) An individual citizen of the Philippines who is working and

deriving income from abroad as an overseas contract worker is taxable only on income
derived from sources within the Philippines: Provided, That a seaman who is a citizen of
the Philippines and who receives compensation for services rendered abroad as a
member of the complement of a vessel engaged exclusively in international trade shall
be treated as an overseas contract worker. (NIRC)
In Section 2 of Revenue Regulations (RR) No. 1-79, the term “most of the
time” means presence outside the Philippines for not less than 183 days during the
taxable year.
The provisions above have been the bases for BIR rulings which held that
income of employees who were assigned overseas is not taxable in the Philippines
under either of the following premises:
• Employees who are registered with the Philippine Overseas Employment
Administration (POEA) are considered as overseas contract workers (OCWs),
regardless of the number of days spent outside the Philippines during the taxable year;
or
• Employees who may not be registered with the POEA, but who are physically
present abroad for at least 183 days during the taxable year, are considered as
nonresident citizens.
In these rulings, nonresidency of a Filipino and eligibility to qualify for tax
exemption were determined on the basis of physical presence. The place where the
salary was paid was deemed immaterial in determining residency – perhaps based on
the underlying principle that the situs of taxation in the case of personal services is
determined by the place where the services are rendered.
Thus, based on the Tax Code provision as interpreted in past BIR rulings,
companies and employees often remember and use the 183-day threshold.
However, based on a recent BIR ruling, it appears that looking only at the 183-day rule
is not enough.
II. Aliens
1. Resident (Section 22F, NIRC)

(F) The term "resident alien" means an individual whose residence is
within the Philippines and who is not a citizen thereof.
2. Non-resident (Section 5, RR No. 2-1940) (Section 22G, 23 to 25A1,C,D,E,

NIRC) (RR No. 1-1979) (RR No. 5-2001) (RR No. 1-2011)
Why is it important to know non-resident aliens if they are engaged in a business in

the PH or not? They are both taxable.
Section 22. (G) The term "nonresident alien" means an individual whose
residence is not within the Philippines and who is not a citizen thereof.
Section 25. Tax on Nonresident Alien Individual- (CHECK THIS IN NIRC

NEW)
(A) Nonresident Alien Engaged in trade or Business Within the Philippines. -

1) In General. - A nonresident alien individual engaged in trade or
business in the Philippines shall be subject to an income tax in the same manner as an
individual citizen and a resident alien individual, on taxable income received from all
sources within the Philippines.
A nonresident alien individual who shall come to the Philippines and stay
therein for an aggregate period of more than one hundred eighty (180) days during any
calendar year shall be deemed a 'nonresident alien doing business in the Philippines'.
Section 22 (G) of this Code notwithstanding.
(C) Alien Individual Employed by Regional or Area Headquarters and Regional
Operating Headquarters of Multinational Companies. - There shall be levied, collected
and paid for each taxable year upon the gross income received by every alien individual
employed by regional or area headquarters and regional operating headquarters
established in the Philippines by multinational companies as salaries, wages, annuities,
compensation, remuneration and other emoluments, such as honoraria and allowances,
from such regional or area headquarters and regional operating headquarters, a tax
equal to fifteen percent (15%) of such gross income: Provided, however, That the same
tax treatment shall apply to Filipinos employed and occupying the same position as
those of aliens employed by these multinational companies.
For purposes of this Chapter, the term 'multinational company' means a foreign
firm or entity engaged in international trade with affiliates or subsidiaries or branch
offices in the Asia-Pacific Region and other foreign markets.
(D) Alien Individual Employed by Offshore Banking Units. - There shall be levied,
collected and paid for each taxable year upon the gross income received by every alien
individual employed by offshore banking units established in the Philippines as salaries,
wages, annuities, compensation, remuneration and other emoluments, such as
honoraria and allowances, from such off-shore banking units, a tax equal to fifteen
percent (15%) of such gross income: Provided, however, That the same tax treatment
shall apply to Filipinos employed and occupying the same positions as those of aliens
employed by these offshore banking units.
(E) Alien Individual Employed by Petroleum Service Contractor and

Subcontractor - An Alien individual who is a permanent resident of a foreign country but
who is employed and assigned in the Philippines by a foreign service contractor or by a
foreign service subcontractor engaged in petroleum operations in the Philippines shall
be liable to a tax of fifteen percent (15%) of the salaries, wages, annuities,
compensation, remuneration and other emoluments, such as honoraria and allowances,
received from such contractor or subcontractor: Provided, however, That the same tax
treatment shall apply to a Filipino employed and occupying the same position as an
alien employed by petroleum service contractor and subcontractor.
Any income earned from all other sources within the Philippines by the alien
employees referred to under Subsections (C), (D) and (E) hereof shall be subject to the
pertinent income tax, as the case may be, imposed under this Code.
REVENUE REGULATIONS NO. 5-2001 issued August 1, 2001 revokes the
requirement for non-resident citizens, overseas contract workers and
seamen to file information returns on income derived from sources outside
the Philippines beginning taxable year 2001.
REVENUE REGULATIONS NO. 1-2011 issued on February 24, 2011 defines

the tax treatment of income earnings and money remittances of an Overseas
Contract Worker (OCW) or Overseas Filipino Worker (OFW).
An OCW or OFW's income arising out of his overseas employment is

exempt from Income Tax. However, if an OCW or OFW has income earnings
from business activities or properties within the Philippines, such income
earnings are subject to Philippine Income Tax as follows:
a. For Regular Income [Section 24 (A)]:
i. Tax Rate of 5 -32% of taxable income
b. For Passive Income [Section 24(B)]:
i. 20% Final Tax on Interest Income from any currency bank deposit
and yield or any monetary benefit from deposit substitutes and from trust funds
and similar arrangements;
ii. 20% Final Tax on any royalties;
iii. 10% Final Tax on any royalty related on books, as well as literary
works and musical compositions;
iv. 20% Final Tax on prizes (except prizes amounting to P 10,000 or
less which shall be subject to regular Income Tax rate of 5 -32%) and other
winnings (except Philippine Charity Sweepstakes and Lotto Winnings);
v. Exemption from 7.5% Final Tax on interest income from a
depository bank under the expanded foreign currency deposit system upon
presentation of proof of non-residency such as Overseas Employment
Certificate (OEC) or Seaman's Book. However, if the account is jointly in the
name of the overseas contract worker or a Filipino seaman, and an individual
(spouse or dependent) who is living in the Philippines, 50% of the interest
income from such bank deposit will be treated as exempt while the other 50%
shall be subject to a Final Withholding Tax of 7.5%;
vi. 10% Final Tax on cash or property dividends
vii. 5%/10% Final Tax on net capital gains realized on sale, barter,
exchange or other disposition of shares of stock in a domestic corporation
(except shares sold or disposed of through the stock exchange);
viii. 6% Final Tax on capital gains from the sale, exchange or other
disposition of real property located in the Philippines classified as capital assets
based on gross selling price or current fair market value, whichever is higher;
and
ix. 5%/12%/20% Final Tax on interest income from long-term
deposits 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, which was pre-terminated by the holder before the 5th year.
An OCW or OFW may be subjected to 12% Value-Added Tax (VAT) if in

the course of his trade or business, he sells, barters exchanges, leases goods or
properties, renders services in the Philippines or imports goods into the
Philippines pursuant to Sections 106 to 108 of the National Internal Revenue
Code of 1997, as amended. However, if his gross annual sales and/or receipts
do not exceed the amount of P 1,500,000 and he opted not to register as a VAT
taxpayer, he shall be liable to pay instead 3% Percentage Tax of his gross
quarterly sales or receipts.
All migrant workers shall be exempt from the payment of travel tax and
airport-fee upon proper showing of valid proof entitlement (i.e. OEC) issued by
the POEA.
The remittances of all OCWs or OFWs, upon showing of the OEC or valid
Overseas Workers Welfare Administration (OWWA) Membership Certificate by
the OCW or OFW beneficiary or recipient, shall be exempt from the payment of
Documentary Stamp Tax (DST).
In case of OCWs or OFWs whose remittances are sent through the
banking system, credited to beneficiaries or recipient's account in the Philippines
and withdrawn through an automatic teller machine (ATM), it shall be the
responsibility of the OCW or OFW to show the valid proof of entitlement when
making arrangement for his/her remittance transfers. A proof of entitlement that
is no longer valid shall not entitle an OCW or OFW to any DST exemption.
III. Income Tax Formula

Gross Compensation Income XXX
Less:
Personal Exemptions (XXX)
Premium on Health and/or (XXX)
Hospitalization Insurance
Net Compensation Income XXX
Add:
Net Business Income XXX
Net Professional Income XXX
Other Income XXX
Taxable Income Subject to

Graduated Rates XXX
Tax Rates on Various Types of Income
1. Capital Gains Subject to Capital Tax:
CAPITAL GAINS ON SALE OF SHARES (RR No. 6-2008)
REVENUE REGULATIONS NO. 6-2008 issued on May 2, 2008 consolidates the

regulations prescribing the rules on the taxation of sale, barter, exchange or other
disposition of shares of stock of domestic corporation that are listed and traded
through the Local Stock Exchange (LSE), or disposition of shares through Initial
Public Offering (IPO) or disposition of shares not traded through the LSE.
The following sellers or transferors of stock are liable to the tax provided in these
Regulations:
a. Individual taxpayer, whether citizen or alien;
b. Corporate taxpayer, whether domestic or foreign; and
c. Other taxpayers not falling under (a) and (b) above, such as estate,
trust, trust funds and pension funds, among others.
The following are exempted to the taxes imposed in the Regulations:

a. Dealers in securities;
b. Investors in shares of stock in a mutual fund company, as defined in
Section 22(BB) of the Tax Code, as amended and Section 2(s) of these Regulations, in
connection with the gains realized by said investor upon redemption of said shares of
stock in a mutual fund company; and
c. All other persons, whether natural or juridical, who are specifically
exempt from national internal revenue taxes under existing investment incentives and
other special laws.
There shall be levied, assessed and collected on every sale, barter,

exchange or other disposition of shares of stock listed and traded through the LSE a
stock transaction tax at the rate of one-half of one percent (1/2 of 1%) based on the
gross selling price or gross value in money of the shares of stock sold, bartered,
exchanged or otherwise disposed, which shall be assumed and paid by the seller or
transferor through the remittance of the stock transaction tax by the seller or transferor’s
broker.
There shall be levied, assessed and collected on every sale, barter,

exchange or other disposition through IPO of shares of stock in closely held
corporations a tax at the rates provided hereunder, which shall be imposed in
accordance with the proportion of shares of stock sold, bartered, exchanged or
otherwise disposed to the total outstanding shares of stock after the listing in the LSE.
Proportion of Disposed Shares to Outstanding Shares Tax Rate
Up to twenty-five percent (25%)……………………………..4%
Over twenty-five percent (25%) but not over
thirty three and one-third percent (33 1/3%)………2%
Over thirty-three and one third percent (33 1/3%)…………..1%
The said tax on the sale, barter or exchange or issuance of shares of stock
through IPO shall be based on the gross selling price or gross value in money of the
shares of stock sold, bartered, exchanged or otherwise disposed of. The following are
the persons liable to pay the said tax:
a. Primary Offering — The tax herein imposed shall be paid by the issuer
corporation with respect to the shares of stock corresponding to the Primary Offering.
b. Secondary Offering — The tax herein imposed shall be paid by the
selling shareholder(s) with respect to the shares of stock corresponding to the
Secondary Offering.
The provisions of Section 39(B) of the Tax Code, as amended, notwithstanding, a

final tax at the rates prescribed hereunder is imposed on the sale, barter or exchange of
shares of stock not traded through the LSE pursuant to Sections 24(C), 25(A)(3), 25(B),
27(D)(2), 28(A)(7)(c), 28(b)(5)(c) of the Tax Code, as amended.
Amount of Capital Gain Tax Rate Not over P 100,000.................... 5%
On any amount in excess of P 100,000 ………10%
The final tax imposed above shall be upon the net capital gains realized during
the taxable year from the sale, barter, exchange or disposition of shares of stock, except
shares sold or disposed of through the LSE.
The following rules shall apply in determining the selling price of shares of stock:
a. In the case of cash sale, the selling price shall be the total consideration
per deed of sale.
b. If the total consideration of the sale or disposition consists partly in
money and partly in kind, the selling price shall be sum of money and the fair market
value of the property received.
c. In the case of exchange, the selling price shall be the fair market value
of the property received.
d. In case the fair market value of the shares of stock sold, bartered, or
exchanged is greater than the amount of money and/or fair market value of the property
received, the excess of the fair market value of the shares of stock sold, bartered or
exchanged over the amount of money and the fair market value of the property, if any,
received as consideration shall be deemed a gift subject to the donor’s tax under Sec.
100 of the Tax Code, as amended
The “fair market value” (FMV) of the shares of stock sold shall be defined as
follows:
a. In the case of listed shares, which were sold, transferred, or exchanged
outside of the trading system and/or facilities of the LSE, the FMV shall be the closing
price on the day when the shares are sold, transferred, or exchanged. When no sale is
made in the LSE on the day when the listed shares are sold, transferred, or exchanged,
the closing price on the day nearest to the date of sale, transfer or exchange of the
shares shall be the FMV.
b. In the case of shares of stock not listed and traded in the LSE, the book
value of the shares of stock as shown in the financial statements duly certified by an
independent Certified Public Accountant nearest to the date of sale shall be the FMV.
c. In the case of a unit of participation in any association, recreation or
amusement club (such as golf, polo, or similar clubs), the FMV thereof shall be its
selling price or the bid price nearest to the date of sale as published in any newspaper
or publication of general circulation, whichever is higher.
The gain from the sale or other disposition of shares of stock shall be the excess
of the amount realized therefrom over the basis or adjusted basis for determining gain,
and the loss shall be the excess of the basis or adjusted basis for determining loss over
the amount realized. The amount realized from the sale or other disposition of property
shall be the sum of money received plus the fair market value of the property (other
than money) received, if any.
Gain or loss from the sale, barter or exchange of property, for a valuable
consideration, shall be determined by deducting from the amount of consideration
contracted to be paid, the vendor/transferor’s basis for the property sold or disposed
plus expenses of sale/disposition, if any.
If the property is acquired by purchase, the basis is the cost of such property. The
cost basis for determining the capital gains or losses for shares of stock acquired
through purchase shall be governed by the following rules:
a. If the shares of stock can be identified, then the cost shall be the actual
purchase price plus all costs of acquisition, such as commissions, Documentary Stamp
Taxes, transfer fees, etc.
b. If the shares of stock cannot be properly identified, then the cost to be
assigned shall be computed on the basis of the first-in first-out (FIFO) method.
c. If books of accounts are maintained by the seller where every
transaction of a particular stock is recorded, then the moving average method shall be
applied rather than the FIFO method.
d. In general, stock dividend received shall be assigned with a cost basis
which shall be determined by allocating the cost of the original shares of stock to the
total number shares held after receipt of stock dividends (i.e. the original shares plus the
shares of stock received as stock dividends).
If the property was acquired by devise, bequest or inheritance, the basis shall be
the FMV of such property at the time of death of the decedent. The term “property
acquired by bequest, devise or inheritance” means acquisition through testamentary or
intestate succession and includes, among others:
a. Property interests that the taxpayer received as a result of a transfer, or

creation of a trust, in contemplation of or intended to take effect in possession or
enjoyment at or after death; and
b. Such property interests as the taxpayer has received as the result of the
exercise by a person of a general power of appointment by will or by deed executed in
contemplation of or intended to take effect in possession or enjoyment at or after death,
otherwise known as a donation mortis causa or a donation in contemplation of death.
If the property was acquired by gift, the basis shall be the same as it would be in
the hands of the donor or the last preceding owner by whom it was not acquired by gift,
except that if such basis is greater than the FMV of the property at the time of the gift,
then for the purpose of determining the loss, the basis shall be such FMV.
If the property was acquired for less than an adequate consideration in money or
money’s worth, the basis of such property is the amount paid by the transferee for the
property.
The substituted basis of the stock or securities received by the transferor on a
tax-free exchange shall be as follows:
a. The original basis of the property, stock or securities transferred;
b. Less: (i) money received, if any, and (ii) the FMV of the other property
received, if any;
c. Plus: (i) the amount treated as dividend of the shareholder, if any, and
(ii) the amount of any gain that was recognized on the exchange, if any. However, the
property received as 'boot' shall have as basis its FMV. The term "boot" refers to the
money received and other property received in excess of the stock or securities
received by the transferor on a tax-free exchange.
If the transferee of property assumes, as part of the consideration to the

transferor, a liability of the transferor or acquires from the latter property subject to a
liability, such assumption or acquisition (in the amount of the liability) shall, for purposes
of computing the substituted basis, be treated as money received by the transferor on
the exchange.
If the transferor receives several kinds of stock or securities, the Commissioner is

authorized to allocate the basis among the several classes of stocks or securities.
The substituted basis of the property transferred in the hands of the transferee
shall be as follows:
a. The original basis in the hands of the transferor;
b. Plus: the amount of the gain recognized to the transferor on the transfer.
The original basis of the property to be transferred shall be the following, as may
be appropriate :
a. The cost of the property, if acquired by purchase on or after March 1, 1913;
b. The fair market price or value as of the moment of death of the decedent, if
acquired by inheritance;
c. The basis in the hands of the donor or the last preceding owner by whom the
property was not acquired by gift, if the property was acquired by donation. If the basis,
however, is greater than the FMV of the property at the time of donation, then, for
purposes of determining loss, the basis shall be such FMV; or,
d. The amount paid by the transferee for the property, if the property was
acquired for less than an adequate consideration in money or money's worth.
e. The adjusted basis of (a) to (d) above, if the acquisition cost of the property is
increased by the amount of improvements that materially add to the value of the
property or appreciably prolong its life less accumulated depreciation.
f. The substituted basis, if the property was acquired in a previous tax-free
exchange under Section 40(C)(2) of the Tax Code, as amended.
The substituted basis as defined in Section 40(C)(5) of the Tax Code, as

amended, shall be the basis for determining gain or loss on a subsequent sale or
disposition of property subject of the tax-free exchange.
For sale, barter, exchange or other forms of disposition of shares of stock subject
to the 5%/10% Capital Gains Tax on the net capital gain during the taxable year, the
capital losses realized from this type of transaction during the taxable year are
deductible only to the extent of capital gains from the same type of transaction during
the same period. If the transferor of the shares is an individual, the rule on holding
period and capital loss carry-over will not apply, notwithstanding the provisions of
Section 39 of the Tax Code , as amended.
Losses from shares of stock, held as capital asset, which have become worthless
during the taxable year shall be treated as capital loss as of the end of the year.
However, this loss is not deductible against the capital gains realized from the sale,
barter, exchange or other forms of disposition of shares of stock during the taxable year,
but must be claimed against other capital gains to the extent provided for under Section
34 of the Tax Code, as amended. For the 5% and 10% net Capital Gains Tax to apply,
there must be an actual disposition of shares of stock held as capital asset, and the
capital gain and capital loss used as the basis in determining net capital gain, must be
derived and incurred respectively, from a sale, barter, exchange or other disposition of
shares of stock.
The following rules shall apply with respect to losses from wash sales of shares
of stock:
a. A taxpayer cannot deduct any loss claimed to have been sustained from the
sale or other disposition of stock, if, within a period beginning 30 days before the date of
such sale or disposition and ending 30 days after such date (referred to in this section
as the 61-day period), he has acquired (by purchase or by an exchange upon which the
entire amount of gain or loss was recognized by law), or has entered into a contract or
option so to acquire, substantially identical stock.
However, this prohibition does not apply in the case of a dealer in stock if the
sale or other disposition of stock is made in the ordinary course of the business of such
dealer.
b. Where more than one loss is claimed to have been sustained within the
taxable year from the sale or other disposition of stock or securities, it shall be applied
to the losses in the order in which the stock the disposition of which resulted in the
respective losses were disposed of (beginning with the earliest disposition). If the order
of disposition of stock disposed of at a loss on the same day cannot be determined, the
stock or securities will be considered to have been disposed of in the order in which
they were originally acquired (beginning with earlie st acquisition).
c. Where the amount of stock or securities acquired within the 61-day period is
less than the amount of stock or securities sold or otherwise disposed of, then the
particular shares of stock or securities the loss from the sale or other disposition of
which is not deductible shall be those with which the stock or securities acquired are
matched in accordance with this rule: The stock or securities sold will be matched in
accordance with the order of their acquisition (beginning with the earliest acquisition)
with an equal number of the shares of stock or securities sold or otherwise disposed of.
d. Where the amount of stock or securities acquired within the 61-day period is
not less than the amount of stock or securities sold or otherwise disposed of, then the
particular shares of stock or securities the acquisition of which resulted in the non-
deductibility of the loss shall be those with which the stock or securities disposed of are
matched in accordance with this rule: The stock or securities sold or otherwise disposed
of will be matched with an equal number of the shares of stock or securities acquired in
accordance with the order of acquisition (beginning with the earliest acquisition) of the
stock or securities acquired.
e. The acquisition of any share of stock or any security which results in the non-
deductibility of a loss shall be disregarded in determining the deductibility of any other
loss.
f. As provided in the Regulations, the word “acquired” means acquired by
purchase or by an exchange upon which the entire amount of gain or loss was
recognized by law, and comprehends cases where the taxpayer has entered into a
contract or option within the 61-day period to acquire by purchase or by such an
exchange the subject shares of stock.
Upon surrender by the investor of the shares in exchange for cash and property
distributed by the issuing corporation upon its dissolution and liquidation of all assets
and liabilities, the investor shall recognize either capital gain or capital loss upon such
surrender of shares computed by comparing the cash and fair market value of property
received against the cost of the investment in shares. The difference between the sum
of the cash and the fair market value of property received and the cost of the investment
in shares shall represent the capital gain or capital loss from the investment, whichever
is applicable. If the investor is an individual, the rule on holding period shall apply and
the percentage of taxable capital gain or deductible capital loss shall depend on the
number of months or years the shares are held by the investor. Section 39 of the Tax
Code, as amended, shall apply in all possible situations. The capital gain or loss derived
therefrom shall be subject to the regular Income Tax rates imposed under the Tax Code,
as amended, on individual taxpayers or to the corporate Income Tax rate, in case of
corporations.
When preferred shares are redeemed at a time when the issuing corporation is
still in its “going-concern” and is not contemplating in dissolving or liquidating its assets
and liabilities, capital gain or capital loss upon redemption shall be recognized on the
basis of the difference between the amount/value received at the time of redemption
and the cost of the preferred shares. Similarly, the capital gain or loss derived shall be
subject to the regular Income Tax rates imposed under the Tax Code, as amended, on
individual taxpayers or to the corporate Income Tax rate, in case of corporations.
Where a corporation voluntarily buys back its own shares, in which case it
becomes treasury shares, the stock transaction tax under Section 127(A) of the Tax
Code shall apply if the shares are listed and executed through the trading system and/or
facilities of the LSE. Otherwise, if the shares are not listed and traded through the LSE,
it is subject to the 5% and 10% net Capital Gains Tax.
The tax imposed on the sale, barter or exchange of shares of stock shall be
collected as follows:
a. Tax on sale of shares of stock listed and traded through the LSE — The stock
broker who effected the sale has the duty to collect the tax from the seller upon
issuance of the confirmation of sale, issue the corresponding official receipt thereof and
remit the same to the collecting bank/officer of the Revenue District Officers (RDO)
where the broker is registered within 5 banking days from the date of collection
thereof,and to submit on Mondays of each week to the Scretary of the LSE, of which he
is a member, a true and complete return, which shall contain a declaration, that he
made under the penalties of perjury, of all the transactions effected through him during
the preceding week and of taxes collected by him and turned over to the concerned
RDO. The Secretary of the LSE shall reconcile the records of the LSE with the weekly
reports of stockbrokers and, in turn, transmit to the RDO, on or before the 15th day of
the following month, a consolidated return of all transactions effected during the
preceding month through the LSE.
b. Tax on shares of stock sold or exchanged through IPO — The corporate issuer
in Primary Offering shall file the return and pay the corresponding tax to the RDO which
has jurisdiction over said corporate issuer within 30 days from the date of listing of the
shares of stock in the LSE. The return shall be accompanied with a copy of the
instrument of sale.
In the case of shares of stock sold or exchanged through Secondary Offering at
the time of listing at the LSE of shares of closely-held corporations, the provisions in (a)
above shall apply as to the time and manner of the payment of the tax on the sale
thereof.
c. Tax on shares of stock not traded through the LSE — Persons deriving capital
gains from the sale or exchange of listed shares of stock not traded through the LSE, as
prescribed by these regulations, shall file a return within 30 days after each transaction
and a final consolidated return of all transactions during the taxable year on or before
the 15th day of the 4th month following the close of the taxable year.
In the case of an individual taxpayer, the filing of the final consolidated return of
all transactions shall be during the calendar year. However, for corporate taxpayers, the
filing of the final consolidated return of all transactions shall be in accordance with the
accounting period employed by such taxpayer which may either be calendar or fiscal
year basis.
No sale, exchange, transfer or similar transaction intended to convey ownership

of, or title to any share of stock shall be registered in the books of the corporation unless
the receipts of payment of the tax herein imposed is filed with and recorded by the stock
transfer agent or secretary of the corporation. It shall be the duty of the aforesaid
persons to inform the Bureau of Internal Revenue in case of non-payment of tax. Any
stock transfer agent or secretary of the corporation or the stockbroker who caused the
registration of transfer of ownership or title on any share of stock in violation of the
aforementioned requirements shall be punished in accordance with the provisions of T
itle X, Chapters I and II of the Tax Code, as amended.
In addition to the civil and criminal liabilities of the taxpayer for violation of the
provisions of these Regulations, administrative penalties prescribed under Sections 248
and 249 of the Tax Code, as amended, shall be imposed, which shall be collected at the
same time, in the same manner and as part of the tax.
There shall be imposed, in addition to the tax required to be paid, a penalty

equivalent to 25% of the amount due, in the following cases:
a. Failure to file any return and pay the tax due thereon as required by the
provisions of the Tax Code, as amended, and these Regulations, on the date
prescribed;
b. Unless otherwise authorized by the Commissioner, filing a return with an
internal revenue officer other than those with whom the return is required to be filed; or
c. Failure to pay the deficiency tax within the time prescribed for its payment in
the notice of assessment; or
d. Failure to pay the full or part of the amount of the tax shown on any return
required to be filed under the provisions of the Tax Code, as amended, and these
Regulations, on or before the date prescribed for its payment.
In case of willful neglect to file the return within the period prescribed by the Tax
Code or these Regulations, or in case a false or fraudulent return is willfully made, the
penalty to be imposed shall be 50% of the tax or of the deficiency tax, in case any
payment has been made on the basis of such return before the discovery of the falsity
or fraud.
There shall be assessed and collected on any unpaid amount of tax, interest at
the rate of 20% per annum. Any deficiency in the tax due shall be subjected to interest
at the rate of 20%, which interest shall be assessed and collected from the date
prescribed for its payment until the full payment thereof.
In case of failure to pay the amount of the tax due on the return required to be
filed, or a deficiency tax, or any surcharge or interest thereon on the due date appearing
in the notice and demand of the Commissioner of Internal Revenue, there shall be
assessed and collected on the unpaid amount, interest at the rate of 20% per annum
until the amount is fully paid, which interest shall form part of the tax.
CAPITAL GAINS ON SALE OF REALTY (RR No. 10-98) (RR No. 8-98 - August 25,
1988) (Section 39, NIRC)
REVENUE REGULATIONS NO. 10-98 issued September 2, 1998 prescribes the

regulations to implement RA No. 8424 relative to the imposition of income taxes on
income derived under the Foreign Currency Deposit and Offshore Banking Systems.
Specifically, interest income which is actually or constructively received by a resident
citizen of the Philippines or by a resident alien individual from a foreign currency
bank deposit will be subject to a final withholding tax of 7.5%. The depository bank
will withhold and remit the tax. If a bank account is jointly in the name of a non-
resident citizen, 50% of the interest income from such bank deposit will be treated as
exempt while the other 50% will be subject to a final withholding tax of 7.5%. The
Regulations will apply on taxable income derived beginning January 1, 1998
pursuant to the provisions of Section 8 of RA 8424. In case of deposits which were
made in 1997, only that portion of interest which was actually or constructively
received by a depositor starting January 1, 1998 is taxable.
REVENUE REGULATIONS NO. 8-98 issued September 2, 1998 amends pertinent

portions of Revenue Regulations Nos. 11-96 and 2-98 relative to the tax treatment of
the sale, transfer or exchange of real property. Specifically, the Capital Gains Tax
(CGT) Return will be filed by the seller within 30 days following each sale or
disposition of real property. Payment of the CGT will be made to an Authorized Agent
Bank (AAB) located within the Revenue District Office (RDO) having jurisdiction over
the place where the property being transferred is located. Creditable withholding
taxes, on the other hand, deducted and withheld by the withholding agent/buyer on
the sale, transfer or exchange or real property classified as ordinary asset will be
paid by the withholding agent/buyer upon filing of the return with the AAB located
within the RDO having jurisdiction over the place where the property being
transferred is located. Payment will have to be done within 10 days following the end
of the month in which the transaction occurred, provided, however, that taxes
withheld in December will be filed on or before January 25 of the following year.
SEC. 39. Capital Gains and Losses. - (NIRC) check this if same sa bago
(A) Definitions- As used in this Title -
(1) Capital Assets. - The term "capital assets" means property held by the taxpayer
(whether or not connected with his trade or business), but does not include stock in
trade of the taxpayer or other property of a kind which would properly be included in the
inventory of the taxpayer if on hand at the close of the taxable year, or property held by
the taxpayer primarily for sale to customers in the ordinary course of his trade or
business, or property used in the trade or business, of a character which is subject to
the allowance for depreciation provided in Subsection (F) of Section 34; or real property
used in trade or business of the taxpayer.
(2) Net Capital Gain. - The term "net capital gain" means the excess of the gains from
sales or exchanges of capital assets over the losses from such sales or exchanges.
(3) Net Capital Loss. - The term "net capital loss" means the excess of the losses from
sales or exchanges of capital assets over the gains from such sales or exchanges.
(B) Percentage Taken Into Account. - In the case of a taxpayer, other than a
corporation, only the following percentages of the gain or loss recognized upon the sale
or exchange of a capital asset shall be taken into account in computing net capital gain,
net capital loss, and net income: (1) One hundred percent (100%) if the capital asset
has been held for not more than twelve (12) months; and (2) Fifty percent (50%) if the
capital asset has been held for more than twelve (12) months;
(C) Limitation on Capital Losses. - Losses from sales or exchanges of capital assets
shall be allowed only to the extent of the gains from such sales or exchanges.
If a bank or trust company incorporated under the laws of the Philippines, a substantial
part of whose business is the receipt of deposits, sells any bond, debenture, note, or
certificate or other evidence of indebtedness issued by any corporation (including one
issued by a government or political subdivision thereof), with interest coupons or in
registered form, any loss resulting from such sale shall not be subject to the foregoing
limitation and shall not be included in determining the applicability of such limitation to
other losses.
(D) Net Capital Loss Carry-over. - If any taxpayer, other than a corporation, sustains in
any taxable year a net capital loss, such loss (in an amount not in excess of the net
income for such year) shall be treated in the succeeding taxable year as a loss from the
sale or exchange of a capital asset held for not more than twelve (12) months.
(
E) Retirement of Bonds, Etc. - For purposes of this Title, amounts received by the
holder upon the retirement of bonds, debentures, notes or certificates or other
evidences of indebtedness issued by any corporation (including those issued by a
government or political subdivision thereof) with interest coupons or in registered form,
shall be considered as amounts received in exchange therefor.
(F) Gains or Losses From Short Sales, Etc. - For purposes of this Title -
(1) Gains or losses from short sales of property shall be considered as gains or losses
from sales or exchanges of capital assets; and (2) Gains or losses attributable to the
failure to exercise privileges or options to buy or sell property shall be considered as
capital gains or losses.
2. Passive Income Subject to Final Tax - interest, dividends, royalties, awards

(Section 24 B,C,D, NIRC)
3. “Other Income” Subject to Graduated Tax Rates - (Section 24A, RR No.

8-2018)
Deductions from income
Personal Additional and Special Exemptions; Amounts (Section 35, NIRC)
SECTION 35. Allowance of Personal Exemption for Individual Taxpayer. -
(A) In General- For purposes of determining the tax provided in Section 24 (A) of this
Title, there shall be allowed a basic personal exemption as follows:
For single individual or married individual judicially decreed as legally separated with no
qualified dependents P20,000
For Head of Family P25,000
For each married individual P32,000
In the case of married individuals where only one of the spouses is deriving gross
income, only such spouse shall be allowed the personal exemption.
For purposes of this paragraph, the term "head of family" means an unmarried or
legally separated man or woman with one or both parents, or with one or more brothers
or sisters, or with one or more legitimate, recognized natural or legally adopted children
living with and dependent upon him for their chief support, where such brothers or
sisters or children are not more than twenty-one (21) years of age, unmarried and not
gainfully employed or where such children, brothers or sisters, regardless of age are
incapable of self-support because of mental or physical defect.
(B) Additional Exemption for Dependents- There shall be allowed an additional
exemption of Eight thousand pesos (P8,000) for each dependent not exceeding four (4).
The additional exemption for dependent shall be claimed by only one of the spouses in
the case of married individuals.
In the case of legally separated spouses, additional exemptions may be claimed only by
the spouse who has custody of the child or children: Provided, That the total amount of
additional exemptions that may be claimed by both shall not exceed the maximum
additional exemptions herein allowed.
For purposes of this Subsection, a "dependent" means a legitimate, illegitimate
or legally adopted child chiefly dependent upon and living with the taxpayer if such
dependent is not more than twenty-one (21) years of age, unmarried and not gainfully
employed or if such dependent, regardless of age, is incapable of self-support because
of mental or physical defect.
(C) Change of Status- If the taxpayer marries or should have additional

dependent(s) as defined above during the taxable year, the taxpayer may claim the
corresponding additional exemption, as the case may be, in full for such year.
If the taxpayer dies during the taxable year, his estate may still claim the personal
and additional exemptions for himself and his dependent(s) as if he died at the close of
such year.
If the spouse or any of the dependents dies or if any of such dependents marries,
becomes twenty-one (21) years old or becomes gainfully employed during the taxable
year, the taxpayer may still claim the same exemptions as if the spouse or any of the
dependents died, or as if such dependents married, became twenty-one (21) years old
or became gainfully employed at the close of such year.
(D) Personal Exemption Allowable to Nonresident Alien Individual. - A

nonresident alien individual engaged in trade, business or in the exercise of a
profession in the Philippines shall be entitled to a personal exemption in the amount
equal to the exemptions allowed in the income tax law in the country of which he is a
subject - or citizen, to citizens of the Philippines not residing in such country, not to
exceed the amount fixed in this Section as exemption for citizens or resident of the
Philippines: Provided, That said nonresident alien should file a true and accurate return
of the total income received by him from all sources in the Philippines, as required by
this Title.
RESIDENT CITIZENS and RESIDENT ALIENS (Sec 5, 6, RR-2, RR 2-98)
REVENUE REGULATIONS NO. 2-98 issued May 17, 1998 prescribes the
regulations to implement Republic Act (RA) No. 8424 relative to the Withholding on
Income subject to the Expanded Withholding Tax and Final Withholding Tax,
Withholding of Income Tax on Compensation, Withholding of Creditable Value-
Added Tax and Other Percentage Taxes. Said Regulations will take effect on
compensation income paid beginning January 1,1998. No penalties for non-
compliance with the new features of the Tax Code will apply until May 15, 1998.
RESIDENT CITIZENS- A Filipino resident citizen is taxable on income from all

sources (within and without the Philippines). Case # 5: SONIC COMPANY, MR DELA CRUZ
RESIDENT ALIENS- A resident alien is taxable only on income from sources

WITHIN the Philippines.
A resident alien is an individual whose residence is in the Philippines and
who is not a Filipino citizen.
An alien actually present in the Philippines who is not a mere transient or
sojourner is a resident of the Philippines for the purposes of the income tax. Whether he
is a transient or not id determined by his intentions with regard to the length and nature
of his stay. A mere floating intention indefinite as to time, to return to another country is
not sufficient to constitute hi a transient. If he lives in the Philippines and has no definite
intention to stay, he is a resident.
One who comes to the Philippines for a definite purpose which, in its
nature, may be promptly accomplished is a transient. But if his purpose is of such a
nature that an extended stay may be necessary for its accomplishment, and to that end
the alien makes his home temporarily in the Philippines, he becomes a resident, though
it may be his intention at all times to return to his domicile abroad when the purpose of
which he came has been consummated or abandoned. (Sec. 5, RR No.2)
NON-RESIDENT CITIZENS- A non resident citizen is taxable only on income

derived from sources within the Philippines.
A non-resident citizen is a Filipino citizen who:

1. Establishes to the satisfaction of the CIR the fact of his physical presence abroad
with a definite intention to reside therein.
2. Leaves the Philippines during the taxable year to reside abroad (as immigrant or for
employment in the permanent basis).
3. Works and derives income from abroad and whose employment requires him to be
present abroad most of the time during the taxable year .
4. Has been previously considered as a non-resident and arrives in the Philippines at
any time during the taxable year to reside here permanently (only with respect to his
income from sources abroad until the date of his arrival in the country)
Other considerations:
1. A Filipino citizen working and deriving abroad as an Overseas Contract Worker is
taxable only on income from sources WITHIN the Philippines.
2. OCW refers to Filipino citizens in foreign countries, who are physically present in
foreign country as a consequence of their employment in that country. Their salaries
and wages are paid by an employer abroad and is not borne by an entity or person
in the Philippines. They must be duly registered with the POEA with valid Overseas
Employment Certificate.
3. An OCW’s income arising out of his overseas employment is exempt from income
tax.
NON-RESIDENT ALIENS ENGAGED IN BUSINESS IN THE PHILIPPINES
A non-resident alien is an individual whose residence and citizenship is not in the

Philippines.
One who comes to the Philippines for a definite purpose which, in its nature, may
be promptly accomplished is a transient. But if his purpose is of such a nature that an
extended stay may be necessary for its accomplishment, and to that end the alien
makes his home temporary in the Philippines, he becomes a resident, though it may be
his intention at all times to return to his domicile abroad when the purpose of which he
came has been consummated or abandoned. [Sec.5, RR no.2]
In general, a non-resident alien individual who shall some to the Philippines and
stay therein for an aggregate period of more than 180 days during any calendar year
shall be deemed a non-resident alien doing business in the Philippines.
Intended stay in the Philippines:

1. Up to 180 days- non-resident alien not engaged in trade or business.
2. More than 180 days but less than 1 year- non-resident alien engaged in trade or
business.
3. 1 year or more- resident alien.
GENERAL RULE: Subject to an income tax in the same manner as an individual citizen
and a resident alien individual on taxable income from all sources within the Philippines.
Cash and/or property dividends
The following shall be subject to an income tax of twenty percent (20%) on the total
amount thereof:
A. Cash and/or property dividends from:  

1.A domestic corporation; 
2.A joint stock company; 
3.An insurance or mutual fund company; 
4.A regional operating headquarter of multinational company; 
5.The share of a nonresident alien individual in the distributable net income after tax
of a partnership (except a general professional partnership) of which he is a partner;  
6.The share of a nonresident alien individual in the net income after tax of an
association, a joint account, or a joint venture taxable as a corporation of which he
is a member or a co- venturer;  
B. Interests
C. Royalties (in any form); and
D. Prizes (except prizes amounting to Ten thousand pesos (P10,000) or less which
shall be subject to graduated tax) and other winnings (except Philippine Charity
Sweepstakes and Lotto winnings)  
Except:
A. The following Royalties shall be subject to a final tax of ten percent (10%) on the
total amount thereof: 
1.On books as well as other literary works; and 2. On musical compositions
B. Cinematographic films and similar works shall be subject to twenty-five percent

(25%) of the gross income
C. Interest income from 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) shall be exempt from the tax
But should the holder of the certificate pre- terminate the deposit or investment
before the fifth (5th) year, a final tax shall be imposed on the entire income and shall be
deducted and withheld by the depository bank from the proceeds of the long-term
deposit or investment certificate based on the remaining maturity thereof:
1. Four (4) years to less than five (5) years - 5%;
2. Three (3) years to less than four (4) years - 12%; and
3. Less than three (3) years - 20%.
Capital gains
Capital gains realized from sale, barter or exchange of shares of stock in

domestic corporations not traded through the local stock exchange, and real properties
shall be subject to the similar tax prescribed on citizens and resident aliens.
Sale, barter or exchange of Shares of stock in domestic corporation not

traded –
1. Net over P100,000 – 5% of net capital gains realized
2. On any amount in excess of P100,000 – 10% of net capital gains realized
Sale, barter or exchange of real properties – 6% of gross selling price or

current FMV whichever is higher  
PERSONAL AND ADDITIONAL EXEMPTIONS INCREASED TO P50,000

(regardless of marital status) AND P25,000 per dependent child
(maximum of 4) introduced by RA 9504 implemented by RR 10-2008 and
RR 16-2008 - WALA NA DAW TO
RA 9504:
Personal Exemption: P 50,000 for each individal taxpayer.
In the case of married individuals where only one of the spouses is deriving gross
income, only such spouse shall be allowed the personal exemption.
Additional Exemption: P 25,000 for each dependent not exceeding four.
The additional exemption for dependents shall be claimed by only one of the
spouses in the case of married individuals.
“In the case of legally separated spouses, additional exemptions may be claimed
only by the spouse who has custody of the child or children: Provided, That the total
amount of additional exemptions that may be claimed by both shall not exceed the
maximum additional exemptions herein allowed.
“For purposes of this Subsection, a ‘dependent’ means a legitimate, illegitimate or

legally adopted child chiefly dependent upon and living with the taxpayer if such
dependent is not more than twenty-one (21) years of age, unmarried and not
gainfully employed or if such dependent, regardless of age, is incapable of self-
support because of mental or physical defect.
(Note: For implementation, see RR 10-2008 and RR 16-2008)
Senior Citizen Law, RA 7432, as amended by RA 9257 and implemented by RR

4-2006 (December 2, 2006) and RR 1-2007 (December 22, 2006)
Republic Act No. 9257 February 26, 2004

AN ACT GRANTING ADDITIONAL BENEFITS AND PRIVILEGES TO SENIOR
CITIZENS AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 7432, OTHERWISE
KNOWN AS "AN ACT TO MAXIMIZE THE CONTRIBUTION OF SENIOR CITIZENS
TO NATION BUILDING, GRANT BENEFITS AND SPECIAL PRIVILEGES AND FOR
OTHER PURPOSES”
Be it enacted by the Senate and House of Representatives of the Philippine Congress

Assembled:
SECTION 1. This Act shall be known as the "Expanded Senior Citizens Act of 2003."
SECTION 2. Republic Act. No. 7432 is hereby amended to read as follows:
"SECTION 1. Declaration of Policies and Objectives. – Pursuant to Article XV, Section 4

of the Constitution, it is the duty of the family to take care of its elderly members while
the State may design programs of social security for them. In addition to this, Section 10
in the Declaration of Principles and State Policies provides: "The State shall provide
social justice in all phases of national development." Further, Article XIII, Section 11
provides: " The State shall adopt an integrated and comprehensive approach to health
and other social services available to all the people at affordable cost. There shall be
priority for the needs of the underpriviledged, sick, elderly, disabled, women and
children." Consonant with these constitution principles the following are the declared
policies of this Act:
(a) To motivate and encourage the senior citizens to contribute to nation building;
(b) To encourage their families and the communities they live with to reaffirm the valued
Filipino tradition of caring for the senior citizens;
(c) To give full support to the improvement of the total well-being of the elderly and their
full participation in society considering that senior citizens are integral part of Philippine
society;
(d) To recognize the rights of senior citizens to take their proper place in society. This
must be the concern of the family, community, and government;
(e) To provide a comprehensive health care and rehabilitation system for disabled
senior citizens to foster their capacity to attain a more meaningful and productive
ageing; and
(f) To recognize the important role of the private sector in the improvement of the
welfare of senior citizens and to actively seek their partnership.
In accordance with these policies, this Act aims to:
(1) establish mechanism whereby the contribution of the senior citizens are maximized;
(2) adopt measures whereby our senior citizens are assisted and appreciated by the
community as a whole;
(3) establish a program beneficial to the senior citizens, their families and the rest of the
community that they serve; and
(4) establish community-based health and rehabilitation programs in every political unit
of society."
"SEC. 2. Definition of Terms. – For purposes of this Act, these terms are defined as
follows:
(a) "Senior citizen" or "elderly" shall mean any resident citizen of the Philippines at least
sixty (60) years old;
(b) "Benefactor" shall mean any person whether related to the senior citizens or not who
takes care of him/her as a dependent;
(c) "Head of the family" shall mean any person so defined in the National Internal
Revenue Code, as amended; and
(d) "Geriatrics" shall refer to the branch of medical science devoted to the study of the
biological and physical changes and the diseases of old age."
"SEC. 3. Contribution to the Community. – Any qualified senior citizen as determined by
the Office for Senior Citizens Affairs (OSCA) may render his/her services to the
community which shall consist of, but not limited to, any of the following:
(a) Tutorial and/or consultancy services;
(b) Actual teaching and demonstration of hobbies and income generating skills;
(c) Lectures on specialized fields like agriculture, health, environment protection and the
like;
(d) The transfer of new skills acquired by virtue of their training mentioned in Section 4,
paragraph (d); and
(e) Undertaking other appropriate services as determined by the Office for Senior
Citizens Affairs (OSCA) such as school traffic guide, tourist aide, pre-school assistant,
etc.
In consideration of the services rendered by the qualified elderly, the Office for Senior
Citizens Affairs (OSCA) may award or grant benefits or privileges to the elderly, in
addition to the other privileges provided for under this Act."
"SEC. 4. Privileges for the Senior Citizens. – The senior citizens shall be entitled to the
following:
(a) the grant of twenty percent (20%) discount from all establishments relative to the
utilization of services in hotels and similar lodging establishment, 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;
(b) a minimum of twenty percent (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;
(c. exemption from the payment of individual income taxes: Provided, That their annual
taxable income does not exceed the poverty level as determined by the National
Economic and Development Authority (NEDA) for that year;
(d) exemption from training fees for socioeconomic programs;
(e) free medical and dental service, diagnostic and laboratory fees such as, but not
limited to, x-rays, computerized tomography scans and blood tests, in all government
facilities, subject to the guidelines to be issued by the Department of Health in
coordination with the Philippine Health Insurance Corporation (PHILHEALTH);
(f) the grant of twenty percent (20%) discount on medical and dental services, and
diagnostic and laboratory fees provided under Section 4 (e) hereof, including
professional fees of attending doctors in all private hospitals and medical facilities, in
accordance with the rules and regulations to be issued by the Department of Health, in
coordination with the Philippine Health Insurance Corporation;
(g) the grant of twenty percent (20%) discount in fare for domestic air and sea travel for
the exclusive use or enjoyment of senior citizens;
(h) the grant of twenty percent (20%) discount in public railways, skyways and bus fare
for the exclusive use and enjoyment of senior citizens;
(i) educational assistance to senior citizens to pursue post secondary, tertiary, post
tertiary, as well as vocational or technical education in both public and private schools
through provision of scholarship, grants, financial aid subsidies and other incentives to
qualified senior citizens, including support for books, learning materials, and uniform
allowance, to the extent feasible: Provided, That senior citizens shall meet minimum
admission requirement;
(j) to the extent practicable and feasible, the continuance of the same benefits and
privileges given by the Government Service Insurance System (GSIS), Social Security
System (SSS) and PAG-IBIG, as the case may be, as are enjoyed by those in actual
service.
(k) retirement benefits of retirees from both the government and private sector shall be
regularly reviewed to ensure their continuing responsiveness and sustainability, and to
the extent practicable and feasible, shall be upgraded to be at par with the current scale
enjoyed by those in actual service.
(l) to the extent possible, the government may grant special discounts in special
programs for senior citizens on purchase of basic commodities, subject to the guidelines
to be issued for the purpose by the Department of Trade and Industry (DTI) and the
Department of Agriculture (DA); and
(m) provision of express lanes for senior citizens in all commercial and government
establishments; in the absence thereof, priority shall be given to them.
In the availment of the privileges mentioned above, the senior citizen or elderly person
may submit as proof of his/her entitlement thereto any of the following:
(a) an ID issued by the city or municipal mayor or of the barangay captain of the place
where the senior citizen or the elderly resides;
(b) the passport of the elderly person or senior citizen concerned; and
(c) other documents that establish that the senior citizen or elderly person is a citizen of
the Republic and is at least sixty (60) years of age.
The establishment may claim the discounts granted under (a), (f), (g) and (h) as tax
deduction based on the net cost of the goods sold or services rendered: Provided That
the cost of the discount shall be allowed as deduction from gross income for the same
taxable year that the discount is granted. Provided, further, That the total amount of the
claimed tax deduction net of value added tax 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, as amended."
"SEC. 5. Government Assistance. – The Government shall provided the following:

(a) Employment
Senior citizens who have the capacity and desire to work, or be re-employed, shall be
provided information and matching services to enable them to be productive members
of society. Terms of employments shall conform with the provisions of the labor code, as
amended, and other laws, rules and regulations.
Private entities that will employ senior citizens as employees upon effectivity of this Act,
shall be entitled to an additional deduction from their gross income, equivalent to fifteen
percent (15%) of the total amount paid as salaries and wages to senior citizens subject
to the provision of Section 34 of the National Internal Revenue Code, as
amended: Provided, however, That such employment shall continue for a period of at
least six (6) months: Provider, further, that the annual income of a senior citizen does
not exceed he poverty level as determined by the National Economic and Development
Authority (NEDA) for that year.
The Department of Labor and Employment (DOLE), in coordination with other
government agencies such as, but not limited to, the Technology and Livelihood
Resource Center (TLRC) and the Department and Trade and Industry (DTI), shall
assess, design and implement training programs that will provide skills and welfare or
livelihood support for senior citizens.
(b) Education
The Department of Education (DepEd), Technical Education and Skill Development
Authority (TESDA) and the Commission and Higher Education (CHED), in consultation
of non-government organizations (NGOs) and people's organizations (Pos) for senior
citizen, shall institute a program that will ensure access to formal and non-formal
education.
(c ) Health
The Department of Health (DOH), in coordination with local government units (LGUs),
non-government organizations (NGOs) and people's organizations (Pos) for senior
citizens, shall institute a national health program and shall provide an integrated health
service for senior citizens. It shall train community-based health workers among senior
citizens and health personnel to specialize in the geriatric care health problems of
senior citizens.
(d) Social Services
The Department of Social Welfare and Development (DSWD), in cooperation with the
Office for Senior Citizen affairs (OSCA) and the local government units, non-
government organizations and peoples organizations for senior citizens, shall develop
and implement programs on social services for senior citizens, the components of which
are:
(1) "self and social enhancement services" which provide senior citizens opportunities
for socializing, organizing, creative expression, and improvement of self;
(2)" after care and follow-up services" which provide senior citizen who are discharged
from the home/institutions for the aged, especially those who have problems of
reintegration with family and community, wherein both the senior citizens and their
families are provided with counseling;
(3)"neighborhood support services: wherein the community/family members provide
care giving services to their frail, sick, or bedridden senior citizens; and
(4) "substitute family care" in the form of residential care/group homes for
the abandoned, neglected, unattached or homeless senior citizens and those incapable
of self-care.
The grant of at least fifty percent (50%) discount for the consumption of electricity, water
and telephone by the senior citizens center and residential care/group homes that are
non-stock, non-profit domestic corporation organized and operated exclusively for the
purpose of promoting of well-being of abandoned, neglected, unattached, or homeless
senior citizens.
(e) Housing
The national government shall include in its national shelter program the special
housing needs of senior citizens, such as establishment of housing units for the elderly;
(f) Access to Public Transport
The Department of Transportation and Communication (DOTC) shall develop a program
to assist senior citizens to fully gain access in the use of public transport facilities.
Further, the government shall provide the following assistance to those caring for and
living with the senior citizens:
(a)The senior citizen shall be treated as dependents provided for in the National Inter
Revenue Code, as amended, and as such, individual taxpayers caring for them, be they
relatives or not shall be accorded the privileges granted by the Code insofar as having
dependents are concerned.
(b)Individuals or non-government institutions establishing homes, residential
communities or retirement villages solely for the senior citizens shall be accorded the
following:
(1) realty tax holiday for the first five (5) years starting from the first year of operation;
(2) priority in the building and/or maintenance of the provincial or municipal roads
leading to the aforesaid home, residential community or retirement village."
"SEC. 6. The Office for Senior Citizens Affairs (OSCA). – There shall be established in
all cities and municipalities an OSCA to be headed by a senior citizen who shall be
appointed by the mayor for
a term of three (3) years without reappointment from a list of three (3) nominees of the
sangguniang panlungsod or the sangguniang bayan. The head of the OSCA shall be
assisted by the City Social Welfare and Development Officer or the municipal social
welfare and development officer, in coordination with the Social Welfare and
Development Office.
The Office of the Mayor shall exercise supervision over the OSCA relative to their plans,
activities and programs for senior citizens. The OSCA shall work together and establish
linkages with accredited NGOs, Pos, and the barangays in their respective areas.
The office for senior citizens affairs shall have the following functions:
(a) To plan, implement and monitor yearly work programs in pursuance of the objectives
of this Act;
(b) To draw up a list of available and required services which can provided by the senior
citizens;
(c) To maintain and regularly update on a quarterly basis the list of senior citizens and to
issue nationally uniform individual identification cards, free of charge, which be valid
anywhere in the country;
(d) To service as a general information and liaison center to serve the needs of the
senior citizens;
(e) To monitor compliance of the provisions of this Act particularly the grant of special
discounts and privileges to senior citizens;
(f) To report to the mayor, establishment found violating any provision of this Act; and
(g) To assist the senior citizens in filing complaints or charges against any
establishment, institution, or agency refusing to comply with the privileges under this Act
before the Department of Justice or the provincial, city or municipal trial court."
"SEC. 7. Municipal/ City Responsibility. – It shall be the responsibility of the municipal/

city through the mayor to require all establishment covered by this Act to prominently
display posters, stickers, and other notices that will generate public awareness of the
right and privileges of senior citizens and to ensure that the provisions of this Act are
implemented to its fullest."
"SEC. 8. Partnership of the National and Local Government Units. – The national
government and local government units shall explore livelihood opportunities and other
undertaking to enhance the well-being of senior citizens. The shall encourage the
establishment of grassroots organizations for the elderly in their respective territorial
jurisdictions."
"SEC. 9 Support for Non-Governmental Organizations (NGOs). – Non-governmental

organizations or private volunteer organizations dedicated to the promotions,
enhancement and support of the welfare of senior citizens are hereby encouraged to
become partners of government in the implementation of program and projects for the
elderly.
According, the government shall recognize the vital role of NGOs in complementing the
government in the delivery of services to senior citizens. It shall likewise encourage
NGOs for the senior citizens to develop innovative service models and pilots projects
and to assist in the duplication of successful examples of these models elsewhere in the
country.
"SEC. 10. Penalties. – Any person who violates any provision of this Act shall suffer the
following penalties:
(1) For the first violation, a fine of not less than Fifty thousand pesos (P50,000.00) but
not exceeding One hundred thousand pesos (P100,000.00) and imprisonment of not
less than six (6) months but not more than two (2) years; and
(2) For any subsequent violation, a fine of not less than One hundred thousand pesos
(P100,000.00) but exceeding Two hundred thousand pesos (P200,000.00) and
imprisonment for not less than two (2) years but not less than six (6) years.
Any person who abuses the privileges granted herein shall be punished with a fine of
not less than Five thousand pesos (P5,000.00) but not more than Fifty thousand pesos
(P50,000.00), and imprisonment of not less than six (6) months.
If the offender is a corporation, organization or any similar entity, the official thereof
directly involved shall be liable therefore.
If the offender is an alien or a foreigner, he shall be deported immediately after service
of sentence without further deportation proceedings.
Upon filling 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 this Act."
"SEC. 11. Monitoring and Coordinating Mechanism. – A monitoring and coordinating

mechanism shall be established to be chaired by the DSWD, with the assistance of the
Department of Justice (DOJ), Department of Health (DOH), Department of the Interior
and Local Government (DILG), and five (5) accredited NGOs representing but not
limited to, women, urban poor, rural poor, and the veterans."
"SEC. 12. Implementing Rules and Regulations. – The Secretary of Social Welfare and
Development, within sixty (60) days from the approval of this Act, shall promulgate the
implementing, rules and regulations for the effective implementation of the provisions of
this Act. In consultation and coordination with the following agencies and offices:
(a) Department of Health;

(b) Department of Labor and Employment;
(c) Department of Education;
(d) Depart of Transportation and Communications;
(e) Department of Justice;
(f) Department of Interior and Local Government;
(g) Department of Trade and Industry;
(h) Department of Finance;
(i) Commission of Higher Education;
(j) Technical Education and Skills Development Authority;
(k) National Economic and Development Authority;
(l) Housing and Urban Development Coordinating Council; and
(m) Five (5) non-governmental organizations of people's organizations for the senior
citizens duly accredited by the DSWD."
SEC. 13. Appropriation. – The necessary appropriation for the operation and
maintenance of the OSCA shall be appropriated and approved by the local government
units concerned. The amount necessary to carry out the provisions of this Act upon its
effectivity shall be charged out of the funds of the Office of the President. Thereafter,
any such sum as shall be needed for the regular implementation of this Act shall be
included in subsequent General Appropriations Act following its enactment into law."
SECTION 3. All laws, presidential decrees, executive orders and rules and regulations
or part thereof, contrary to, or inconsistent with the provisions of this Act, are hereby
repealed or modified accordingly.
SECTION 4. Should any provision of this Act be found unconstitutional by a court of law,
such provision shall be severed from the remainder of this Act, and such action shall not
affect the enforceability of the remaining provisions of this Act.
SECTION 5. This Act shall take effect fifteen (15) days after its complete publication in
any two (2) national newspapers of general circulation.
Approved,
FRANKLIN DRILON JOSE DE VENECIA JR.
President of the Senate Speaker of the House of Representatives
This Act, which is a consolidation of Senate Bill No. 2395 and House Bill No.
5987, was finally passed by the Senate and the House of Representatives on
December 16, 2003.
OSCAR G. YABES ROBERTO P. NAZARENO
Secretary of Senate Secretary General
House of Represenatives
Approved: February 26, 2004
GLORIA MACAPAGAL-ARROYO
President of the Philippines
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 1⁄2% 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 Three years to less than four years Less than three
years – 5%– 12%; and – 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.
REVENUE REGULATIONS NO. 1-2007 issued on January 11, 2007 amends certain
provisions of Revenue Regulations (RR) No. 4-2006, which implements the
tax privileges provisions of Republic Act (R.A.) No. 9257, otherwise known as
the “Expanded Senior Citizens Act of 2003”.
The Regulations amended Section 8(5) of RR No. 4-2006 by deleting the TIN
requirement as one of the conditions in order that establishments may claim the
sales discounts as deductions from gross income. A new Section (Section 10)
was also added to clarify the basis of computation of the Value-Added Tax on the
sale to senior citizens with sales discounts by the subject establishments.
Original Sections 10 and 11 of RR No. 4-2006 were also numbered as Sections
11 and 12, respectively.
These Regulations shall in no case be given retroactive effect such that no

refund can be claimed for any previous transactions using different basis of
computation from that reflected in Section 10 thereof.
Constitutionality of Expanded Senior Citizen Act of 2003, as amended by RA

9994, Expanded Senior Citizen Act of 2010, implemented by RR 8-201,
September 3, 2010
REPUBLIC ACT No. 9994

AN ACT GRANTING ADDITIONAL BENEFITS AND PRIVILEGES TO SENIOR
CITIZENS, FURTHER AMENDING REPUBLIC ACT NO. 7432, AS AMENDED,
OTHERWISE KNOWN AS "AN ACT TO MAXIMIZE THE CONTRIBUTION OF
SENIOR CITIZENS TO NATION BUILDING, GRANT BENEFITS AND SPECIAL
PRIVILEGES AND FOR OTHER PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippine Congress

Assembled:
Section 1. Title. - This Act Shall be known as the "Expanded Senior Citizens Act of
2010."
Section 2. Section 1 of Republic Act No. 7432, as amended by Republic Act No. 9257,
otherwise known as the "Expanded Senior Citizens Act of 2003", is hereby further
amended to read as follows:
"SECTION 1. Declaration of Policies and Objectives. - As provided in the Constitution of

the Republic of the Philippines, it is the declared policy of the State to promote a just
and dynamic social order that will ensure the prosperity and independence of the nation
and free the people from poverty through policies that provide adequate social services,
promote full employment, a rising standard of living and an improved quality of life. In
the Declaration of Principles and State Policies in Article II, Sections 10 and 11, it is
further declared that the State shall provide social justice in all phases of national
development and that the State values the dignity of every human person and
guarantees full respect for human rights.
"Article XIII, Section 11 of the Constitution provides that the Sate 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. Article XV, Section 4 of the Constitution Further declares
that it is the duty of the family to take care of its elderly members while the State may
design programs of social security for them.
"Consistent with these constitutional principles, this Act shall serve the following
objectives:
"(a) To recognize the rights of senior citizens to take their proper place in society and
make it a concern of the family, community, and government;
"(b) To give full support to the improvement of the total well-being of the elderly and their
full participation in society, considering that senior citizens are integral part of Philippine
society;
"(c) To motivate and encourage the senior citizens to contribute to nation building;
"(d) To encourage their families and the communities they live with to reaffirm the valued
Filipino tradition of caring for the senior citizens;
"(e) To provide a comprehensive health care and rehabilitation system for disabled
senior citizens to foster their capacity to attain a more meaningful and productive
ageing; and
"(f) To recognize the important role of the private sector in the improvement of the
welfare of senior citizens and to actively seek their partnership.
"In accordance with these objectives, this Act shall:

"(1) establish mechanisms whereby the contributions of the senior citizens are
maximized;
"(2) adopt measures whereby our senior citizens are assisted and appreciated by the
"(3) establish a program beneficial to the senior citizens, their families and the rest of
the community they serve: and
"(4) establish community-based health and rehabilitation programs for senior citizens in
every political unit of society."
Section 3. Section 2 of Republic Act No. 7432, as amended by Republic Act No. 9257,
otherwise known as the Expanded Senior Citizens Act of 2003", is hereby further
SEC. 2. Definition of terms. - For purposes of this Act, these terms are defined as
follows:
"(a) Senior citizen or elderly refers to any resident citizen of the Philippines at least sixty
(60) years old;
"(b) Geriatrics refer to the branch of medical science devoted to the study of the
biological and physical changes and the diseases of old age;
"(c) Lodging establishment refers to a building, edifice, structure, apartment or house
including tourist inn, apartelle, motorist hotel, and pension house engaged in catering,
leasing or providing facilities to transients, tourists or travelers;
"(d) Medical Services refer to hospital services, professional services of physicians and
other health care professionals and diagnostics and laboratory tests that the necessary
for the diagnosis or treatment of an illness or injury;
"(e) Dental services to oral examination, cleaning, permanent and temporary filling,
extractions and gum treatments, restoration, replacement or repositioning of teeth, or
alteration of the alveolar or periodontium process of the maxilla and the mandible that
are necessary for the diagnosis or treatment of an illness or injury;
"(f) Nearest surviving relative refers to the legal spouse who survives the deceased
senior citizen: Provided, That where no spouse survives the decedent, this shall be
limited to relatives in the following order of degree of kinship: children, parents, siblings,
grandparents, grandchildren, uncles and aunts;
"(g) Home health care service refers to health or supportive care provided to the senior
citizen patient at home by licensed health care professionals to include, but not limited
to, physicians, nurses, midwives, physical therapist and caregivers; and
"(h) Indigent senior citizen, refers to any elderly who is frail, sickly or with disability, and
without pension or permanent source of income, compensation or financial assistance
from his/her relatives to support his/her basic needs, as determined by the Department
of Social Welfare and development (DSWD) in consultation with the National
Coordinating and Monitoring Board."
Section 4 Section 4 of Republic Act No. 7432, as amended by Republic Act No. 9257,
otherwise known as the "Expanded Senior Citizens Act of 2003", is hereby further
"SEC. 4. Privileges for the Senior Citizens. -

The senior citizens shall be entitled to the following:
"(a) the grant of twenty percent (20%) discount and exemption from the value -added
tax (VAT), if applicable, on the sale of the following goods and services from all
establishments, for the exclusive use and enjoyment or availment of the senior citizen
"(1) on the purchase of medicines, including the purchase of influenza and
pnuemococcal vaccines, and such other essential medical supplies, accessories and
equipment to be determined by the Department of Health (DOH).
"The DOH shall establish guidelines and mechanism of compulsory rebates in the
sharing of burden of discounts among retailers, manufacturers and distributors, taking
into consideration their respective margins;
"(2) on the professional fees of attending physician/s in all private hospitals, medical
facilities, outpatient clinics and home health care services;
"(3) on the professional fees of licensed professional health providing home health care
services as endorsed by private hospitals or employed through home health care
employment agencies;
"(4) on medical and dental services, diagnostic and laboratory fees in all private
hospitals, medical facilities, outpatient clinics, and home health care services, in
accordance with the rules and regulations to be issued by the DOH, in coordination with
the Philippine Health Insurance Corporation (PhilHealth);
"(5) in actual fare for land transportation travel in public utility buses (PUBs), public utility
jeepneys (PUJs), taxis, Asian utility vehicles (AUVs), shuttle services and public
railways, including Light Rail Transit (LRT), Mass Rail Transit (MRT), and Philippine
National Railways (PNR);
"(6) in actual transportation fare for domestic air transport services and sea shipping
vessels and the like, based on the actual fare and advanced booking;
"(7) on the utilization of services in hotels and similar lodging establishments,
restaurants and recreation centers;
"(8) on admission fees charged by theaters, cinema houses and concert halls, circuses,
leisure and amusement; and
"(9) on funeral and burial services for the death of senior citizens;
"(b) exemption from the payment of individual income taxes of senior citizens who are
considered to be minimum wage earners in accordance with Republic Act No. 9504;
"(c) the grant of a minimum of five percent (5%) discount relative to the monthly
utilization of water and electricity supplied by the public utilities: Provided, That the
individual meters for the foregoing utilities are registered in the name of the senior
citizen residing therein: Provided, further, That the monthly consumption does not
exceed one hundred kilowatt hours (100 kWh) of electricity and thirty cubic meters (30
m3) of water: Provided, furthermore, That the privilege is granted per household
regardless of the number of senior citizens residing therein;
"(d) exemption from training fees for socioeconomic programs;
"(e) free medical and dental services, diagnostic and laboratory fees such as, but not
limited to, x-rays, computerized tomography scans and blood tests, in all government
facilities, subject to the guidelines to be issued by the DOH in coordination with the
PhilHealth;
"(f) the DOH shall administer free vaccination against the influenza virus and
pneumococcal disease for indigent senior citizen patients;
"(g) educational assistance to senior citizens to pursue pot secondary, tertiary, post
tertiary, vocational and technical education, as well as short-term courses for retooling
in both public and private schools through provision of scholarships, grants, financial
aids, subsides and other incentives to qualified senior citizens, including support for
books, learning materials, and uniform allowances, to the extent feasible: Provided,
That senior citizens shall meet minimum admission requirements;
"(h) to the extent practicable and feasible, the continuance of the same benefits and
privileges given by the Government Service Insurance System (GSIS), the Social
Security System (SSS) and the PAG-IBIG, as the case may be, as are enjoyed by those
in actual service;
"(i) retirement benefits of retirees from both the government and the private sector shall
be regularly reviewed to ensure their continuing responsiveness and sustainability, and
to the extent practicable and feasible, shall be upgraded to be at par with the current
scale enjoyed by those in actual service;
"(j) to the extent possible, the government may grant special discounts in special
programs for senior citizens on purchase of basic commodities, subject to the guidelines
to be issued for the purpose by the Department of Trade and Industry (DTI) and the
Department of Agriculture (DA);
"(k) provision of express lanes for senior citizens in all commercial and government
establishments; in the absence thereof, priority shall be given to them; and
"(l) death benefit assistance of a minimum of Two thousand pesos (Php2, 000.00) shall
be given to the nearest surviving relative of a deceased senior citizen which amount
shall be subject to adjustments due to inflation in accordance with the guidelines to be
issued by the DSWD.1avvphi1
"In the availment of the privileges mentioned above, the senior citizen, or his/her duly
authorized representative, may submit as proof of his/her entitled thereto any of the
following:
"(1) an identification card issued by the Office of the Senior Citizen Affairs (OSCA) of the
place where the senior citizen resides: Provided, That the identification card issued by
the particular OSCA shall be honored nationwide;
"(2) the passport of the senior citizen concerned; and
"(3) other documents that establish that the senior citizen is a citizen of the Republic
and is at least sixty (60) years of age as further provided in the implementing rules and
regulations.
"In the purchase of goods and services which are on promotional discount, the senior
citizen can avail of the promotional discount or the discount provided herein, whichever
is higher.
"The establishment may claim the discounts granted under subsections (a) and (c) of
this section as tax deduction based on the cost of the goods sold or services rendered:
Provided, That the cost of the discount shall be allowed as deduction from gross income
for the same taxable year that the discount is granted: Provided, further, 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 (NICR), as amended."
Section 5. Section 5 of the same Act, as amended, is hereby further amended to read
as follows:
"SEC. 5. Government Assistance. - The government shall provide the following:
"(a) Employment
"Senior citizens who have the capacity and desire to work, or be re-employed, shall be
provided information and matching services to enable them to be productive members
of society. Terms of employment shall conform with the provisions of the Labor Code, as
amended, and other laws, rules and regulations.
"Private entities that will employ senior citizens as employees, upon the effectivity of this
Act, shall be entitled to an additional deduction from their gross income, equivalent to
fifteen percent (15%) of the total amount paid as salaries and wages to senior citizens,
subject to the provision of Section 34 of the NIRC, as amended: Provided, however,
That such employment shall continue for a period of at least six (6) months: Provided,
further, That the annual income of the senior citizen does not exceed the latest poverty
threshold as determined by the National Statistical Coordination Board (NSCB) of the
National Economic and Development Authority (NEDA) for that year.
"The Department of Labor and Employment (DOLE), in coordination with other
government agencies such as, but not limited to, the Technology and Livelihood
Resource Center (TLRC) and the Department of Trade and Industry (DTI), shall assess,
design and implement training programs that will provide skills and welfare or livelihood
support for senior citizens.
"(b) Education
"The Department of Education (DepED), the Technical Education and Skills
Development Authority (TESDA) and the Commission on Higher Education (CHED), in
consultation with nongovernmental organizations (NGOs) and people's organizations
(POs) for senior citizens, shall institute programs that will ensure access to formal and
nonformal education.
"(c) Health
"The DOH, in coordination with local government units (LGUs), NGOs and POs for
senior citizens, shall institute a national health program and shall provide an integrated
health service for senior citizens. It shall train community-based health workers among
senior citizens and health personnel to specialize in the geriatric care and health
problems of senior citizens.
"The national health program for senior citizens shall, among others, be harmonized
with the National Prevention of Blindness Program of the DOH.
"Throughout the country, there shall be established a "senior citizens' ward" in every
government hospital. This geriatric ward shall be for the exclusive use of senior citizens
who are in need of hospital confinement by reason of their health conditions. However,
when urgency of public necessity purposes so require, such geriatric ward may be used
for emergency purposes, after which, such "senior citizens' ward" shall be reverted to its
nature as geriatric ward.
"(d) Social Services
"At least fifty percent (50%) discount shall be granted on the consumption of electricity,
water, and telephone by the senior citizens center and residential care/group homes
that are government-run or non-stock, non-profit domestic corporation organized and
operated primarily for the purpose of promoting the well-being of abandoned, neglected,
unattached, or homeless senior citizens, subject to the guidelines formulated by the
DSWD.
"(1) "self and social enhancement services" which provide senior citizens opportunities
for socializing, organizing, creative expression, and self-improvement;
"(2) "after care and follow-up services" for citizens who are discharged from the homes
or institutions for the aged, especially those who have problems of reintegration with
family and community, wherein both the senior citizens and their families are provided
with counseling;
"(3) "neighborhood support services" wherein the community or family members provide
caregiving services to their frail, sick, or bedridden senior citizens; and
"(4) "substitute family care " in the form of residential care or group homes for the
abandoned, neglected, unattached or homeless senior citizens and those incapable of
self-care.
"(e) Housing
"The national government shall include in its national shelter program the special
housing needs of senior citizens, such as establishment of housing units for the elderly.
"(f) Access to Public Transport
"The Department of Transportation and Communications (DOTC) shall develop a
program to assist senior citizens to fully gain access to public transport facilities.
"(g) Incentive for Foster Care
"The government shall provide incentives to individuals or nongovernmental institution
caring for or establishing homes, residential communities or retirement villages solely
for, senior citizens, as follows:
"(1) realty tax holiday for the first five (5) years starting from the first year of operation;
and
"(2) priority in the construction or maintenance of provincial or municipal roads leading
to the aforesaid home, residential community or retirement village.
"(h) Additional Government Assistance
"(1) Social Pension
"Indigent senior citizens shall be entitled to a monthly stipend amounting to Five
hundred pesos (Php500.00) to augment the daily subsistence and other medical needs
of senior citizens, subject to a review every two (2) years by Congress, in consultation
with the DSWD.
"(2) Mandatory PhilHealth Coverage
"All indigent senior citizens shall be covered by the national health insurance program of
PhilHealth. The LGUs where the indigent senior citizens resides shall allocate the
necessary funds to ensure the enrollment of their indigent senior citizens in accordance
with the pertinent laws and regulations.
"(3) Social Safety Nets
"Social safety assistance intended to cushion the effects of economics shocks, disasters
and calamities shall be available for senior citizens. The social safety assistance which
shall include, but not limited to, food, medicines, and financial assistance for domicile
repair, shall be sourced from the disaster/calamity funds of LGUs where the senior
citizens reside, subject to the guidelimes to be issued by the DSWD."
Section 6. Section 6 of the same Act, as amended, is heeby further amended to read
as follows:
SEC. 6. The Office for Senior Citizens Affairs (OSCA). - There shall be established in all
cities and municipalities an OSCA to be headed by a senior citizen who shall be
appointed by the mayor for a term of three (3) years without reappointment but without
prejudice to an extension if exigency so requires. Said appointee shall be chosen from a
list of three (3) nominees as recommended by a general assembly of senior citizens
organizations in the city or municipality.
"The head of the OSCA shall be appointed to serve the interest of senior citizens and
shall not be removed or replaced except for reasons of death permanent disability or
ineffective performance of his duties to the detriment of fellow senior citizens.
"The head of the OSCA shall be entitled to receive an honorarium of an amount at least
equivalent to Salary Grade 10 to be approved by the LGU concerned.
"The head of the OSCA shall be assisted by the City Social Welfare and Development
officer or by the Municipal Social Welfare and Development Officer, in coordination with
the Social Welfare and Development Office.
"The Office of the Mayor shall exercise supervision over the OSCA relative to their
plans, activities and programs for senior citizens. The OSCA shall work together and
establish linkages with accredited NGOs Pos and the barangays in their respective
areas.
"The OSCA shall have the following functions:
"(a) To plan, implement and monitor yearly work programs in pursuance of the
objectives of this Act;
"(b) To draw up a list of available and required services which can be provided by the
senior citizens;
"(c) To maintain and regularly update on a quarterly basis the list of senior citizens and
to issue national individual identification cards, free of charge, which shall be valid
anywhere in the country;
"(d) To serve as a general information and liason center for senior citizens;
"(e) To monitor compliance of the provisions of this Act particularly the grant of special
discounts and privileges to senior citizens;
"(f) To report to the mayor, any individual, establishments, business entity, institutions or
agency found violating any provision of this Act; and
"(g) To assist the senior citizens in filing complaints or charges against any individual,
establishments, business entity, institution, or agency refusing to comply with the
privileges under this Act before the Department of Justice (DOJ), the Provincial
Prosecutor's Office, the regional or the municipal trial court, the municipal trial court in
cities, or the municipal circuit trial court."
as follows:
"SEC. 10. Penalties. - Any person who refuses to honor the senior citizen card issued
by this the government or violates any provision of this Act shall suffer the following
penalties:
"(a) For the first violation, imprisonment of not less than two (2) years but not more than
six (6) years and a fine of not less than Fifty thousand pesos (Php50,000.00) but not
exceeding One hundred thousand pesos (Php100,000.00);
"(b) For any subsequent violation, imprisonment of not less than two (2) years but not
more than six (6) years and a fine of not less than One Hundred thousand pesos
(Php100,000.00) but not exceeding Two hundred thousand pesos (Php200,000.00); and
"(c) Any person who abuses the privileges granted herein shall be punished with
imprisonment of not less than six (6) months and a fine of not less than Fifty thousand
pesos (Php50,000.00) but not more than One hundred thousand pesos
(Php100,000.00).
"If the offender is a corporation, partnership, organization or any similar entity, the
officials thereof directly involved such as the president, general manager, managing
partner, or such other officer charged with the management of the business affairs shall
be liable therefor.
"If the offender is an alien or a foreigner, he/she shall be deported immediately after
service of sentence.
"Upon filing of 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 person, establishment
or business entity that fails to abide by the provisions of this Act."
as follows:
"SEC. 11. Monitoring and Coordinating Mechanism. - A National Coordinating and

Monitoring Board shall be established which shall be composed of the following:
"(a) Chairperson - the Secretary of the DSWD or an authorized representative;
"(b) Vice Chairperson - the Secretary of the Department of the Interior and Local
Government (DILG) or an authorized representative; and
"(c) Members:
"(1) the Secretary of the DOJ or an authorized representative;
"(2) the Secretary of the DOH or an authorized representative;
"(3) the Secretary of the DTI or an authorized representative; and
(4) representatives from five (5) NGOs for senior citizens which are duly accredited by
the DSWD and have service primarily for senior citizens. Representatives of NGOs shall
serve a period of tree (3) years.
"The Board may call on other government agencies, NGOs and Pos to serve as
resource persons as the need arises. Resource person have no right to vote in the
National Coordinating and Monitoring Board."
Section 9. Implementing Rules and Regulations. - Within sixty (60) days from
theeffectivity of this Act, the Secretary of the DSWD shall formulate and adopt
amendments to the existing rules and regulations implementing Republic Act No. 7432,
as amended by Republic Act No. 9257, to carry out the objectives of this Act, in
consultation with the Department of Finance, the Department of Tourism, the Housing
and Urban Development Coordinating Council (HUDCC), the DOLE, the DOJ, the DILG,
the DTI, the DOH, the DOTC, the NEDA, the DepED, the TESDA, the CHED, and five
(5) NGOs or POs for the senior citizens duly accredited by the DSWD. The guidelines
pursuant to Section 4(a)(i) shall be established by the DOH within sixty (60) days upon
the effectivity of this Act.
Section 10. Appropriations. - The Necessary appropriations for the operation and
maintenance of the OSCA shall be appropriated and approved by the LGUs concerned.
For national government agencies, the requirements to implement the provisions of this
Act shall be included in their respective budgets: Provided, That the funds to be used for
the national health program and for the vaccination of senior citizens in the first year of
the DOH and thereafter, as a line item under the under the DOH budget in the
subsequent General Appropriations Act (GAA): Provided, further, That the monthly
social pension for indigent senior citizens in the first year of implementation shall be
added to the regular appropriations of the DSWD budget in the subsequent GAA.
Section 11. Repealing Clause. - All law, executive orders, rules and regulations or any
part hereof inconsistent herewith are deemed repealed or modified accordingly.
Section 12. Separability Clause. - If any part or provision of this Act shall be declared
unconstitutional and invalid, such 18 declaration shall not invalidate other parts thereof
which shall remain in full force and effect.
Section 13. Effectivity. - This Act shall take effect fifteen (15) days its complete
publication n the Official Gazette or in at least two (2) newspapers of general circulation,
whichever comes earlier.
Approved
(Sgd.) PROSPERO C. NOGRALES (Sgd.) JUAN PONCE ENRILE

Speaker of the House of President of the Senate
Representatives
This Act which is a consolidation of Senate Bill No. 3561 and House Bill No. 6390 was
finally passed by the Senate and the House of Representatives on January 27, 2010.
(Sgd.) MARILYN B. BARUA-YAP (Sgd.) EMMA LIRIO-REYES

Secretary General Secretary of Senate
House of Represenatives
Approved: FEB 15, 2010
(Sgd.) GLORIA MACAPAGAL-ARROYO
President of the Philippines
IMPLEMENTING RULES AND REGULATIONS OF REPUBLIC ACT NO. 9994, ALSO

KNOWN AS THE "EXPANDED SENIOR CITIZENS ACT OF 2010," AN ACT
GRANTING ADDITIONAL BENEFITS AND PRIVILEGES TO SENIOR CITIZENS,
FURTHER AMENDING REPUBLIC ACT NO. 7432 OF 1992 AS AMENDED BY
REPUBLIC ACT NO. 9257 OF 2003
RULE I
TITLE, PURPOSE AND CONSTRUCTION
Article 1. Title. - These Rules shall be known and cited as the Implementing Rules and
Regulations of Republic Act No. 9994, otherwise known as the "Expanded Senior
Citizens Act of 2010."
Article 2. Purpose. - Pursuant to Section 9 of RA No. 9994 (hereinafter referred to as

the Act), these Rules and Regulations are promulgated to prescribe the procedures and
guidelines for its implementation, in order to facilitate compliance with the Act and to
achieve its objectives.
Article 3. Construction. - These Rules shall be construed and applied in accordance

with and in furtherance of the policies and objectives of the law. In case of conflict or
ambiguity, the same shall be construed liberally and in favor of the senior citizens.
RULE II 
DECLARATION OF POLICIES AND OBJECTIVES
Article 4. Declaration of Policies and Objectives. -
Section 1. As provided in the Constitution of the Philippines:

a) It is the declared policy of the State to promote a just and dynamic social order that
will ensure the prosperity and independence of the nation and free the people from
poverty through policies that provide adequate social services, promote full
employment, a rising standard of living, and an improved quality of life for all.
b) It is further declared that the State shall promote social justice in all phases of
national development and values the dignity of every human person and guarantees full
respect for human rights.
c) In all matters relating to the care, health, and benefits of the elderly, 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
people at affordable costs giving priority for the needs of the underprivileged sick,
elderly, disabled, women and children.
d) Further, it is declared that though the family has the duty to take care for its elderly
members, the State may also help through just programs of social security.
Section 2. Consonant with these constitutional policies and RA 9994, these Rules shall
serve the following objectives:
a) To recognize the rights of senior citizens to take their proper place in society and
make them a concern of the family, community, and government;
b) To give full support to the improvement of the total well-being of the elderly and their
full participation as an integral part of Philippine society;
c) To motivate and encourage the senior citizens to contribute to nation building;
d) To encourage their families and the communities they live in to reaffirm and apply the
valued Filipino traditions of caring for the senior citizens;
e) To provide a comprehensive health care and rehabilitation system for senior citizens
with disability to foster their capacity to attain a more meaningful and productive ageing;
and
f) To recognize the important role of the private and the non-government sector in the
improvement of the welfare of senior citizens and to actively seek their partnership.
Section 3. In conformity with these objectives, these Rules shall:

a) Establish mechanisms whereby the contributions of the senior citizens are
maximized;
b) Adopt measures whereby our senior citizens are assisted and appreciated by the
c) Establish programs beneficial to the senior citizens, their families and the rest of the
community that they serve; and
d) Establish community-based health and rehabilitation programs in every political unit
of society.
RULE III 
DEFINITION OF TERMS
Article 5. Definition of Terms. - For purposes of these Rules, the terms are defined as
follows:
5.1 SENIOR CITEZEN OR ELDERLY - refers to any Filipino citizen who is a resident of
the Philippines, and who is sixty (60) years old or above. It may apply to senior citizens
with "dual citizenship" status provided they prove their Filipino citizenship and have at
least six (6) months residency in the Philippines.
5.2 BENEFACTOR - refers to any person whether related or not to the senior citizen
who provides care or who gives any form of assistance to him/her, and on whom the
senior citizen is dependent on for primary care and material support, as certified by the
City or Municipal Social Welfare and Development Officer (C/MSWDO).
5.3 GERIATRICS - refers to the branch of medical science devoted to the study,
management and treatment of the biological and physical changes, and the diseases of
old age.
5.4 GERONTOLOGY - is the scientific study of the biological, psychological, and

sociological phenomena associated with old age and ageing and in determining
answers about the normal aging process rather than the diseases of old age. It is also
the scientific study of the processes of aging from many disciplines, including social
work, anthropology, biology, history, sociology, psychology, and demography.
5.5 IDENTIFICATION DOCUMENT - refers to any document or proof of being a senior

citizen which may be used for the availment of benefits and privileges under the Act and
its Rules. It shall be any of the following:
a) Senior Citizens' Identification Card issued by the Office of Senior Citizens Affairs
(OSCA) in the city or municipality where the elderly resides;
b) The Philippine passport of the elderly person or senior citizen concerned; and
c) Other valid documents that establish the senior citizen or elderly person as a citizen
of the Republic and at least sixty (60) years of age, which shall include but not be
limited to the following government-issued identification documents indicating an
elderly's birthdate or age: driver's license, voters ID, SSS/GSIS ID, PRC card, postal ID.
5.6 LODGING ESTABLISHMENT - refers to a building, edifice, structure, apartment, or

house including tourist inn, apartelle, motorist hotel, and pension house engaged in
catering, leasing, or providing facilities to transients, tourists, or travelers, duly licensed
with business permit and/or franchised by the national government agencies or the local
government units.
5.7 HOTEL/HOSTEL - refers to an establishment whose building, edifice or premises,
including a completely independent part thereof such as cottages, cabanas, or huts, are
used for the regular reception, accommodation or lodging of travelers, tourists, or
vacationers, and provides other services incidental thereto for a fee;
5.8 RESTAURANT - refers to any establishment duly licensed and with business
permits issued by the local government units, offering to the public, regular and special
meals or menu, fast food, cooked food and short orders. Such eating-places may also
serve coffee, beverages and drinks. This covers Quick-Service Restaurants or QSRs,
Casual Dining and Fine Dining Restaurants as defined below:
a) QUICK SERVICE RESTAURANTS, or fast-food chains, refer to restaurants with
multiple branches that have menu boards where food item choices are listed.
Customers place their orders with the cashier and pay right after their orders are
taken.
b) CASUAL and FINE DINING RESTAURANTS - are restaurants where customers
are seated first before their food orders are taken by waiters. They are served at
their tables and pay only after they have consumed their meals.
5.9 MEDICINES - refer to prescription and non-prescription/over-the-counter drugs,

both generic and branded, including vitamins and mineral supplements medically
prescribed by the elderly's physician, and approved by the Department of Health (DOH)
and the Food and Drug Administration (FDA), which are intended for use in the
diagnosis, cure, mitigation, treatment or prevention of human disease or sickness. It
does not include food, devices or their components, parts, or accessories.
5.10 MEDICAL SERVICES - refer to public and private hospital services, professional
services of physicians and other health care professionals, and diagnostic and
laboratory tests that are requested by a physician as necessary for the diagnosis and/or
treatment of an illness or injury.
5.11 DENTAL SERVICES - refer to oral examination, cleaning, permanent and

temporary filling, extractions and gum treatments, restoration, replacement or
repositioning of teeth, or alteration of the alveolar or periodontium process of the maxilla
and the mandible that are necessary for the diagnosis and/or treatment of a dental
illness or injury.
5.12 DIAGNOSTIC AND LABORATORY TESTS - refers to diagnostic examinations

that are necessary for the diagnosis and/or treatment of an illness and injury, including
but not limited to X-ray, CT scans, ECG, 2D Echo, gastroenterology, blood chemistry
exams, histopathology and immunopathology, hematology, urine analysis, parasitology
and bacteriology test, and serology.
5.13 OFFICE FOR SENIOR CITIZENS AFFAIRS (OSCA) - refers to the office
established in cities and municipalities under the Office of the Mayor headed by a senior
citizen.
5.14 NON_GOVERNMENTAL ORGANIZATION or NGO - refers to any private entity,

which is non-profit and voluntary in nature dedicated to the promotion, enhancement
and support of the welfare of senior citizens, duly registered with any regulatory body.
For purposes of the Act and its Rules, an ACCREDITED NGO refers to any private non-
stock non-profit organization, regional or national in scope, mainly providing services for
senior citizens, duly registered with the Securities and Exchange Commission (SEC),
Cooperative Development Authority (CDA), or any appropriate government regulatory
body and registered or licensed with, and with programs accredited by, the Department
of Social Welfare and Development (DSWD).
5.15 PEOPLE'S ORGANIZATION or PO - refers to a type of social welfare and

development association with a bonafide membership, an identifiable leadership and an
organizational structure that has demonstrated its capacity to promote the public
interest and engage in social welfare and development activities. As part of the civil
society movement, it is composed of a specific population or sector, like the senior
citizens, and seeks to represent the interest of its members.
5.16 SENIOR CITIZENS CENTER - refers to the place established by Republic Act No.
7876 or the Senior Citizens Center Act, with recreational, educational, health and social
programs and facilities designed for the full enjoyment and benefit of the senior citizens
in the city or municipality accredited by the DSWD. It can be any available structure, a
spacious room in a private or public building, a room attached to a community center, a
barangay hall or chapel.
5.17 RETIREMENT VILLAGE - refers to an independent-living facility, often with

continuing-care amenities. It refers to a residential community offering separate or
autonomous houses for residents. It is a retirement habitat with a multi-residence
housing facility that is planned, designed and geared towards people who no longer
work and are restricted to a certain age. It has particular conveniences catering to the
wishes and desires of retirees, which may include services such as clubhouses,
swimming pools, arts and crafts, boating, walking trails, golf courses, active adult retail
and on-site medical services.
5.18 GROUP HOMES - refer to a community-based alternative living arrangement to

institutional care. It can be a transit home for a definite period for neglected older
persons while the necessary services of locating relatives and care management is
ongoing. It envisions responding to the needs of the senior citizens who have been
abandoned, have no families to return to or to whose family reunification is not suitable,
and are assessed to be needing group living experience. The program enables a
minimum of 6 and a maximum of 10 clients discharged from a residential care facility to
live together and manage their group living activities with minimal supervision from the
agency social worker.
5.19 FOSTER CARE - refer to a social work intervention which provides for a planned
substitute or alternative family care by a licensed foster family to a neglected,
abandoned, unattached and poor older person.
5.20 RESIDENTIAL CARE FACILITY - refers to facility which provides twenty-four (24)
hour residential care services operated primarily for the purpose of promoting the well-
being of abandoned, neglected, unattached or homeless senior citizens. The facility
may be run by government or non-stock non-profit organization and is accredited by the
DSWD to serve a minimum of 10 clients.
5.21 AFTER CARE SERVICES - refer to the provision of interventions, approaches,

and strategies with the end goal of ensuring effective reintegration of older persons
discharged from residential facilities.
5.22 BASIC NECESSITIES - refer to rice, corn, bread, fresh, dried and canned fish and
other marine products, fresh pork, beef and poultry, meat, fresh eggs, fresh and
processed milk, fresh vegetables, root crops, coffee, sugar, cooking oil, salt, laundry
soap, detergents, and drugs classified as essential by the DOH and other commodities
as maybe classified by the Department of Trade and Industry (DTI) and the Department
of Agriculture (DA) according to Republic Act No. 7581 or the Price Act.
5.23 PRIME COMMODITIES - refer to fresh fruits, flour, dried, processed and canned
pork, beef and poultry, meat, dairy products not falling under basic necessities; noodles,
onions, garlic, and all drugs not classified as essential drugs by the DOH and other
commodities that may be classified by the DTI and the DA according to Republic Act
No. 7581 or The Price Act.
5.24 NEAREST SURVIVING RELATIVE - refers to the closest person related to the
deceased senior citizen by blood or affinity, such as the legal spouse who survives the
deceased senior citizen: Provided, That where no spouse survives the decedent, this
shall be limited to relatives in the following order of degree of kinship: children, parents,
siblings, grandchildren, uncles and aunts.
5.25 HOME HEALTH CARE SERVICE - refers to health or supportive care provided to
the senior citizen patient at home by TESDA-certified caregivers or licensed health care
professionals to include, but not limited to, physicians, nurses, midwives, and physical
therapists.
5.26 INDIGENT SENIOR CITIZEN - refers to any elderly who is frail, sickly, or with
disability, and without pension or regular source of income, compensation or financial
assistance from his/her relatives to support his/her basic needs, as determined by the
DSWD in consultation with the National Coordinating and Monitoring Board (NCMB).
RULE IV 
PRIVILEGES FOR THE SENIOR CITIZENS
Article 6. OSCA-issued Senior Citizens' Identification Card. - For the availment of

benefits and privileges under the Act and these Rules, the senior citizen, or his/her duly
authorized representative, shall present as proof of eligibility, a valid and original Senior
Citizens' Identification Card issued by the Head of the Office of Senior Citizens Affairs
(OSCA) of the place where the senior citizen resides, and which shall be honored
nationwide.
Article 7. Twenty Percent (20%) Discount and VAT Exemption - The senior citizens
shall be entitled to the grant of twenty percent (20%) discount and to an exemption from
the value-added tax (VAT), IF APPLICABLE, on the sale of the goods and services
covered by Section 1 to 6 of this Article, from all establishments for the exclusive use
and enjoyment or availment of senior citizens.
For this purpose, the Department of Finance (DOF) through the Bureau of Internal
Revenue (BIR) shall come up with the appropriate Revenue Regulations on the 20%
senior citizens discount and VAT exemption within thirty (30) days from effectivity of
these Rules that shall cover among others, new invoicing procedures, reportorial
requirements, and a system for claiming tax deductions.
Section 1. MEDICAL_RELATED PRIVILEGES
(a) MEDICINE AND DRUG PURCHASES - The 20% discount and VAT exemption shall
apply to the purchase of generic or branded medicines and drugs by or for senior
citizens, including the purchase of influenza and pneumococcal vaccines. The 20%
discount and VAT exemption shall also be granted to the purchase of vitamins and
mineral supplements which are medically prescribed by an attending physician for
prevention and treatment of diseases, illness, or injury.
(b) ESSENTIAL MEDICAL SUPPLIES, ACCESSORIES AND EQUIPMENT - The 20%

discount and VAT exemption privilege shall also apply to the purchase of eyeglasses,
hearing aids, dentures, prosthetics, artificial bone replacements like steel, walkers,
crutches, wheelchairs whether manual or electric-powered, canes/quad canes, geriatric
diapers, and other essential medical supplies, accessories and equipment by or for
senior citizens.
The purchase under Sections 1 (a) and (b) from drug stores, hospital pharmacies,
medical and optical clinics and similar establishments including non-traditional outlets
dispensing medicines, shall be subject to guidelines that shall be issued by the DOH
within thirty (30) days from effectivity of these Rules, in coordination with the Food and
Drug Administration (FDA) and the Philippine Health Insurance Corporation
(PHILHEALTH). Said guidelines shall also indicate what constitutes discounted
essential medical supplies, accessories and equipment as contemplated by Section 1
(b), and will be subjected to a regular review as deemed necessary in keeping with the
changes, demands and needs of senior citizens.
The guidelines issued by the DOH, in consultation with the DOF and the BIR, shall also
establish mechanisms of compulsory rebates in the sharing of burden of discounts
among retailers, manufacturers and distributors, taking into consideration their
respective margins. When necessary, the DOF and the BIR shall come up with the
appropriate Revenue Regulations for this purpose.
(c) MEDICAL AND DENTAL SERVICES IN THE PRIVATE FACILITIES - Medical and
dental services, diagnostic and laboratory tests such as but not limited to X-Rays,
computerized tomography scans, and blood tests, that are requested by a physician as
necessary for the diagnosis and/or treatment of an illness or injury are subjected to the
20% discount and VAT exemption.
(d) PROFESSIONAL FEES OF ATTENDING PHYSICIAN/S in all private hospitals,

medical facilities, outpatient clinics and home health care facilities shall be subjected to
the 20% discount and VAT exemption.
(e) PROFESSIONAL FEES OF LICENSED HEALTH WORKERS PROVIDING HOME

HEALTH CARE SERVICES as endorsed by private hospitals or employed through
home health care employment agencies are entitled to the 20% discount and VAT
exemption. The burden of the discount shall be borne solely by the employment agency
given the health worker's very minimal share compared to the agency fee.
Section 2. DOMESTIC TRANSPORTATION PRIVILEGES

The Department of Transportation and Communication (DOTC), in coordination with the
Maritime Industry Authority (MARINA), Philippine Ports Authority (PPA), the Civil
Aeronautics Board (CAB), Light Rail Transit Authority (LRTA), Philippine National
Railways (PNR), Mass Rail Transit Authority (MRTA) and Land Transportation
Franchising and Regulatory Board (LTFRB), shall within thirty (30) days from effectivity
of these Rules issue the necessary circulars or directives on the following transportation
privileges of senior citizens:
(a) AIR AND SEA TRANSPORTATION PRIVILEGES - Fare for domestic air, and sea
travel, including \f0 advanced booking, shall be subject to the 20% discount and VAT
exemption, if applicable.
(b) PUBLIC LAND TRANSPORTATION PRIVILEGES - Fare in the public railways

including LRT, MRT, and PNR, fares in buses (PUB), jeepneys (PUJ), taxi and shuttle
services (AUV), are likewise subject to the 20% discount and VAT exemption, if
applicable.
Section 3. HOTELS, RESTAURANTS, RECREATIONAL CENTERS, AND PLACES OF

LEISURES, AND FUNERAL SERVICES
The Department of Interior and Local Government (DILG) and Department of Tourism
(DOT) shall, within thirty (30) days from effectivity of these Rules, issue the necessary
circulars or directives to establishments for its implementation to ensure compliance
herewith.
(a) HOTELS AND SIMILAR LODGING ESTABLISHMENTS - The discount shall be for
room accommodation and other amenities offered by the establishment such as but not
limited to hotel-based parlors and barbershops, restaurants, massage parlor, spa,
sauna bath, aromatherapy rooms, workout gyms, swimming pools, Jacuzzis, ktv bars,
internet facilities, food, drinks and other services offered. The term "hotel" shall include
beach and mountain resorts,
(b) RESTAURANTS - The discount shall be for the purchase of food, drinks, dessert,
and other consumable items served by the establishments offered for the consumption
of the general public.
(c) For Dine-in services under paragraphs (a) and (b) of Section 3, and Section 4,
paragraph 2 of Article 7, the privilege must be personally availed of by the senior citizen
as defined under these Rules, and no proxies or authorization in favor of another person
who is not a senior citizen will be honored.
(d) Consistent with the intent of the Act, the phrase "exclusive use and enjoyment" of
the senior citizen shall mean "for the senior citizen's personal consumption" only. As
such, the 20% senior citizen discount shall not apply to "children's meals" which are
primarily prepared and intentionally marketed for children. Similarly, the 20% senior
citizen discount shall not apply to "pre-contracted" party packages or bulk orders.
(e) Food, drinks and other consumable items provided in Section 3 (a) and (b), and
Section 4, paragraph 2 of Article 7 purchased by the senior citizen shall be processed
separately as an independent transaction from his/her non-eligible companions to
ensure that it is for his/her exclusive consumption and to enable computation of the 205
discount and the exemption from the Value Added Tax (VAT), which only the senior
citizen is entitled to.
However, if the group of diners is composed entirely of senior citizens, all of whom
present valid senior citizens IDs, each shall be entitled to a 20% discount and
exemption from Value Added Tax.
(f) The 20% discount shall apply to Take-Out/Take-Home/Drive-Thru orders as long as it

is the senior citizen himself/herself who is present and personally ordering, and he/she
can show a valid senior citizen ID card.
(g) For Delivery Orders, the 20% discount shall likewise apply subject to certain
conditions; i.e. senior citizen ID card number must be given while making the order over
the telephone; the senior citizen ID card must also be presented upon delivery to verify
the identity of the senior citizen entitled to the 20% discount.
(h) For the above-mentioned transactions under paragraphs (f) and (g) of Section 3 of
Article 7, the Most Expensive Meal Combination (MEMC) shall apply to food purchases
by senior citizens. The MEMC is an amount corresponding to the combination of the
most expensive and biggest single-serving meal with beverage served in a quick
service restaurant, is deemed flexible and is adjusted accordingly by food
establishments to estimate a single food purchase for an individual senior citizen.
Section 4. RECREATION CENTERS - The discount shall be for the utilization of

services in the form of fees, charges and rental for sport facilities or equipment,
including golfcart rentals and green fees, or venues for ballroom dancing, yoga,
badminton courts, bowling lanes, table or lawn tennis, workout gyms, martial arts
facilities.
Non-profit, stock golf and country clubs which are not open to the general public, and
are private and for exclusive membership only as duly proven by their official Securities
and Exchange (SEC) registration papers, are not mandated to give the 20% senior
citizens discount. However, should restaurants and food establishments inside these
country clubs be independent concessionaires and food sold are not consumable items
under club membership dues, they must grant the 20% senior citizen discount.
Section 5. ADMISSION FEES PRIVILEGE - The discount shall be applied to admission

fees charged by theaters, cinema houses and concert halls, circuses, carnivals, and
other similar places of culture, leisure and amusement such as museums and parks.
Section 6. FUNERAL AND BURIAL SERVICES - The beneficiary or any person who
shall shoulder the funeral and burial expenses of the deceased senior citizen, shall
claim the discount under this Rule for the deceased senior citizen 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.
Article 8. CREDIT CARD PAYMENTS - The 20% discount and VAT exemption shall
also apply to purchases of goods and services by senior citizens paying through credit
cards.
Article 9. NO DOUBLE DISCOUNTS - In the purchase of goods and services which

are on promotional discount, the senior citizen can avail of the establishment's offered
discount or the 20% discount provided herein, whichever is higher and more favorable.
In cases where the senior citizen is also a person with disability (PWD) entitled to a 20%
discount under his/her valid PWD identification card (ID), the senior citizen shall use
either his/her OSCA-issued ID card or PWD ID card to avail of the 20% discount.
Article 10. TAX DEDUCTION - The establishment may claim the discounts provided
herein as tax deductions based on the cost of the goods sold or services rendered:
Provided. 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: Provides, further, 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.
For this purpose, the Department of Finance (DOF) through the Bureau of Internal
Revenue (BIR) shall come up with the appropriate Revenue Regulations on the 20%
senior citizens discount and VAT exemption within thirty (30) days from effectivity of
these Rules.
Article 11. OTHER PRIVILEGES
Section 1. INCOME TAX EXEMPTION - The senior citizen shall be entitled to

exemption from the payment of the individual income tax, provided he/she is considered
to be minimum wage earner in accordance with Republic Act No. 9504.
Section 2. EXEMPTION FROM TRAINING FEES - The senior citizen shall be

exempted from training fees for socio-economic programs conducted by private and
government agencies subject to the guidelines to be issued within thirty (30) days from
effectivity of these Rules by the DTI, the Department of Labor and Employment (DOLE),
the DA, the Technical Education and Skills Development Authority (TESDA) and the
Department of Science and Technology - Technology Resource Center (DOST-TRC).
Section 3. FREE MEDICAL AND DENTAL SERVICES IN GOVERNMENT FACILITIES
- Medical and dental services, diagnostic and laboratory tests requested by the
physician such as but not limited to X-rays, computerized tomography scans, and blood
tests availed of by senior citizens, including professional fees of attending doctors in all
government hospitals, medical facilities, outpatient clinics, and home health care
services, shall be provided free of charge to senior citizens. These shall be in
accordance with the rules and regulation to be issued by the DOH, in coordination with
the PHILHEALTH.
Section 4. FREE VACCINATION FOR INDIGENT SENIOR CITIZENS - The DOH shall,
subject to technical and operational guidelines which it shall issue not later than thirty
(30) days from effectivity of these Rules, administer free vaccinations against the
influenza virus and pneumococcal disease for indigent senior citizen patients.
Neglected, abandoned, unattached or homeless senior citizens in government-run
residential homes, centers and facilities shall likewise be entitled to free vaccinations
under these Rules.
The DOH shall enjoin all government and private hospitals, as well as other health
facilities to post, publish or print out a schedule of health benefits and privileges i.e.,
laboratory and diagnostic test fees, which should be regularly updated. These postings
and publications shall be clearly identified in the guidelines.
Section 5. EDUCATIONAL PRIVILEGES - Educational assistance shall be granted to

senior citizens to pursue post secondary, post tertiary, as well as vocational or technical
education in both public and private schools through provision of scholarships, grants,
financial aid, subsidies and other incentives to qualified senior citizens, including
support for books, learning materials, and uniform allowance, to the extent feasible:
Provided, that senior citizens shall meet minimum admission requirements.
Section 6. BENEFITS AND PRIVILEGES FOR RETIREES - To the extent practicable

and feasible, the senior citizen shall be granted the continuance of the same benefits
and privileges given by the Government Service Insurance System (GSIS), Social
Security System (SSS) and PAG-IBIG, as the case may be, as are enjoyed by those in
active service.
Retirement benefits of retirees from both the government and the private sector shall be
regularly reviewed every year to ensure their continuing responsiveness and
sustainability, and to the extent practicable and feasible, shall be upgraded to be at par
with the current scale enjoyed by those in actual service based on National Economic
and Development Authority (NEDA) poverty threshold per region as determined by the
National Statistical Coordination Board (NSCB).
Section 7. PRIVILEGES ON GRANTING SPECIAL DISCOUNTS IN SPECIAL

PROGRAMS - To the extent possible, the government may grant special discounts in
special programs for senior citizens on purchase of basic necessities and prime
commodities, subject to the guidelines to be issued for the purpose by the DTI and the
DA within (30) days from effectivity of these Rules. Provided, That such special
programs and their guidelines shall be developed by the concerned department within
the concerned department's jurisdiction.
Section 8. EXPRESS LANES PRIVILEGES - Accessible express lanes for senior

citizens shall be provided in all private, banking, commercial, and government
Article 12. UTILITY DISCOUNTS
Section 1. Five (5%) Discount - The grant of a minimum of five percent (5%) discount
relative to the monthly utilization of water and electricity by households with senior
citizens; Provided, That the individual meters for the foregoing utilities are registered in
the name of the senior citizen residing therein: provided, further, that the monthly
consumption does not exceed one hundred kilowatt hours (100 kWh) of electricity and
thirty cubic meters (30m') of water: Provided, furthermore, that the privilege is granted
per household regardless of the number of senior citizens residing therein.
To avail of the discount under this Section, the senior citizen shall:
1. Apply for the discount personally or thru a representative. There shall be annual
renewal of application to the utility provider.
2. Submit requirements.
a. Proof of age and citizenship
b. Proof of billing. Meter registration should be in the name of the senior citizen for a
period of one year
c. Proof of residence
Section 2. Fifty (50%) Discount - The grant of a 50% discount an all electricity, water,
telephone consumption for DSWD-accredited senior citizens centers and residential
care institutions or group homes that are government-run or organized and operated by
non-stock, non-profit domestic corporations, primarily for the purpose of promoting the
well-being of abandoned, neglected, unattached or homeless senior citizens.
Such senior citizens centers and residential care or group homes must have been in
operation for at least six (6) months and must have a separate meter for said utilities/
services.
Section 3. DSWD shall issue the necessary guidelines within (30) days from effectivity
of these Rules for the accredited senior citizens centers and residential/group homes
willing to avail of the utility discount.
The Energy Regulatory Commission (ERC), the Metropolitan Waterworks and
Sewerage System (MWSS), the Local Water Utility Administration (LWUA) and other
concerned utility-regulatory agencies shall, within six (6) months after the effectivity of
these Rules, formulate supplemental guidelines to cover recovery rate mechanics and/
or sharing of burden, among other concern of the distribution utilities.
RULE V 
GOVERNMENT ASSISTANCE
Article 13. EMPLOYMENT
Section 1. Senior citizens, who have the capacity and desire to work, or to be re-
employed, shall be provided by the DOLE, in coordination with other government
agencies including local government units, with information and matching services to
enable them to be productive members of society. Terms of employment shall conform
to the provisions of the Labor Code, as amended, Civil Service Laws and other laws,
rules and regulations.
Section 2. Private entities that shall employ senior citizens as employees upon
effectivity of the Act, shall be entitled to an additional deduction from their gross Income,
equivalent to fifteen percent (15%) of the total amount paid as salaries and wages to
senior citizens subject to the provision of Section 34 of the National Internal Revenue
Code (NIRC), as amended and the Revenue Regulations to be issued by the BIR and
approved by the DOF; Provided, however, That such employment shall continue for a
period of at least six (6) months; Provided, further, That the net annual income of the
senior citizen does not exceed the poverty level for that year as determined by NEDA
thru the NSCB.
Section 3. The DOLE, in coordination with other government agencies, such as, but not
limited to, the DOST-Technology Resource Center (DOST-TRC) and the DTI, shall
assess, design and implement training programs that will provide free of charge to
senior citizens the appropriate skills development, livelihood training programs, and
welfare or livelihood support.
Article 14. EDUCATION

The Department of Education (DepEd), the DOST-TRC, the Technical Education and
Skills Development Authority (TESDA), and the Commission on Higher Education
(CHED), in consultation with non-governmental (NGOs) and people's organizations
(POs) for senior citizens, shall institute a program that will ensure access of senior
citizens to formal and non-formal education. They are to:
a) Formulate and implement relevant and effective course designs and educational
programs;
b) Conduct the necessary training for the implementation of the appropriate curriculum
for the purpose;
c) Ensure the availability of the needed-educational facilities in the form of modular
programs and other distance and alternative learning materials;
d) In coordination with OSCA and the City or Municipal Social Welfare and Development
Officer, shall conduct assessment and profiling of senior citizens who wanted to study;
and
e) Conduct continuing research and development program for the necessary and
relevant education of the senior citizens.
Article 15. HEALTH
Section 1. The DOH, in coordination with local government units (LGUs), NGOs and
POs for senior citizens, shall institute a national health program that shall incorporate
the National Prevention of Blindness Program, and shall also provide an integrated
health service for senior citizens.
It shall train community-based health workers including barangay health workers,
among senior citizens and health personnel to specialize in geriatric care, gerontology,
and health problems of senior citizens.
Section 2. The National Health Program aims to promote healthy and productive older
population through the following:
a) Establishment and provision of a comprehensive and integrated health service
package catering to the specific needs of the citizens;
b) Human resource development/capacity building of health personnel in relation to the
care and health problems of senior citizens;
c) Health promotion;
d) Conduct of researches and study in geriatric care, gerontology, and health needs of
senior citizens;
e) In coordination with the municipal health worker, designate one (1) barangay health
worker to attend to senior citizens' health needs;
f) The barangay, in coordination with local office health office shall designate one day of
every month specifically for medical attention of senior citizens;
g) Establishment of senior citizens' ward in every government hospital and in all levels
of hospitals throughout the country; and
h) Provision of accessible express lanes, or prioritization, in all health facilities.
Section 3. Provide technical assistance in coordination with DSWD, NGOs and other
concerned agencies to local government units in the establishment of community based
health rehabilitation programs.
Article 16. SOCIAL SERVICES

The DSWD, in cooperation with the OSCA and the local government units, non-
governmental organizations and people'' organizations for senior citizens, shall develop
and implement programs and social services for senior citizens. Local government units
shall ensure that the developed programs and social services are provided. The
components of these programs are:
a) Self and social enhancement services which provide senior citizens opportunities for
socializing, organizing, creative expression, and improvement of self;
b) After care services for senior citizens who are discharged from the homes/institutions
for the aged, especially those who have problems of reintegration with family and
community, wherein both the senior citizens and their families are provided with
counseling;
c) Neighborhood support services/home care wherein the community or family
members provide caregiving services to their frail, sick, or bedridden senior citizens;
and
d) Substitute family care in the form of residential care, group homes, or foster homes
for the abandoned, neglected, unattached or homeless senior citizens and those
incapable of self-care.
e) Inclusion of community-based settings as practicum for academic institutions and in
the curriculum of caregiving and technical vocational schools.
Article 17. HOUSING

The national government shall include in its national shelter program the special
housing needs of senior citizens, such as establishment of housing units for the elderly.
Section 1. The Housing and Land Use Regulatory Board (HLURB) shall formulate
housing rules on how to develop subdivision suitable to the requirements of male and
female senior citizens. The Home Development Mutual Fund (HDMF) shall promote the
establishment of elderly residence and shall review its existing circulars particularly the
limitation of the age requirements of sixty-five (65) years old at the date of the loan
application and seventy (70) years old at loan maturity. It shall also consider the concept
of pension in lieu compensation.
Section 2. The housing program for the poor senior citizens which include the
establishment/donation of group/foster homes for the neglected, abused and
unattached or homeless senior citizens and those incapable of self-care including its
management, maintenance and operations shall be established in accordance with EO
105, approving and directing the implementation of the program, "Provision of Group/
Foster Home for Neglected, Abandoned, Abused, Unattached and Poor Older Persons
and Persons with Disabilities" promulgated on May 16, 2002.
Article 18. ACCESS TO PUBLIC TRANSPORT

The DOTC and its attached agencies and sectoral officers shall improve the
implementation or programs to assist senior citizens to fully gain access in the use of
public transport facilities. The minimum requirements and standards to make
transportation facilities and utilities for public use accessible to senior citizens shall be
developed to enhance the mobility of senior citizens. There shall be strict
implementation of courtesy space and seats for the exclusive use of senior citizens in all
transport system. As far as practicable, PUVs shall also strive to install safe lower
stepping boards.
Article 19. INCENTIVE FOR FOSTER CARE

The DILG through the local government units, in consultation with the DOF and the BIR
which shall provide the necessary guidelines, shall provide incentives to persons or
NGO institutions implementing foster care programs for senior citizens, as follows:
(a) reality tax holiday for the first five (5) years starting from the first year of operation
and/or implementation of foster care program; and
(b) priority in the construction, or maintenance of provincial or municipal roads leading
to the aforesaid home, residential community or retirement village.
Article 20. ADDITIONAL GOVERNMENT ASSISTANCE

Section 1. SOCIAL PENSION - Pursuant to the eligibility criteria as may be determined
by the DSWD, indigent senior citizens shall be entitled to a monthly stipend amounting
to Five hundred pesos (Php 500.00) to augment the daily subsistence and other
medical needs of senior citizens. The grant of social pension shall be subject to a
review every two (2) years by Congress, in consultation with the DSWD within three
months after convening the Congress.
The DSWD, in consultation with the Department of Budget and Management (DBM), the
DILG, the NCMB, NGOs, and people's organizations shall formulate guidelines within
thirty (30) days from effectivity of these Rules for the development of criteria, selection
of, and establishment of database for indigent senior citizens focusing on targeting,
delivery, monitoring and evaluation, to facilitate implementation of this additional
government assistance.
Section 2. MANDATORY PHILHEALTH COVERAGE - All indigent senior citizens shall

be covered by the national health insurance program of PHILHEALTH. The local
government units where the indigent senior citizens reside shall allocate the necessary
funds to ensure the enrollment and lifetime coverage of their indigent senior citizens, in
accordance with the pertinent laws and regulations.
Section 3. SOCIAL SAFETY NETS - Social safety assistance intended to cushion the
effects of economic shocks; disasters and calamities shall be available for senior
citizens. The social safety assistance which shall include, but not limited to, food,
medicines, and financial assistance for domicile repair, shall be sourced from the
disaster/calamity funds of local government units where the senior citizens reside,
subject to the guidelines to be issued by the DSWD in coordination with DILG.
Section 4. DEATH BENEFIT ASSISTANCE - Death benefit assistance of a minimum of

Two thousand pesos (Php 2, 000.00) shall be given to the nearest surviving relative who
took care of the deceased senior citizens reside, subject to the guidelines to be issued
by the DSWD and DILG.
In keeping with the intention of the law and similar government assistance being
granted, this benefit shall apply in relation to deceased indigent senior citizens only.
However, it will not preclude LGUs already granting burial assistance to continue giving
such benefit to non-indigent senior citizens.
RULE VI 
THE OFFICE FOR SENIOR CITIZENS AFFAIRS (OSCA)
Article 21. Office of Senior Citizens Affairs - There shall be established in all cities
and municipalities an Office for Senior Citizens Affairs (OSCA).
Section 1. OSCA Head - The senior citizen to be appointed by the City or Municipal
Mayor as OSCA Head should have the following qualifications:
a) A Filipino citizen and resident of the municipality or city for at least one (1) year;
b) A registered voter of the concerned city or municipality;
c) Able to read and write;
d) Must be physically and mentally capable of performing the tasks of OSCA Head;
e) A bonafide member of a duly registered senior citizens organization which has a track
record of at least three consecutive years;
f) Good moral character; and
g) At least a high school graduate
Section 2. Selection and Term of OSCA Head. - The OSCA Head shall be chosen from
a list of three (3) nominees as recommended by a general assembly of DSWD-
accredited or LGU-registered senior citizens organizations in the city or municipality. He/
she shall appointed by the mayor for a term of three (3) years without reappointment but
without prejudice to an extension not exceeding three (3) months, if exigency so
requires.
The OSCA Head shall be appointed to serve the interest of senior citizens and
shall not be removed or replaced except for reasons of death, permanent disability, or
ineffective performance of his duties to the detriment of fellow senior citizens, as stated
in a resolution issued by the general assembly. In case of death or permanent disability,
the remaining term shall be served by the new reappointed if he/she has not served
one-half of the full term.
Section 3. Remuneration for Services Rendered. - The head of the OSCA shall be
entitled to received an honorarium of an amount equivalent to at least Salary Grade 10
to be approved by the local government unit concerned.
For 3rd to 6th class local government units, their respective sanggunians may provide
for a reasonable and practicable remuneration for the OSCA Head.
Section 4. Functions of OSCA. - The office for Senior Citizens Affairs shall have the
following Functions:
a) In consultation with the City or Municipal Social Work and Development Officer and
duly registered senior citizen organizations, to plan, develop, implement, consolidate,
and monitor yearly work programs in pursuance of the objectives of the Act and its
Rules;
b) To draw up a list of available and required services which can be provided by the
registered federations and associations of senior citizens;
c) To maintain and regularly update on a quarterly basis the list of senior citizens and to
issue national uniform individual identification cards and purchase booklets, free of
charge, which shall be valid anywhere in the country;
d) To serve as a general information and liaison center the needs of the senior citizens;
e) To monitor compliance of the provisions of the Act and its Rules particularly the grant
of special discounts and privileges to senior citizens;
f) To report to the Mayor, any person, natural or judicial; establishments, business,
entity, institution or agency found violating any provision of the Act and its Rules;
g) To facilitate the creation of a city or municipality coordinating and monitoring board
consisting of OSCA Head, the City or Municipal Social Work and Development Officer
and the presidents of concerned duly registered senior citizens organizations to
deliberate and act on the complaints;
h) To assist senior citizens in filling complaints or charges against any person, natural or
judicial; establishment, institution, or agency refusing to comply with the privileges under
the Act before the Department of Justice (DOJ), the Provincial Prosecutor's Office, the
regional or the municipal trial court, the municipal trial court in cities, or the municipal
circuit trial court;
i) To assist and coordinate with the concerned person, natural or judicial, establishment,
institution or agency in investigating fraudulent practices and abuses of the discount and
privileges exclusively granted to senior citizens ; and
j) To establish linkages and work together wit the accredited NGOs, people's
organizations, and the barangays in their respective areas.
Section 5. Operations and Maintenance of OSCA. - The necessary appropriation for

the operation and maintenance of the OSCA shall be provided by the local government
units concerned. An office space established at the Office of the Mayor shall likewise be
provided.
Section 6. Assistance and Supervision of OSCA. - The OSCA Head shall be assisted
by the City of the Municipal Social Welfare and Development Officer (C/MSWDO). The
Office of the Mayor shall exercise supervision over the OSCA relative to their plans,
activities and programs for senior citizens.
RULE VII 
PENALTIES AND OTHER SANCTIONS
Article 22. Violations in Discounted Medicine Purchases - The following acts
concerning drug and medicine purchases are considered violative of the provisions of
the Act and its Rules:
Section 1. A senior Citizen or his /her representative or a person misusing the privileges
by:
a) using several purchase booklets,
b) availing of the discounts to buy medicines, drugs, medical accessories and supplies
not for the use of the senior citizen,
c) unauthorized use of the identification card of the senior citizen.
Section 2. A medical practitioner giving prescription to other persons in the name of the
senior citizen or giving anomalous prescription.
Section 3. Retailers and establishments dispensing medicines:

a) refusing to grant the full 20% senior citizens discount and VAT exemption on drug
and medicine purchases paid via credit card,
b) making a distinction between branded and generic drugs and medicines in giving the
20% discount,
c) posting notices and signages telling customers that availment of the 20% discount is
limited to cash purchases only,
d) "limiting" of discountable drug and medicine purchases to certain weekdays only,
such that senior citizens cannot avail of the 20% discount on other days, and e)
restricting the purchase time or period for senior citizen discounts after a certain hour.
Article 23. Violations in Discounted Food Purchases - The following acts concerning
food purchases are considered violative of the provisions of the Act and its Rules:
a) Pegging a maximum amount of food purchase subject to 20% discount and the VAT
exemption, and/ or posting of notice to that effect;
b) Refusal to grant the 20% discount and VAT exemption on take -out/ take home/ drive-
thru orders it appearing that the purchase is for the exclusive use and enjoyment of
senior citizens;
c) Refusal to grant a 20% discount and VAT exemption on delivery orders it appearing
that the purchases is for the exclusive use and enjoyment of senior citizens.
Article 24. PENALTIES - Any person who refuses to honor the senior citizen card or
violates any provision of the Act and its Rules shall suffer the following penalties:
Section 1. For the first violation, a fine of not less than Fifty thousand pesos (Php
50,000.00) but not exceeding One hundred thousand pesos (Php 100,000.00) and
imprisonment for not less than two (2) years but not more than six (6) years; and
Section 2. For any subsequent violation, a fine of not less than One hundred thousand
pesos (Php 100,000.00) but not exceeding Two hundred thousand pesos (Php
200,000.00) and imprisonment for not less than two (2) years but not more than six (6)
years.
Section 3. Any person who abuses the privileges granted herein shall be punished with
a fine of not less than fifty thousand pesos (Php 50,000.00) but not more than One
hundred thousand pesos (Php 100,000.00) and imprisonment of not less than six (6)
months.
Section 4. If the offender is an alien or a foreigner, he/she shall be deported

immediately after service of sentence without further deportation proceedings.
Section 5. If the offender is a corporation, partnership, organization or any similar entity
the officials thereof directly involved such as the president, general manager, managing
partner, or such other officer charged with the management of the business affairs shall
be liable therefor.
Section 6. Upon filing of 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 person,
establishment or business entity that fails to abide by the provisions of the Act and these
Rules.
RULE VIII 
MONITORING AND COORDINATING MECHANISM
Article 25. Monitoring and Coordinating Mechanism. - An inter-agency coordinating

and monitoring mechanism at the national level shall be established which shall be
called the National Coordinating and Monitoring Board (NCMB) on the Expanded Senior
Citizens Act of 2010.
Section 1. NCMB Composition. - The National Coordinating and Monitoring Board shall
be composed of the following:
a) Chairperson - Secretary of the Department of Social Welfare and Development
(DSWD), or authorized representatives;
b) Vice-Chairperson - Secretary of the Department of the Interior and Local Government
(DILG), or authorized representatives;
c) Members: Secretaries or authorized representatives of the following:
1) Department of Justice (DOJ);
2) Department of Health (DOH);
3) Department of Trade and Industry (DTI); and
4) Representatives from five (5) accredited NGOs for senior citizens
The National Inter-Agency Coordinating and Monitoring Board may call on other
government agencies, NGOs and people's organizations to serve as resource persons
as the need arises. Resource persons have no voting rights at the Board.
Section 2. NGO/PO Representation. - The representatives from accredited NGOs and

people's organizations shall be senior citizens, or from other sectors that have services
primarily for senior citizens. These NGO representatives which shall be selected and
appointed by the Board shall serve for a period of three (3) years.
Section 3. Level of Representation. - The authorized representative to the National

Coordinating and Monitoring Board from the government agencies shall have a rank of
not lower than Director level or its equivalent, and for the NGOs, shall have a rank not
lower than an Executive Director.
Section 4. Functions. - The National Coordinating and Monitoring Board (NCMB) shall
have the following functions:
a) Formulate a National Plan of Action for Senior Citizens in coordination with
concerned government agencies and other stakeholders;
b) Develop an effective monitoring and reporting system towards an efficient, consistent
and uniform implementation of the law;
c) Develop and institute effective and innovative approaches and methods with which to
address emerging concerns of the senior citizens;
d) Coordinate the programs and projects of government agencies with responsibilities
under RA No. 9994 and these Rules;
e) Coordinate the conduct of nationwide information, education campaign and other
advocacy activities on RA No. 9994;
f) Monitor the conduct of orientation, training and other capability building programs to
maximize the contributions and participation of senior citizens;
g) Coordinate the conduct and evaluation of the plan of action, research and
documentation of good practices and disparities for policy and program development;
h) To actively establish national, regional and international networks for resource
generation and technical cooperation; and
i) Prepare yearly accomplishment report for the Office of the President, Congress, and
the concerned national government and local government units.
Section 5. Coordinating and Monitoring Body at the Regional Level. - There shall be
established in all regions a Regional Coordinating and Monitoring Board (RCMB) with
similar membership and functions as the National Board. As far as practicable, similar
bodies shall be established in the local government units.
Section 6. Secretariat. - The Department of Social Welfare and Development shall

serve as the Secretariat to the Board at the national and at the regional levels.
RULE IX 
FINAL PROVISIONS
Article 26. Appropriations. - The appropriation necessary to implement the provisions

of the Act and its Rules shall be included in the respective budgets of the responsible
national government agencies subject to availability of funds. The heads of departments
and agencies as well as local chief executives concerned shall immediately include in
their annual appropriations the funding necessary to implement these programs and
services.
Section 1. The funds to be used for the national health program and for the vaccination
of indigent senior citizens in the first year of implementation shall be added to the
regular appropriations of the DOH and thereafter, as a line item under the DOH budget
in the subsequent General Appropriations Act (GAA) subject to availability of funds.
Section 2. The monthly social pension for indigent senior citizens in the first year of
implementation shall be added to the regular appropriations of the DSWD and thereafter
as a line item under the DSWD budget in the subsequent GAA subject to availability of
funds.
Section 3. The local government units concerned shall provide the necessary
appropriations for the operation and maintenance of the OSCA.
Article 27. Repealing Clause. - All laws, presidential decrees, executive orders and
rules and regulations or part thereof, contrary to, or inconsistent with the provisions of
these Rules, are hereby repealed or modified accordingly.
Article 28. Separability Clause. - Should any provision of the Rules be found
unconstitutional or invalid by a court of law, such provision shall be served from the
remainder of these Rules and such action shall not affect the enforceability of the
remaining provisions of these Rules.
Article 29. Effectivity. - These Rules and Regulations shall take effect fifteen (15) days
after its complete publication in at least two (2) national newspapers of general
circulation, and submission to the Office of the National Administrative Register, Law
Center, University of the Philippines.
Signed June 18, 2010 at the Department of Social Welfare and Development, Batasan
Pambansa Complex, Constitution Hills, Quezon City.
Carlos Superdrug Corp vs. DSWD GR No. 166494, June 29, 2007
FACTS:
Petitioners are domestic corporations and proprietors operating drugstores in the

Philippines.
Public respondents, on the other hand, include the DSWD, DOH, DOF, DOJ, and the
DILG, specifically tasked to monitor the drugstores’ compliance with the law; promulgate
the implementing rules and regulations for the effective implementation of the law; and
prosecute and revoke the licenses of erring drugstore establishments.
President Gloria Macapagal-Arroyo signed into law R.A. No. 9257 otherwise known as
the “Expanded Senior Citizens Act of 2003.”
Sec. 4(a) of the Act states that The senior citizens shall be entitled to the following: (a)
the grant of twenty percent (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;
Petitioners assert that Section 4(a) of the law is unconstitutional because it constitutes
deprivation of private property. Compelling drugstore owners and establishments to
grant the discount will result in a loss of profit and capital because according to them
drugstores impose a mark-up of only 5% to 10% on branded medicines, and the law
failed to provide a scheme whereby drugstores will be justly compensated for the
discount.
ISSUE:
WON RA 9257 is constitutional.
HELD:
YES. The law is a legitimate exercise of police power which, similar to the power of
eminent domain, has general welfare for its object. Police power is not capable of an
exact definition, but has been purposely veiled in general terms to underscore its
comprehensiveness to meet all exigencies and provide enough room for an efficient and
flexible response to conditions and circumstances, thus assuring the greatest benefits.
Accordingly, it has been described as the most essential, insistent and the least
limitable of powers, extending as it does to all the great public needs. It is [t]he power
vested in the legislature by the constitution to make, ordain, and establish all manner of
wholesome and reasonable laws, statutes, and ordinances, either with penalties or
without, not repugnant to the constitution, as they shall judge to be for the good and
welfare of the commonwealth, and of the subjects of the same.
For this reason, when the conditions so demand as determined by the legislature,
property rights must bow to the primacy of police power because property rights, though
sheltered by due process, must yield to general welfare.
Police power as an attribute to promote the common good would be diluted

considerably if on the mere plea of petitioners that they will suffer loss of earnings and
capital, the questioned provision is invalidated. Moreover, in the absence of evidence
demonstrating the alleged confiscatory effect of the provision in question, there is no
basis for its nullification in view of the presumption of validity which every law has in its
favor.
Given these, it is incorrect for petitioners to insist that the grant of the senior citizen
discount is unduly oppressive to their business, because petitioners have not taken time
to calculate correctly and come up with a financial report, so that they have not been
able to show properly whether or not the tax deduction scheme really works greatly to
their disadvantage.
In treating the discount as a tax deduction, petitioners insist that they will incur losses.
However, petitioner’s computation is clearly flawed.
For purposes of reimbursement, the law states that the cost of the discount shall be
deducted from gross income, the amount of income derived from all sources before
deducting allowable expenses, which will result in net income. Here, petitioners tried to
show a loss on a per transaction basis, which should not be the case. An income
statement, showing an accounting of petitioners sales, expenses, and net profit (or loss)
for a given period could have accurately reflected the effect of the discount on their
income. Absent any financial statement, petitioners cannot substantiate their claim that
they will be operating at a loss should they give the discount. In addition, the
computation was erroneously based on the assumption that their customers consisted
wholly of senior citizens. Lastly, the 32% tax rate is to be imposed on income, not on the
amount of the discount.
While the Constitution protects property rights, petitioners must accept the realities of
business and the State, in the exercise of police power, can intervene in the operations
of a business which may result in an impairment of property rights in the process.
RA No. 10653, March 1, 2015, Increase of P30,000 exclusion from P30,000 to

P82,000 for 13th month pay & other incentive benefits as implemented by RR
3-2015 (March 9, 2015)
REPUBLIC ACT No. 10653

AN ACT ADJUSTING THE 13th MONTH PAY AND OTHER BENEFITS CEILING
EXCLUDED FROM THE COMPUTATION OF GROSS INCOME FOR PURPOSES OF
INCOME TAXATION, AMENDING FOR THE PURPOSE SECTION 32(B), CHAPTER
VI OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED
Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:
Section 1. Section 32(B), Chapter VI of the National Internal Revenue Code of the
Philippines (Republic Act No. 8424) is hereby amended as follows:
"SEC. 32. Gross Income. —
"x x x
"(B) Exclusions from Gross Income. — The following items shall not be included in
gross income and shall be exempt from taxation under this Title:
"xxx
"(7) Miscellaneous Items. — "xxx
"(e) 13th Month Pay and Other Benefits. — Gross benefits received by officials and
employees of public and private entities: Provided, however, That the total exclusion
under this subparagraph shall not exceed eighty-two thousand pesos (P82,000) which
shall cover:
"xxx
"(iv) Other benefits such as productivity incentives and Christmas bonus: Provided, That
every three (3) years after the effectivity of this Act, the President of the Philippines shall
adjust the amount herein stated to its present value using the Consumer Price Index
(CPI), as published by the National Statistics Office (NSO)."
Section 2. Implementing Rules and Regulations. — The Secretary of Finance shall

promulgate the necessary rules and regulations for the faithful and effective
implementation of the provisions of this Act: Provided, That, the failure of the Secretary
of Finance to promulgate the said rules and regulations shall not prevent the
implementation of this Act upon its effectivity.
Section 3. Repealing Clause. — All laws, orders, issuances, circulars, rules and
regulations or parts thereof which are inconsistent with the provisions of this Act are
hereby repealed or modified accordingly.1âwphi1
Section 4. Separability Clause. — If any provision of this Act is declared

unconstitutional or invalid, other parts or provisions hereof not affected thereby shall
continue to be in full force and effect.
Section 5. Effectivity. — This Act shall take effect fifteen (15) days following its
publication in at least two (2) newspapers of general circulation.
REVENUE REGULATIONS NO. 3-2015 issued on March 13, 2015 implements the
provision of Republic Act No. 10653, more particularly on the increase to P
82,000.00 of the total amount of exclusion from gross income for 13th month
pay and other benefits, effectively further amending the pertinent provisions of
Revenue Regulations (RR) No. 2-98.
The amount of P 82,000.00 shall only apply to the 13th month pay and other benefits
prescribed under the provision of Section 2.78.1.(B)(11) of RR No. 2-98, as
amended, beginning January 1, 2015, and shall in no case apply to other
compensation received by an employee under an employer-employee
relationship, such as basic salary and other allowances. Further, said exclusion
from gross income is not applicable to self-employed individuals and income
generated from business.
The amount of P 82,000.00 shall apply to the 13th month pay and other benefits paid or
accrued beginning January 1, 2015.
All taxpayers-employers shall ensure the correct computation and application of the said
increase on the 13th month and other benefits of the employees in the year-end
adjustments, and the same shall be clearly indicated, among others, in the
Certificate of Compensation/Tax Withheld (BIR Form No. 2316). The said BIR
form shall be issued by the employer to the employee on or before January 31 of
the succeeding calendar year, or if the employment is terminated before the
close of such calendar year, on the day the last payment of compensation is
made.
In case the employee whose employment is terminated and subsequently employed by

another employer before the close of the calendar year, employee-transferee
shall immediately furnish the new employer the accomplished BIR Form issued
by the previous employer, for the appropriate Withholding Tax computation of the
employee’s regular compensation and subsequent year-end adjustment, if any.
RA 10963, Tax Reform for Acceleration and Inclusion (TRAIN Law)
Definition of:
1. Head of the Family (Sec 11 RR-2, RR 2-98)
REVENUE REGULATIONS NO. 2-98 issued May 17, 1998 prescribes

the regulations to implement Republic Act (RA) No. 8424 relative to the
Withholding on Income subject to the Expanded Withholding Tax and
Final Withholding Tax, Withholding of Income Tax on Compensation,
Withholding of Creditable Value- Added Tax and Other Percentage
Taxes. Said Regulations will take effect on compensation income paid
beginning January 1,1998. No penalties for non-compliance with the
new features of the Tax Code will apply until May 15, 1998.
Section 2, RR No. 01-1979: The term "head of family" is defined as "an unmarried
man or woman with one or both parents, or one or more brothers or sisters, or one
or more legitimate, recognized natural, or adopted children living with and dependent
upon him or her for their chief support where such brothers, sisters, or children are
not more than twenty-one years of age, unmarried and not gainfully employed or
where such children are incapable of self-support because they are mentally or
physically defective.
2. Dependent
Section 35(B): For purposes of this Subsection, a 'dependent' means a legitimate,

illegitimate or legally adopted child chiefly dependent upon and living with the
taxpayer if such dependent is not more than twenty-one (21) years of age,
unmarried and not gainfully employed or if such dependent, regardless of age, is
incapable of self-support because of mental or physical defect.
Who is a dependent for purposes of additional exemptions?
(1) A taxpayer’s child, whether legitimate, illegitimate or legally adopted child

(2) Chiefly dependent for support upon on the taxpayer
(3) Living with the taxpayer
(4) Not more than 21 years old, unmarried and not gainfully employed or
(5) Regardless of age, is incapable of self-support because of mental or physical
defect.
Note: Only children (not parents) may be considered “dependent” for purposes of
additional exemptions. The definition of the term “dependent” under Section
35(B) of the NIRC now includes a “Foster Child” or a child placed under planned
temporary substitute parental care by a Foster Parent or a Foster Family. [RMC No.
41-20i3, Jan. 23, 2013]
Change of Status and Personal Exemptions - Section 35(C)
Change of Status: [Section 35(C)]
(1)If taxpayer marries during taxable year, taxpayer may claim the corresponding BPE
in full for such year (i.e., no need to pro-rate the exemption).
(2)If taxpayer should have additional dependent(s) during taxable year, taxpayer may
claim corresponding AE in full for such year.
(3)If taxpayer dies during taxable year, his estate may claim BPE and AE as if he died at
the close of such year.
(4)If during the taxable year spouse dies; or any of the dependents dies or marries,
turns 21 years old or becomes gainfully employed, taxpayer may still claim same
exemptions as if the spouse or any of the dependents died, or married, turned 21
years old or became gainfully employed at the close of such year.
Note: When it comes to change of status, the status beneficial to the taxpayer is used
for purposes of claiming deductions as long as the taxpayer achieved such status at any
time during the taxable period.
Premium Payments on Health and/or Hospitalization Insurance
Section 34(M): Premium Payments on Health and/or Hospitalization Insurance of an

Individual Taxpayer. - The amount of premiums not to exceed Two thousand four
hundred pesos (P2,400) per family or Two hundred pesos (P200) a month paid during
the taxable year for health and/or hospitalization insurance taken by the taxpayer for
himself, including his family, shall be allowed as a deduction from his gross income:
Provided, That said family has a gross income of not more than Two hundred fifty
thousand pesos (P250,000) for the taxable year: Provided, finally, That in the case of
married taxpayers, only the spouse claiming the additional exemption for dependents
shall be entitled to this deduction.
Notwithstanding the provision of the preceding Subsections, The Secretary of Finance,

upon recommendation of the Commissioner, after a public hearing shall have been held
for this purpose, may prescribe by rules and regulations, limitations or ceilings for any of
the itemized deductions under Subsections (A) to (J) of this Section: Provided, That for
purposes of determining such ceilings or limitations, the Secretary of Finance shall
consider the following factors: (1) adequacy of the prescribed limits on the actual
expenditure requirements of each particular industry; and (2) effects of inflation on
expenditure levels: Provided, further, That no ceilings shall further be imposed on items
of expense already subject to ceilings under present law.
Premiums Paid on Health or Hospitalization Insurance – amount of premium paid
on health and/or hospitalization by an individual taxpayer (head of family or married), for
himself and members of his family during the taxable year.
Requisites:
(1) Insurance must have actually been taken.
(2) The amount of premium deductible does not exceed P2,400 per family or P200
per month whichever is lower during the taxable year.
(3) That said family has a gross income of not more than P250,000 for the calendar
year.
(4) In case of married individual, only the spouse claiming additional exemption shall
be entitled to this deduction.
The following may avail of the deduction:

(1) Individual taxpayers earning purely compensation income during the year.
(2) Individual taxpayer earning business income or in practice of his profession.
Attrition Act of 2005 (RA 9355) - Abakada Guro vs. Honorable Cesar
Purisima (GR No. 166715, August 14, 2008)
Republic Act (RA) No. 9335 also known as the Attrition Act of 2005 was enacted to
optimize the revenue-generation capability and collection of the Bureau of Internal
Revenue (BIR) and the Bureau of Customs (BOC).
The law intends to encourage BIR and BOC officials and employees to exceed their
revenue targets by providing a system of rewards and sanctions through the creation of
a Rewards and Incentives Fund (Fund) and a Revenue Performance Evaluation Board
(Board).
It covers all officials and employees of the BIR and the BOC with at least six months of
service, regardless of employment status.
Abakada Guro vs Purisima (Digest):
Facts:
Petitioners seeks to prevent respondents from implementing and enforcing Republic Act
(RA) 9335. R.A. 9335 was enacted to optimize the revenue-generation capability and
collection of the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC).
The law intends to encourage BIR and BOC officials and employees to exceed their
revenue targets by providing a system of rewards and sanctions through the creation of
a Rewards and Incentives Fund (Fund) and a Revenue Performance Evaluation Board
(Board). It covers all officials and employees of the BIR and the BOC with at least six
months of service, regardless of employment status.
Petitioners, invoking their right as taxpayers filed this petition challenging the
constitutionality of RA 9335, a tax reform legislation. They contend that, by establishing
a system of rewards and incentives, the law “transforms the officials and employees of
the BIR and the BOC into mercenaries and bounty hunters” as they will do their best
only in consideration of such rewards. Thus, the system of rewards and incentives
invites corruption and undermines the constitutionally mandated duty of these officials
and employees to serve the people with utmost responsibility, integrity, loyalty and
efficiency.
Petitioners also claim that limiting the scope of the system of rewards and incentives
only to officials and employees of the BIR and the BOC violates the constitutional
guarantee of equal protection. There is no valid basis for classification or distinction as
to why such a system should not apply to officials and employees of all other
government agencies.
In addition, petitioners assert that the law unduly delegates the power to fix revenue
targets to the President as it lacks a sufficient standard on that matter. While Section
7(b) and (c) of RA 9335 provides that BIR and BOC officials may be dismissed from the
service if their revenue collections fall short of the target by at least 7.5%, the law does
not, however, fix the revenue targets to be achieved. Instead, the fixing of revenue
targets has been delegated to the President without sufficient standards. It will therefore
be easy for the President to fix an unrealistic and unattainable target in order to dismiss
BIR or BOC personnel.
Finally, petitioners assail the creation of a congressional oversight committee on the

ground that it violates the doctrine of separation of powers. While the legislative function
is deemed accomplished and completed upon the enactment and approval of the law,
the creation of the congressional oversight committee permits legislative participation in
the implementation and enforcement of the law.
Issues:
(1) Whether or not the scope of the system of rewards and incentives limitation to
officials and employees of the BIR and the BOC violates the constitutional guarantee of
equal protection.
(2) Whether or not there was an unduly delegation of power to fix revenue targets to the
President.
(3) Whether or not the doctrine of separation of powers has been violated in the creation
of a congressional oversight committee.
Discussion:
(1) The Court referred to the ruling of Victoriano v. Elizalde Rope Workers’ Union, which
states that “the guaranty of equal protection of the laws is not a guaranty of equality in
the application of the laws upon all citizens of the State.
The equal protection of the laws clause of the Constitution allows classification.
Classification in law, as in the other departments of knowledge or practice, is the
grouping of things in speculation or practice because they agree with one another in
certain particulars. A law is not invalid because of simple inequality. The very idea of
classification is that of inequality, so that it goes without saying that the mere fact of
inequality in no manner determines the matter of constitutionality.
The Court has held that the standard is satisfied if the classification or distinction is
based on a reasonable foundation or rational basis and is not palpably arbitrary. “
(2) To determine the validity of delegation of legislative power, it needs the following: (1)
the completeness test and (2) the sufficient standard test. A law is complete when it sets
forth therein the policy to be executed, carried out or implemented by the delegate. It
lays down a sufficient standard when it provides adequate guidelines or limitations in
the law to map out the boundaries of the delegate’s authority and prevent the delegation
from running riot. To be sufficient, the standard must specify the limits of the delegate’s
authority, announce the legislative policy and identify the conditions under which it is to
be implemented.
(3) Based from the ruling under Macalintal v. Commission on Elections, it is clear that
congressional oversight is not unconstitutional per se, meaning, it neither necessarily
constitutes an encroachment on the executive power to implement laws nor undermines
the constitutional separation of powers. Rather, it is integral to the checks and balances
inherent in a democratic system of government. It may in fact even enhance the
separation of powers as it prevents the over-accumulation of power in the executive
branch.
Ruling:
(1) The equal protection clause recognizes a valid classification, that is, a classification
that has a reasonable foundation or rational basis and not arbitrary.22 With respect to
RA 9335, its expressed public policy is the optimization of the revenue-generation
capability and collection of the BIR and the BOC.23 Since the subject of the law is the
revenue- generation capability and collection of the BIR and the BOC, the incentives
and/or sanctions provided in the law should logically pertain to the said agencies.
Moreover, the law concerns only the BIR and the BOC because they have the common
distinct primary function of generating revenues for the national government through the
collection of taxes, customs duties, fees and charges.
Both the BIR and the BOC principally perform the special function of being the
instrumentalities through which the State exercises one of its great inherent functions –
taxation. Indubitably, such substantial distinction is germane and intimately related to
the purpose of the law. Hence, the classification and treatment accorded to the BIR and
the BOC under R.A. 9335 fully satisfy the demands of equal protection.
(2) R.A. 9335 adequately states the policy and standards to guide the President in fixing
revenue targets and the implementing agencies in carrying out the provisions of the law
under Sec 2 and 4 of the said Act. Moreover, the Court has recognized the following as
sufficient standards: “public interest,” “justice and equity,” “public convenience and
welfare” and “simplicity, economy and welfare.”33 In this case, the declared policy of
optimization of the revenue-generation capability and collection of the BIR and the BOC
is infused with public interest.
(3) The court declined jurisdiction on this case. The Joint Congressional Oversight
Committee in RA 9335 was created for the purpose of approving the implementing rules
and regulations (IRR) formulated by the DOF, DBM, NEDA, BIR, BOC and CSC. On
May 22, 2006, it approved the said IRR. From then on, it became functus officio and
ceased to exist. Hence, the issue of its alleged encroachment on the executive function
of implementing and enforcing the law may be considered moot and academic.
Conclusion:
R.A. No. 9335 is constitutional, except for Section 12 of the law which creates a Joint
Congressional Oversight Committee to review the law’s IRR.
That RA No. 9335 will turn BIR and BOC employees and officials into “bounty hunters
and mercenaries” is purely speculative as the law establishes safeguards by imposing
liabilities on officers and employees who are guilty of negligence, abuses, malfeasance,
etc. Neither is the equal protection clause violated since the law recognizes a valid
classification as only the BIR and BOC have the common distinct primary function of
revenue generation. There are sufficient policy and standards to guide the President in
fixing revenue targets as the revenue targets are based on the original estimated
revenue collection expected of the BIR and the BOC.
However, the creation of a Joint Congressional Oversight Committee for the purpose of
reviewing the IRR formulated by agencies of the executive branch (DOF, DBM, NEDA,
etc.) is unconstitutional since it violates the doctrine of separation of powers since
Congress arrogated judicial power upon itself.
RA 10754, Expanding Tax Benefits to PWDs dated March 23, 2016,

Additional exemption of P25,000 as dependent to taxpayer caring for them
if within 4th degrees to taxpayer not gainfully employed
[REPUBLIC ACT NO. 10754]
AN ACT EXPANDING THE BENEFITS AND PRIVILEGES OF PERSONS WITH

DISABILITY (PWD)
Be it enacted by the Senate and House of Representatives of the Philippines in

Congress assembled:
SECTION 1. Section 32 of Republic Act No. 7277, as amended, otherwise known as the
“Magna Carta for Persons with Disability”, is hereby further amended to read as follows:
“SEC. 32. Persons with disability shall be entitled to:
“(a) At least twenty percent (20%) discount and exemption from the 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 all private hospitals and medical facilities, in
accordance with the rules and regulations to be issued by the DOH, in coordination with
the PhilHealth;
“(6) On fare for domestic air and sea travel;
“(7) On actual fare 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.
“(b) Educational assistance to PWD, for them to pursue primary, secondary, tertiary,
post tertiary, as well as vocational or technical education, in both public and private
schools, through the provision of scholarships, grants, financial aids, subsidies and
other incentives to qualified PWD, including support for books, learning materials, and
uniform allowance to the extent feasible: Provided, That PWD shall meet the minimum
admission requirements;
“(c) To the extent practicable and feasible, the continuance of the same benefits and
privileges given by the Government Service Insurance System (GSIS), Social Security
System (SSS), and Pag-IBIG, as the case may be, as are enjoyed by those in actual
service;
“(d) To the extent possible, the government may grant special discounts in special
programs for PWD on purchase of basic commodities, subject to the guidelines to be
issued for the purpose by the Department of Trade and Industry (DTI) and the
Department of Agriculture (DA); and
“(e) Provision of express lanes for PWD in all commercial and government
“The abovementioned privileges are available only to PWD who are Filipino citizens
upon submission of any of the following as proof of his/her entitlement thereto:
“(i) An identification card issued by the city or municipal mayor or the barangay captain
of the place where the PWD resides;
“(ii) The passport of the PWD concerned; or
“(iii) Transportation discount fare Identification Card (ID) issued by the National Council
for the Welfare of Disabled Persons (NCWDP).
“The privileges 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.
“The establishments may claim the discounts granted in subsection (a), paragraphs (1),
(2), (3), (5), (6), (7), and (8) as tax deductions based on the net cost of the goods sold
or services rendered: Provided, however, 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: Provided, further, That the total amount of the claimed tax deduction net of
value-added tax, 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.”
SEC. 2. Section 33 of Republic Act No. 7277, as amended, is hereby further amended
to read as follows:
“SEC. 33. Incentives. – Those caring for and living with a PWD shall be granted the
following incentives:
“(a) PWD, who are within the fourth civil degree of consanguinity or affinity to the
taxpayer, regardless of age, who are not gainfully employed and chiefly dependent upon
the taxpayer, shall be treated as dependents under Section 35(b) of the NIRC of 1997,
as amended, and as such, individual taxpayers caring for them shall be accorded the
privileges granted by the Code insofar as having dependents under the same section
are concerned; and
“x x x.”
SEC. 3. Implementing Rules and Regulations, – The Department of Social Welfare

and Development (DSWD), in consultation with the Department of Health (DOH), the
Department of Finance (DOF), and the National Council on Disability Affairs (NCDA),
shall promulgate the necessary rules and regulations for the effective implementation of
the provisions of this Act: Provided, That the failure of the concerned agencies to
promulgate the said rules and regulations shall not prevent the implementation of this
Act upon its effectivity.
SEC. 4. Separability Clause. – If any provision of this Act is declared invalid or

unconstitutional, other provisions hereof which are not affected thereby shall remain in
full force and effect.
SEC. 5. Repealing Clause. – All laws, orders, decrees, rules and regulations, and other
parts thereof inconsistent with the provisions of this Act are hereby repealed, amended
or modified accordingly.
SEC. 6. Effectivity. – This Act shall take effect fifteen (15) days after its publication in the
Official Gazette or in two (2) newspapers of general circulation.
The realization principle is the concept that revenue can only be recognized once
the underlying goods or services associated with the revenue have been delivered or
rendered, respectively. Thus, revenue can only be recognized after it has been
earned.
Differentiate gross income and net income
Is stock dividend subject to taxation? Stock dividends are not income subject to
income tax on the part of the stockholder when he merely holds more shares
representing the same equity interest in the corporation that declared stock dividends.
Inchoate rights - stocks
Particular treatment Sale of principal residence - Section 24 D, NIRC
Sale of principal residence 

Principal residence: the family home of the individual taxpayer (RR 14-2000)
Disposition of principal residence (capital asset) is exempt from Capital Gains Tax,
provided:
i. Sale or disposition of the old principal residence;
ii. By natural persons - citizens or aliens provided that they are residents taxable under
Sec. 24 of the Code (does not include an estate or a trust);  
iii. The proceeds of which is fully utilized in (a) acquiring or (b) constructing a new
principal residence within eighteen (18) months from date of sale or disposition;  
iv. Notify the Commissioner within thirty (30) days from the date of sale or disposition
through a prescribed return of his intention to avail the tax exemption;  
v. Can only be availed of only once every ten (10) years;
vi. The historical cost or adjusted basis of his old principal residence shall be carried
over to the cost basis of his new principal residence  
vii. If there is no full utilization, the portion of the gains presumed to have been realized
shall be subject to capital gains tax.  
viii. Portion of presumed gains subject to CGT: (Unutilized/GSP) x (higher of GSP or

FMV)  
NOTES: registered before January ____ graduated table
Individual Income Tax Rates
1997 Tax Code
Lowest Bracket Below 10,000 ———— 5%
Highest bracket Above 500,000 ———— 32%
Deductions: Additional and Personal Exemptions
TRAIN LAW
LB Below 250,000 ———— 0%
250k-400 ……………………………. (CHECK REVIEWER)

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PART II

BASIC CONCEPTS IN INCOME

Definition of Income Tax:

Nature of Income Tax : (direct, progressive and excise)

Purpose of Income Taxes:

Requisites of income to be taxable:

HERNANDO B. CONWI vs. THE HONORABLE COURT OF TAX APPEALS and

Respondent Commissioner of Internal Revenue, on the other hand, refutes

Section 21 of the National Internal Revenue Code, before its amendment by

Petitioners are citizens of the Philippines temporarily residing abroad by virtue of

Respondent Commissioner argues that CB Circular No. 289 speaks of receipts

Section 21 of the National Internal Revenue Code, amended up to August 4,

Pursuant to this authority, Revenue Memorandum Circular Nos. 7-71 10 and

Petitioners argue that since there were no remittances and acceptances of

CASE: Madrigal vs Rafferty, G.R. No. L-12287 August 7, 1918

STATEMENT OF THE CASE:

Income as contrasted with capital or property is to be the test. The essential

Service of wealth Wealth itself

Subject to tax Return of capital is not subject to tax

Classifications of Income Subject to Philippine Income Tax

1. Compensation Income- tall remunerations for services performed by an employee

General Rule: every form of compensation income is taxable regardless how it is

3. Business Income- any income derived from doing business.

a. Interest income- earning derived from depositing or lending of money, goods

b. Dividend income- form of earnings derived from the distribution made by a

c. Royalty income- royalty is a valuable property that can be developed and

Kinds of Individual Tax Payers (Sections 23, 24, 25, NIRC)

Definition of each kind of taxpayer:

I. Citizens (of the PH)-

FOR TAXATION PURPOSES: RESIDENTS AND NON-RESIDENTS

2. Non-resident (Section 22E, NIRC)

(E) The term "nonresident citizen" means:

(1) A citizen of the Philippines who establishes to the satisfaction of the

3. Overseas Filipino Workers (Section 23C, NIRC, RR No. 1-79)

Non-residents taxable lang pag within

Sec 23 (C) An individual citizen of the Philippines who is working and

1. Resident (Section 22F, NIRC)

2. Non-resident (Section 5, RR No. 2-1940) (Section 22G, 23 to 25A1,C,D,E,

Why is it important to know non-resident aliens if they are engaged in a business in

Section 25. Tax on Nonresident Alien Individual- (CHECK THIS IN NIRC

(A) Nonresident Alien Engaged in trade or Business Within the Philippines. -

(E) Alien Individual Employed by Petroleum Service Contractor and

REVENUE REGULATIONS NO. 1-2011 issued on February 24, 2011 defines

An OCW or OFW's income arising out of his overseas employment is

An OCW or OFW may be subjected to 12% Value-Added Tax (VAT) if in

III. Income Tax Formula

Personal Exemptions (XXX)

Net Compensation Income XXX

Net Business Income XXX

Net Professional Income XXX

Other Income XXX

Taxable Income Subject to

Tax Rates on Various Types of Income

1. Capital Gains Subject to Capital Tax:

CAPITAL GAINS ON SALE OF SHARES (RR No. 6-2008)

REVENUE REGULATIONS NO. 6-2008 issued on May 2, 2008 consolidates the

The following are exempted to the taxes imposed in the Regulations:

There shall be levied, assessed and collected on every sale, barter,

There shall be levied, assessed and collected on every sale, barter,

The provisions of Section 39(B) of the Tax Code, as amended, notwithstanding, a

a. Property interests that the taxpayer received as a result of a transfer, or

If the transferee of property assumes, as part of the consideration to the

If the transferor receives several kinds of stock or securities, the Commissioner is

The substituted basis as defined in Section 40(C)(5) of the Tax Code, as

A. Cash and/or property dividends from:  