Computing For Senior Citizen’s Discount

As a new holder of senior citizen’s card, I noticed the difference on how business establishments compute the discounts on the purchases I made in the last three (3) months that I have used the privilege. I had no problems with the big name establishments like Jollibee, KFC, Mercury Drug and the like. Their point-of-sales (POS) terminals are programmed to handle the discounts on purchases by senior citizens.

When the privilege was first granted under Republic Act No. 7432, as amended by Republic Act No. 9257, otherwise known as the “Expanded Senior Citizens Act of 2003“, computing for the senior citizen’s discount was very simple. The business establishment just had to deduct twenty (20%) from the selling price of the goods subject to discount. However, when the 12% value-added tax (VAT) was imposed sometime in 2005, the 20% senior citizen’s discount was watered down to 8% so our legislators again amended the law to becomeExpanded Senior Citizens Act of 2010or Republic Act No. 9994.

Under Republic Act No. 9994, the grant of twenty percent (20%) discount and exemption from the value -added tax (VAT) was imposed on the sale of goods and services subject to such privilege for the exclusive use and enjoyment or availment of the senior citizen (SC). This provision causes some confusion in computing for senior citizen’s discounts. In view of this, let me present how to correctly compute the figure based on the search and information from some people knowledgeable on the matter.

Let us say that the price of the goods that the senior citizen wanted to avail and subject to discount is PhP100. The selling price (SP) includes 12% VAT and 20% discount shall apply. Computation for the net amount that the senior citizen must pay will be as follows:

A) The amount of VAT must first be computed according to the formula –

Amount of VAT = (Selling Price x 12%)/1.12 = (PhP100 x 0.12)/1.12 = PhP12/1.12 = PhP10.71

B) Next step is to deduct the Amount of VAT from the Selling Price to get the Sales Net of VAT as follows:

Sales Net of VAT = Selling Price – Amount of VAT = PhP100 – 10.71 = PhP89.29

C) The amount of discount is the next to be computed and this is done as shown below:

Amount of Discount = Sales Net of VAT x 20% = PhP89.29 x 0.20 = PhP17.86

D) Last step to arrive at the amount that the senior citizen must pay is to deduct the amount of discount from the Sales Net of VAT as follows:

Amount To Be Paid By SC = Sales Net of VAT – Amount of Discount = PhP89.29 – 17.86 = PhP71.43

From the above computations, it can be easily seen that the total amount deducted from the selling price to arrive at the amount to be paid by the senior citizen equaled to PhP28.57 (PhP10.71 VAT + PhP17.86 Discount). Translated to percentage of selling price, (PhP28.57/PhP100 x 100%), it can be concluded that the senior citizen is entitled to 28.57% deduction on the selling price of goods covered by RA 9994.