BIR updates 2010 tax rules on shared drug discounts for seniors

MANILA, Philippines — The Bureau of Internal Revenue (BIR) has revised its 16-year-old tax rules on senior citizen discounts to clarify how pharmaceutical companies, distributors, and retailers can claim tax deductions when they share the cost of discounts on medicines.

The amendments, issued under Revenue Regulations No. 7-2026, address a gap in the original rules issued in 2010, which did not specifically provide for the allocation of tax deductions when the mandatory 20-percent discount was shouldered by different players in the pharmaceutical supply chain.

The change brings the tax treatment of shared discounts in line with the burden-sharing mechanism mandated under Republic Act No. 9994, or the Expanded Senior Citizens Act of 2010, which directed the Department of Health (DOH) to establish guidelines for distributing the cost of discounts among retailers, manufacturers and distributors.

Article continues after this advertisement

The clarification is particularly relevant where manufacturers, distributors and retailers agree to divide the cost of discounts, since the company selling the medicine to the senior citizen may not ultimately shoulder the entire amount.

FEATURED STORIES

NEWSINFO

NEWSINFO

NEWSINFO

READ: Senior citizens can only be granted one type of discount, says SC

Under the revised regulations, the BIR explicitly recognizes pharmaceutical retailers, manufacturers and distributors as establishments covered by these burden-sharing arrangements.

The rules also cover arrangements involving wholesalers-retailers and wholesalers, providing a clearer basis for determining which companies may claim the discount as a deduction from their gross income.

The burden-sharing mechanism is not new. The 2010 law already provided for sharing the financial impact of senior citizen discounts among pharmaceutical supply-chain players.

Article continues after this advertisement

However, the BIR’s implementing regulations issued that year did not specifically explain how the corresponding tax deductions should be divided when more than one company assumed the cost.

Under the amended rules, each company may deduct only the portion of the senior citizen discount it has agreed to shoulder under a burden-sharing agreement.

Article continues after this advertisement

This means a company cannot claim the entire 20-percent discount as a tax deduction if it bears only part of the cost.

The deduction must correspond to its agreed share of the discount, rather than the full amount granted to the senior citizen at the point of sale.

The rules also specify that only establishments that actually grant the discount may claim it as a deduction, subject to the provision governing burden-sharing arrangements.

Companies participating in these arrangements must enter into agreements consistent with DOH guidelines. The agreements must be properly documented and furnished to the DOH.

The requirements establish a documentary basis for determining each participant’s responsibility for the discount and the amount it may claim for tax purposes.

Your subscription could not be saved. Please try again.

Your subscription has been successful.

By expressly recognizing burden-sharing agreements, the BIR’s revised rules provide a framework for applying the tax deduction when the cost of a medicine discount is distributed across several businesses instead of being borne entirely by the retailer. /cb