PWD Discount Requirement for Small Non-VAT Businesses in the Philippines

A practical legal guide for micro-entrepreneurs, shopkeepers, and service providers

1. Why this matters

Persons with Disabilities (PWDs) are statutorily entitled to price concessions similar to those enjoyed by senior citizens. Although the law is national in scope, tiny mom-and-pop stores, eateries, clinics, and other non-VAT-registered enterprises often struggle with the mechanics:

“Do I still have to give the discount if I don’t charge VAT?”
“Can I deduct it from my taxes?”
“What paperwork will the BIR expect?”

This article gathers, in one place, every rule, revenue issuance, and practical workaround you need to stay compliant while keeping your books clean.

2. Core legal framework

Issuance	Key points
RA 7277 (1992) – “Magna Carta for Disabled Persons”	Declares the State policy of rehabilitation, self-development, and integration of PWDs.
RA 9442 (2006)	First inserted the 20 % discount and banned taunts, ridicules, and vilification.
RA 10754 (2016)	Added VAT exemption (12 %) and clarified covered goods/services.
IRR of RA 10754 (Joint DTI-DOH-DOJ, July 2017)	Operational details: identification cards, purchase booklets, local oversight.
BIR Revenue Regulations (RR) No. 5-2017	Tax treatment, documentation, penalty clauses; mirrors senior citizen RR #8-2010.
BIR Revenue Memorandum Circular (RMC) No. 38-2016	Interim guidelines between RA 10754’s effectivity (Apr 17 2016) and RR #5-2017.

3. Who must grant the discount?

Everyone who sells or renders the covered goods/services in the course of trade, whether or not they are VAT-registered.

There is no “small business” exception in the Acts themselves.

Covered items (identical to senior citizen list):

Medicine and medical supplies
All kinds of food prepared for immediate consumption (restaurants, carinderias, kiosks, food delivery)
Transport fares – land, air, sea
Hotel & lodging accommodations
Medical & dental services, diagnostic/lab fees, professional fees of physicians (public & private)
Admission fees to cinemas, concerts, cultural shows, leisure & amusement centers
Funeral & burial services

4. What is a “small non-VAT business”?

You fall into this bucket if:

Your gross sales/receipts do not exceed ₱3,000,000 in the last 12 months OR you exclusively sell goods/services that are VAT-exempt under Sec. 109 of the Tax Code; AND
You did not opt to register as a VAT taxpayer.

Instead of 12 % VAT you pay percentage tax (currently 1 % until June 30 2025 under the CREATE Act, reverting to 3 % thereafter).

5. Discount mechanics for non-VAT sellers

Scenario	Formula
You are NOT VAT-registered.	Final price = Regular selling price – 20 %. Ignore VAT because you never included it.
You ARE VAT-registered.	Final price = (Regular price ÷ 1.12) – 20 % discount. (Remove VAT first, then apply 20 %).

Example (₱200 meal, non-VAT eatery): 200 × 20 % = ₱40 discount → PWD pays ₱160.

6. What paperwork must you ask from the customer?

PWD Identification Card issued by the LGU (not an OSCA card; that is for seniors).
Purchase booklet (for medicine, groceries, etc.) – record the transaction.
Authorization letter if bought by a relative on behalf of the PWD (plus valid ID of buyer).

You cannot insist on any other ID (e.g., passport) if the PWD card is valid and unexpired.

7. What receipts must you issue?

Official receipt (OR) or sales invoice (SI) showing:
- Gross selling price
- Less: 20 % PWD discount (itemized)
- Net amount actually paid.
Write the PWD ID number on the OR/SI.
Keep a separate “PWD Discount Logbook”—mandatory under RR 5-2017.

8. Tax treatment for non-VAT businesses

Tax type	Treatment of the 20 % discount
Percentage tax (BIR Form 2551Q)	Discount is NOT a deduction from gross sales; you compute the 1 %/3 % on the amount before discount.
Income tax (ITR Form 1701/1702)	Discount is treated as ordinary deductible expense if you use itemized deductions. It cannot be claimed if you opted for the 40 % OSD (optional standard deduction).
	Conditions to deduct: • Properly recorded in books and logbook • Supported by OR/SI & photocopy of PWD ID • Not claimed simultaneously as senior citizen discount (one discount only).

Tip: Create an “Expenses – PWD Discounts” account under Selling & Distribution Expenses to keep things tidy.

9. Journal entry template (non-VAT, itemized deduction)

Dr   Sales            ₱200.00
     Cr   Cash                     ₱160.00
     Cr   PWD Discount Expense      ₱40.00

At period-end, close “Sales” to income, deduct “PWD Discount Expense” along with other allowable deductions.

10. Penalties for refusal or over-pricing

Fine: ₱50,000 – ₱100,000 (first offense); ₱100,000 – ₱200,000 (subsequent).
Imprisonment: 6 months – 2 years (first); 2 years – 6 years (subsequent).
Administrative sanctions from DTI, LTFRB, DOH, LGU (permit suspension/revocation).

11. Frequent problem areas & solutions

Issue	Practical answer
“Promo runs” or bulk discounts	The PWD must be allowed to choose the higher of your promo price or the 20 % discount, but never both (no double discount).
Online food apps / delivery	If you are the merchant of record, you remain liable for the discount; coordinate with the platform to insert a “PWD discount” field.
Pickup via representative	Accept as long as the rep shows the PWD ID and authorization letter; staple copies to your OR.
PWD also a senior citizen	The customer chooses either senior or PWD privilege, not both.
Refunding VAT on purchases made before non-VAT registration	Not required; the obligation attaches at the time of sale.
Applying the discount to raw groceries	Only if prepared food is for immediate consumption; raw ingredients for home cooking do not qualify.

12. Interaction with CREATE Act percentage tax rates

Period	Percentage tax rate for non-VAT entities	Effect on PWD compliance
Jul 1 2020 – Jun 30 2025	1 %	Discount is still computed on gross selling price; the lower percentage tax rate does not alter the 20 % entitlement.
July 1 2025 onward	3 % (reversion)	Same mechanics; only the tax rate on gross receipts changes.

13. Recent BIR audit focus points

Clear linkage between line-item “PWD Discount” in books and the supporting ORs/SIs.
Mismatch between logbook totals and claimed deductions.
Businesses using OSD but still deducting discounts (disallowed).
Failure to back-out VAT first (in VAT-registered audits).

14. Compliance checklist for small non-VAT businesses

Train cashiers & staff to request the PWD ID.
Update POS/software (or manual OR template) to show discount line.
Maintain logbook with sequential numbers matching your ORs.
File percentage tax even if you choose the 8 % “flat tax” (for individual taxpayers) – the 8 % replaces income tax, not percentage tax.
Archive copies of IDs & authorizations for at least 3 years (ordinary audit period).

15. Bottom line

Even the smallest sari-sari or clinic must honor the 20 % PWD discount; exemption from VAT does not spare you from the social obligation. The good news: every peso you grant can reduce your income-taxable profit (as an itemized business expense) as long as you keep orderly records. By integrating simple steps—staff training, receipt formatting, and a dedicated logbook—you can stay on the right side of both the BIR and the spirit of the Magna Carta for Disabled Persons.

Disclaimer: This guide is for general information only and is not a substitute for personalized legal or tax advice. Consult your accountant or lawyer for specific applications to your business.