Accounting and Business Treatment on PWD Privileges

We know what privileges are given to PWD (Persons with disabilities), such as discount and VAT exemption on their purchases. The question now is how will business treat such privileges in the books? This is what we will answer in this article.

Who are qualified PWD?

Contrary to popular belief, not all person who claims have a disability are qualified to the discount and VAT exemptions. In fact, PWD is required to present a PWD ID for them to claim the privileges under RA 10754 -An Act Expanding the Benefits and Privileges of PWD. PWD ID proves that the person has registered and has submitted the requirements as proof of the disability including a medical certificate issued by a physician.

The privileges of PWD were discussed in this article. https://mgmco.net/2019/11/20/pwd-vat-exemptions-and-discounts-rr-9-2019/

What is the business treatment for the discount?

As stated in RR 5-2017 “All establishments, which granted sales discounts on their sale of goods and/or services to PWD may claim the said discount as a deduction from the gross income for the same taxable year that the discount is granted. Provided that, the name of PWD and the PWD ID No. are reflected in the required record of sales for PWD.” A sale to PWD without proper details such as name and PWD ID will not be allowed as deductible to gross income.

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 PWD.

For Percentage Taxpayer, how do you treat the discount?

The amount of sales discounts shall be excluded for purposes of computing the Three Percent (3%) Percentage Tax but shall be included as part of the gross sales/receipts for income tax purposes. The sales discount granted shall then be accounted for as a deduction from the gross income of the establishment for the same taxable year that the discount was granted.

Is there a limit on how much a PWD can consume wherein a discount is applicable?

Only the portion of the gross sales exclusively used, consumed or enjoyed by the PWD shall be eligible for the deductible sales discount. The seller must record its sales inclusive of the discount granted, not as a reduction of sales to arrive at net sales, but as a deduction from its gross income (sales less cost of sales).

If there are existing promotions, can PWD claim additional discounts on top of existing promotions?

The privileges granted to PWD shall not be claimed if the said 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 programs. Thus, a PWD who is at the same time a senior citizen can only claim one 20% discount on a particular sales transaction.

If PWD sale is VAT exempt, what will be the treatment for corresponding input VAT from the sale to PWD?

The input tax attributable to VAT exempt sale is considered as cost or an expense account by business establishments and shall not be allowed as an input tax credit. If there is no name of PWD and PWD ID No. indicated in the records of sales, the input tax attributable to VAT exempt sale claimed as an expense by business establishments shall be disallowed. The exemption herein granted will not cover other indirect taxes that may be passed on by the seller to a PWD buyer, such as Percentage Tax, Excise Tax, etc. In such a case, the discount must be on the total cost of the goods or services charged by the seller, exclusive of the VAT.

Can PWD privileges be extended to relatives? 

The effective taxable year 2016, a Benefactor of a qualified PWD may claim the additional exemption of Twenty-Five Thousand Pesos (P 25,000) for each PWD, if such PWD, regardless of age, satisfies requirements of the regulation. The total number of dependents (qualified dependent children and/or qualified dependent PWD), for which additional exemptions may be claimed by the taxpayer/benefactor, shall not exceed four (4). The additional exemptions for qualified dependent PWD shall be claimed only by one taxpayer or by 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 or PWD. Provided, that the number of additional exemptions that may be claimed by both shall not exceed the maximum additional exemptions of four (4).

For more information on the regulation, you may download the revenue regulation here.

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