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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
Under Republic Act No. 10754 or the Act Expanding the Benefits and Privileges of Persons with Disability (PWD), an annual income tax deduction is given to relatives who are caring for and living with a Person with Disability (PWD).
BIR Revenue Regulation No. 05-2017 provides that persons caring for and living with a PWD may claim the additional exemption of twenty-five thousand pesos (P25,000) for a qualified PWD who is considered as a dependent for tax purposes.
Republic Act No. 10754 or the Act Expanding the Benefits and Privileges of Persons with Disability (PWD) have been enacted to amend certain provisions under Republic Act No. 7277 or the Magna Carta for Disabled Persons. With the passage of R.A. No. 10754, PWDs are able to enjoy more benefits and privileges.
Aside from the benefits and privileges enjoyed by PWDs, relatives of PWDs caring for and living with them are entitled to a deduction from their annual income tax.
Section 2 of R.A. No. 10754 amended Section 33 of R.A. No. 7277 to read as follows:
“Section 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 employer and chiefly dependent upon the taxpayer, shall be treated as dependents under Section 45(b) of the NIRC of 1997, as amended, and as such, individual taxpayers paying for them shall be accorded the privileges granted by the Code insofar as having dependents under the same section are concerned. xxx”
The Implementing Rules and Regulations for R.A. No. 10754, in prescribing the procedures and guidelines for the implementation of the law, further provide that:
“Those caring for and living with a person with disability, up to the fourth degree of affinity or consanguinity, shall be granted tax incentives in accordance with the provisions of the National Internal Revenue Code, as amended. For purposes of granting the incentives, persons with disability shall be treated as dependents under Section 35(b) of the National Internal Revenue Code of 1997, as amended, and as such, individual taxpayers providing care for them shall be accorded the privileges granted by the Code insofar as having dependents under the same section is concerned.
The treatment of a person with disability as a dependent however should not be construed to mean an increase in the maximum number of dependents, which is currently limited to four (4) dependents, for which additional personal exemption may be claimed by a taxpayer under Section 35(b) of the National Internal Revenue Code of 1997, as amended.”
For this purpose, the Bureau of Internal Revenue shall issue the corresponding Revenue Regulations pertinent to the implementation of the tax incentives and privileges of this Act.
The National Council on Disability Affairs shall revise and disseminate the template of the identification cards of persons with disability to include the name of the guardian, name of the tax claimant, tax identification number of the tax claimant and their contact numbers to facilitate the implementation of this section. It shall also retain the PWD ID number coding by local government unit to facilitate the ease of monitoring of data on the sector in barangays, municipalities, cities, provinces and regions.”
(Section 14, Rule V, Implementing Rules and Regulations of Republic Act No. 10754, or the Act Expanding the Benefits and Privileges of Persons with Disability)
In furtherance of the objective to provide a deduction to the annual income tax of persons caring for and living with a PWD, the Bureau of Internal Revenue issued BIR Revenue Regulation No. 5-2017 (RR No. 05-2017). BIR RR No. 05-2017 provides for the rules and regulations implementing R.A. No. 10754.
BIR RR No. 05-2017 defines a “benefactor” as any Filipino citizen or resident alien, caring for, giving chief support and living with the PWD, who is in the fourth (4th) civil degree of consanguinity or affinity claiming such PWD as dependent. (Section 2.4, BIR RR. No. 05-2017)
BIR RR No. 05-17 further provides:
“Effective taxable year 2016, a Benefactor of a qualified PWD, may claim the additional exemption of twenty-five thousand pesos (P25,000) for each PWD, if such PWD, regardless of age, satisfies all of the following:
- Filipino citizen;
- within the fourth (4th) civil degree of consanguinity or affinity to the taxpayer/benefactor;
- not gainfully employed; and
- chiefly dependent upon and living with the taxpayer/benefactor.
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).” (Sections 8.1 to 8.4, BIR RR No. 05-2017)
Procedure for claiming the tax incentive
The Taxpayer/Benefactor of the persons with disability shall submit the following
documentary requirements to the Revenue District Office (RDO) where he is
registered in order to claim the additional exemption, for the first year of claiming the
exemption and after three (3) years or upon renewal of the PWD ID whichever comes
first:
- Duly accomplished BIR Form No. 2305;
- Photocopy of PWD Identification Card Issued by the Persons with Disability Affairs Office (PDAO) or the City/Municipal Social Welfare and Development Office (C/MSWDO) of the place where the person with disability resides or the National Council on Disability Affairs (NCDA);
- Sworn Declaration/Identification of Qualified Dependent PWD, Support and Relationship (Annex A):
- Birth Certificate of PWD;
- Medical Certificate attesting to disability issued by in accordance with the Implementing Rules and Regulations of R.A. 10754; and
- Barangay Certification certifying that the PWD is living with the benefactor.
The submitted records of the PWD to the RDO must be used as reference for every taxable year, in order to validate the claimed additional exemption for the same PWD. Such record must be renewed by Taxpayer/Benefactor after three (3) years or upon renewal of the PWD ID whichever comes first. In case of Employee-Benefactor, the aforementioned documentary requirements must be submitted to the employer for record and withholding tax purposes.” (Sections 8.5 to 8.6, BIR RR No. 05-2017)
Read also: Employment Status of Persons with Disability (PWD)
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding taxation and taxpayer’s remedies, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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